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Sunday, 11 October 2009

Defence spending

Ben Eltham in an article in New Matilda When defence becomes its own worst enemy draws attention to some issues about defence spending and the problem of cost overruns.

This is an issue where the application of a little economic rationalism might be useful by those who are critical as I am of the extent and character of military expenditure on capital items.

Cost overruns are inevitable in this area. Why?

Problems of a limited number of suppliers, offering unproven technology, assymetry of information between the -purchasers and suppliers, and the temptation by the purchasers to not draw clear boundaries around the capabilities that they want for a given system. There is also the problem of unwillingness of the purchasers to enforce contract conditions and to work away from a purchase if there are delays and overruns. Add to that the revolving door between the purchasers and suppliers. All this is conducted against a background in which the religious appeal to national security makes criticism and questioning of the justification for the expenditure difficult if not subversive.

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