The Military Equipment Cost Problem - Why (some) Nations Struggle to Build Affordable Weapons

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Cheers to the Patrons for voting for this one - my goal here is that we use this episode to get some of the basic concepts and issues on the table so when we talk about specific programs (not that I'm thinking of any particular frigate program or anything) we can jump into the details without having to cover the basics. Hope you enjoy the episode, and I'll see you all again next week.

If war happens against China, it's not the technology that's the problem, it's the semi-serfdom factory cheap cost of them. Thousands upon millions, and everyone gets fed.

It’s interesting how systems don’t fail because they are weak, but because they become too expensive to scale when pressure increases.

This is a major military change happening! As large as the introduction of tanks in World War I. As large as the embracing of aircraft carriers versus battleships. The introduction of effective low-cost weapons, not only will save the current military countries like the United States money, but it also empowers smaller countries. Smaller countries can manufacturing these weapons. Smaller military can support these weapons in the field unlike the incredibly complicated weapons that are currently in the field, like complicated fighters complicated missiles, complicated tanks. The training requirements to use these new low-cost weapons is so much less than the complicated large weapons. These low cost weapons not only can they be made in smaller countries, but they can be smuggled anywhere in the world much more easily. Smuggling a F 35 fighter through an airport is practically impossible, but smuggling a small drone that can be disassembled into unrecognizable parts and actually carried in luggage is incredibly possible. Large expensive weapons are easy to track down and also do recognize when they’re being used and where they’re being fired from. Low-cost drones can be carried in the back trunk of a car, used in a fire forget method while the car drives away. Low-cost weapons can be used in great numbers to overwhelmed defenses, whereas expensive weapons cannot. Like the switch from battleships to aircraft carriers, the existing military establishments in the existing military industrial complexes are going to fight this tooth and toenail and try and kill, kill it before it really gets going, but they will fail doing this. In fact, the existing military and the existing manufacturing industrial complexes will actually be the greatest danger two countries like the United States. Look at the Iran war! The US military was certain that it could cause the collapse of Iran with all of its expensive weapons, but that has not happened, and in fact the US military is embarrassed to realize that Weil can certainly shoot out all of the fighters and destroy all the tanks that Ron might have, it’s pretty much powerless against the drones that Iran has and that Iran is using to close the Oil shipments from the Middle East. In the same fashion, all the expensive air defense systems that were bought by Arab countries are pretty much useless against small drones that can nonetheless fly in and take out their critical infrastructure. It’s only a matter of a short amount of time before the enemies of the European Union, the United Kingdom, the United States, and Canada realize that they can struggle in drones sufficient to destroy major amounts of US and developed country critical infrastructure, and the US military or other military will be completely powerless to stop it. We should all look forward to the next “Pearl Harbor“ in which the United States and other major military countries are caught sleeping.

I paused at 1:52 after the "Why?" so I could make my own statement. Greedy finance bro's decided low margin industries could become more profitable if we off-shored them to places that treated workers like commodities, had little to no regulation, and were willing to prop up the entire system through a subsidized state planned economy just like we used to have in the US from the 40's to the mid 70's(The Golden Age of Capitalism). The latter part now being something they prop up as the very reason why they still do business in places like China but they fight tooth and nail to avoid a return to that kind of economy in the US. Tim Cook recently stated that it's no longer cheaper to build things in China its just that they can do things there we can't here in the US. Well besides polluting rivers and ignoring workers health, investing $50 billion a year for 20 years has a tendency to do that kind of shit Tim.

Unlike Australia, in the US corporations are a reserved power (state). IE Delaware is a popular corporation host for big companies.

Interesting video, though there is a caveat to what you talked about at 36:00 - which is that a cost-plus contract isn't some magical "endless money hack", but often a necessity when you're not just building a thing, but also developing the tech for them. Which is by its nature unpredictable in its complexity. And most cost-plus contracts are usually with a fixed "plus", not a percentage-based one - not to mention that contracts on that principle have massively more oversight placed on them to hopefully avoid any shenenigans

Totally inefficient and weaksauce. I could do a way better job.

Military equipment should not be functionally designed (via top level performance specifying and contract bidding) by governments and military generals that have long careers in the military, but with little or no background in either engineering or economics. Economically efficient and effective battlefield weapons need to be top level designed by engineers that simultaneously understand physics and economics. Military equipment should not by functionally designed by generals, politicians, corporate CEOs, committees, enlisted battlefield soldiers, or really anyone else with inadequate simultaneous understanding of economics and engineering. Backgrounds in military history are not important, and can even be detrimental, as it can lead to preparing for the last war, rather than the next future war, which will be fought with different technologies and different tactics associated with those different technologies.

At the end of the day, modern wars are won by technologically superior military equipment designs, fielded in large quantities, which is made possible by designing the products to be relatively cheap to produce, but still very effective. Adequate levels of creativity in problem solving/engineering aptitude, combined with adequate understanding of economics to do things in a cost effective and efficient manner, is what is important for achieving such objectives. As it so happens, I personally do have a background in electrical engineering, and I do have understanding of how to get things done efficiently, even when operating under budgetary and/or other resource constraints.

Some government should give me the legal freedom to operate in their territory, then invest in me by providing the Bitcoin or other form of seed capital so I can form a company, hire some engineers, design some weapons, and then build one or more factories to manufacture the weapons. Once the weapons are ready, the government should then start buying my superior weapons at a price point high enough that I can make substantial profit on each unit sold, necessary to reinvest the profits back into the company, so as to rapidly design and manufacture additional superior weapon and other military equipment designs.

'Wouldnt it be great if' should be on t-shirt

42:42 there's some depth here too, that civilian-grade equipment's own supply chain might be exploitable by the military-grade specialized equipment. I.e. you won't stick a turbo-prop into a fighter jet, but the inner materials and components of the jet engines powering them (and the production chains thereof) have heavy overlap that can significantly reduce cost/time for military equipment production. Your APC won't use the same engine as your sedan, but your APC's engine will use the same pistons, camshafts, etc. as your sedan's engine.

Additionally, military advancements that can translate to benefits in the civilian sector are also much more attractive, since they can provide returns outside of the immediate military contract that also pads their risk. i.e. if the military-grade Xbox controller had less input drift, you can also use the technology/parts behind that to boost sales in the civilian sector such that the military contract mostly pays for R&D/production overhead for your civilian product run.

for the most part, its not the design of the system, its the lack of factory and resource infrastructure, and industrial knowledge being cultivated and maintained to actually scale when needed. very few people are left in the US who know how to design a tool die.
one reason why China is advancing so rapidly. its not just manufacturing, its design knowhow in everything that they use to basically produce everything the rest of the planet uses.

A comment to help with the algorithm

30:00 Our troops deserve to roll up with two good tank buddies, instead of alone in their gold-plated tank doesn’t roll off the tongue the same way.

How is and ATACMS comparable to an Iskander?😂 Half the speed, half the range half the explosives...

Perun jinxed it again. Just three weeks after saying the US Navy needs to refocus and get their s*** together, Trump announces a new class of 30,000-40,000 t battleships with nothing but an artist's impression for reference.

Wow. I have 30+ years of working in the US defense industry, and I could talk for hours on this subject. But let me add a couple items you missed, or may have only alluded to. These aren't in any particular order. First, oversight and reporting. For every major program the government hires an independent company to oversee the contractor. In my case it was always Aerospace Corporation. They provided independent, technical knowledge to the government to assure the government that the contactor would indeed meet requirements. The problem is that you are now, in many cases, explaining/proving things twice, once to your own company and then again to the independent company. And oversight is extreme, especially in the schedule and cost accounting areas. Earned Value Management in particular. Literally 1/2 my time was just providing status. Second, and in some cases the greatest cost, is requirements creep. Major programs can take 4 to 7 years to go from contract award to end product, and ALWAYS during that time frame new whiz bang sensors or whatver are developed and, of course, the government wants the latest and greatest, and so now the contractor has to literally go back to the drawing board and to insert that new whiz bang sensor or whatever. Related, the contracts also very often are required to use equipment that is under development by a different company, but NOT fully qualified. It could be a complete sensor, or perhaps something small like a new, faster processor. The contractor makes many assumptions on it's capabilities to procede with design, but in almost all cases the item under development ends up with surprises that require significant changes. There's also cases where the new design fails, and we have to go back and redesign for the older model, or just take the schedule hit and essentially wait for them to fix it. Third is cost of labor. I worked in California, and at the time, 10 years ago, the average burdened cost of an engineer was ~$250K a year. For a major program with 1000 engineers thats $250 million a year. That doesn't include all the other employees. There's numerous other things but I've ranted enough...it's a mess.

9:13

What about an airborne carrier of deployable sea vessels? A frigate mothership

Glad you have people that are better than Scott ritter on. That guy is a 🤡

Excellent stuff

32:16 StarCraft reference wow....

Western militaries have an obsession with weapons that don't fail. What we don't hear about those cheap duct tape held Ukrainian drones that only about half or a quarter of them actually reach their target, remainder either being brought down by air defenses or soldiers simply shooting at them.

Western militaries want drone swarms too. Other than being held back by their own supply chains, they are held back by the insane requirements they impose. Like 80% of a drone swarm must reach their target. This essentially means, each drone is going through rigorous quality procedures, which jack up their pricing, and what costs Ukraine $600 to produce, costs $6000 per drone in western military equipment procurement.

IMHO the problem is profit .
the military want the weapons that work best at the cheapest price while private enterprise want to supply the least volume at the highest profit margin .
This is why government defence manufacturing is always the best way to go .
A perfect example of how destructive private enterprise procurement is would be the case of McDonnald Douglas .
ˇhey went bankrupt chasing high profit margin military contracts so rather than bail them out the US government forced a merger with Boeing which has sent Boeing domestic aviation bankrupt as well . so they will become just another missile maker eventually adsorbed into the Raytheon group .
For a historical counter example rifle supply to the UK military was so profitable that the BSA group kept their rifle making machinery ready for immediate production from WW I through to WW II despite having to close down production due to the government having a post war fire sale of surplus rifles . Thus when the UK finally decided to enter WW II BSA had the only rifles available and in fact were the only company with barrel steel in stock having to supply the government run Enfield factory with their first 3 months steel supply .
It is a delicate balance as we have seen with 155 mm artillery rounds and the result will be the same post the russian invasion .
for 2 to 4 years while the planets armories replenish stocks the factories will run at a profit but after that demand will not be enough to support a single manufacturer and perhaps there will actually be no demand apart from some 3rd world tin pot dictators as drones can do everything that afield artillery can do at 20 times the precision and 5% of the cost .

There is an old adage in engineering .
"There is nothing so simple that does the job perfectly well that can not be made betted by making it vastly more complicated & expensive "

Another modern perfect example is the EOS slinger .
A modified space telescope mount , modified astronomy computer tracking = dirt cheap anti drone defence system that worked perfectly .
Harris modified that to use the APKWS missiles for 4 time the price to almost double the range .
From then on there was no system too expensive to do a job that had already had a pair of very capable weapons culminating in the unbelievably expensive German Skynex system starting at € 85,000,000 euros to give no material benefit other than a longer range .
Rheinmetall could have licensed production rights from EOS who are not a volume manufacturer and of course will never ever get any assistance from the Australian government when it could be made overseas and imported for 3 times the price .
As such Rheinmetall could have churned out 200,000 of them by now enough to have one fitted to every front line & near front logistic vehicle rendering russian drones useless and in doing so improved the technology to base the Skynex on it .
So which would you prefer , 160 Slingers , 40 Harris Vampires or 1 Skynex .
While the Skynex might be able to shoot down a ballistic missile before it becomes very expensive scrap metal , I could not see russia finding 160 ballistic missiles to wipe out all of the slingers .

By far the most successful aircraft of WW II was the de Havilland DH.98 Mosquito cheap to build almost impossible to attack and the only true multi purpose airframe of the war being used for everything from reconnaissance to fighter support for long distance bombing , to precision bombing , to close ground support and in most cases doing it better than purpose built airframes .
The problem with military procurement is specifying how the item has to do the job and not just what the job it needs to do is .
A Mosquito was everything that a modern military air frame was not supposed to be so would never even win a. contract and nearly did not get made .

All I can say the us military is toast. They can't get their shit together until our country get nuked or something.

Having a sufficiently large market to realise economies of scale is extremely important. With the USA backing away from NATO, I wonder if they have realised how being a leader in NATO grants access to very large markets. The USA, via NATO, currently sets standards and specifications. If that goes away, the price to produce each new system starts to climb.

The US struggles because it has too much money. And it has four militaries with too much money. Who have ingrained competition against the other militaries. If they build cheap they get less money and that’s losing for that military.

You forget the procurement rule of thumb: the more specific the procurement, the more expensive it will be