To provide a contrary viewpoint here, NPR's Planet Money had a rather good piece a few weeks back on the downsides to drastically scaling back Military Contractors.
The basic gist is that if contractors that supply all of one component or product dry up, those former employees don't just stay unemployed, they go to work in other industries. But, if in 5, 10, or 20 years, you decide you actually need that component or product again, you can't just flip a switch and re-activate manufacturing. The knowledge is gone, all the workers you had who were trained in the process have gone into new fields, and rebuilding your military production infrastructure is very painful. For a good example of this in recent years, FOGBANK.
FOGBANK was a mysterious classified material critical to creating nuclear warheads. Following the turn-down of the cold war and missile reduction plans, the manufacturing plant was mothballed. And the process for creating it was so secretive that no one remembered quite how to make it. Decades later, when aging missiles needed replacements, the process for manufacturing was lost and scientists couldn't reproduce the process based on the information left behind. The US government ended up spending a decade and over eighty million dollars just to research and rediscover the manufacturing process for this one particular component.
Obviously FOGBANK is an extreme case, but it's a fair point worth considering. Drastic cuts to military contractors may leave large holes in military supply, especially of sensitive and classified materials.
Here's the thing... It is not in a military contractor's best interests to properly document and mothball any knowledge or capability so well that it can be handed over to the government, stuck in a warehouse for decades, and be dusted off by someone completely different without difficulty. Doing so is tedious, expensive, and makes the contractor instantly replaceable. Failing to do so is cheap, fast, easy and improves their odds of getting future business!
The flipside is that it's impractical to pay companies to maintain the capacity to build everything they've ever built for all time. Imagine what it would cost IBM to keep people trained in building new versions of every product they've ever invented! If it costs billions to adequately document and mothball the construction process for every wheel you've ever made, but it only costs millions to reinvent the occasional wheel, what do you do?
The flipside is that it's impractical to pay companies to maintain the capacity to build everything they've ever built for all time.
The defense contractors handle that problem by putting those people on other projects. Sometimes it is productive work, sometimes it is just any project with a budget surplus. Their intent is to maintain institutional memory even if the project itself has been mothballed.
That's what I saw happen to people numerous times while working as a consultant to a couple of DoD contractors. I billed a crazy-high rate and they even shuffled me off onto a peripheral program in order to keep me around as a sort of security blanket for the original program that was (slowly) spinning down.
> The US government ended up spending a decade and over eighty million dollars just to research and rediscover the manufacturing process for this one particular component.
Well, we didn't exactly "rediscover" the process for manufacturing FOGBANK. That's because we never actually knew the process -- we just thought we did.
The previous production process just happened to include a contaminant that turned out to be a critical ingredient. This is what we had to discover.
As for the money -- how much would it have cost to keep the existing facility running for the past few decades? If this is more than $80 million (including inflation), then it was better to stop manufacturing it.
The basic gist is that if contractors that supply all of one component or product dry up, those former employees don't just stay unemployed, they go to work in other industries. But, if in 5, 10, or 20 years, you decide you actually need that component or product again, you can't just flip a switch and re-activate manufacturing. The knowledge is gone, all the workers you had who were trained in the process have gone into new fields, and rebuilding your military production infrastructure is very painful. For a good example of this in recent years, FOGBANK.
FOGBANK was a mysterious classified material critical to creating nuclear warheads. Following the turn-down of the cold war and missile reduction plans, the manufacturing plant was mothballed. And the process for creating it was so secretive that no one remembered quite how to make it. Decades later, when aging missiles needed replacements, the process for manufacturing was lost and scientists couldn't reproduce the process based on the information left behind. The US government ended up spending a decade and over eighty million dollars just to research and rediscover the manufacturing process for this one particular component.
http://en.wikipedia.org/wiki/FOGBANK
Obviously FOGBANK is an extreme case, but it's a fair point worth considering. Drastic cuts to military contractors may leave large holes in military supply, especially of sensitive and classified materials.
NPR Planey Money episode: http://www.npr.org/blogs/money/2013/08/23/214928040/episode-...