Introduction: decision-making in defence procurement

The specific characteristics of defence industry have frequently fostered a close relationship between government and its suppliers. Both parties to the contract are driven together by the high stakes involved. American defence analysts have described the ‘non-market, quasi-administrative buyer-seller relationship’ that is the hallmark of the process of weapons procurement. The government hopes to acquire the particular product or weapons system within the time-limit and budget stated in the contract. Rigorous quality controls must be implemented, in order to ensure that the product conforms to the required performance standards. For these reasons, firms in the defence industry do not have the same kind of autonomy available to other firms. Their behaviour and performance excite the close interest of government.

For their part, private arms manufacturers press for allowances to be made, in respect of the risks and uncertainty associated with defence production. The creation of new weapons systems entails high development costs, which are borne in the first instance by the arms contractor. Funds are tied up in research laboratories. Uncertainties surround the final costs of any production programme, especially where the technology is new. Furthermore, the purchaser may be required to alter product specifications at short notice, disrupting the production process. The industry is also vulnerable to sudden shifts in government policy, which could force the abandonment of a weapons system. For the contractor, therefore, armaments production can be a risky business.