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Privatizing Military Production

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Research brief

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The end of the Cold War and subsequent reduction in the size of the military raised many questions about how the Army makes or buys its war materiel. It has a large industrial base, parts of which it owns and operates solely and parts of which are run by civilian contractors. Examples include ammunition plants and arsenals that make heavy ordnance such as gun tubes. The base is large compared with current or anticipated needs and thus underused. Furthermore, much of the equipment is aging and inefficient. Finally, industrial production falls outside the Armys inherently governmental function. Most Western nations with modern armies rely entirely on the private sector to meet their needs for military equipment and ammunition. Indeed, two-thirds of the United States Armys ammunition dollars already go to completely commercial plants. Thus, the question arises Should privatization play a larger role in the Armys procurement processes Research carried out in two of the RAND Corporations federally funded research and development centers, RAND Arroyo Center and RAND National Defense Research Institute, investigated this issue, and the results of the research appear in two publications Rethinking Governance of the Armys Arsenals and Ammunition Plants and Lessons from the North Canadas Privatization of Military Ammunition Production. The key findings were as follows 1 privatizing Army ammunition plants and turning the arsenals into a Federal Government corporation could save the Army money, foster innovation and efficiency, and enable senior leaders to focus on their priority function 2 potential cost savings range from 525 million to 1 billion in the short term, and from 900 million to 3 billion in the long term 3 risk associated with privatization and creating a Federal Government corporation is low and 4 the Canadian experience in privatizing ammunition plants is relevant and support the argument for privatizing U.S. plants.

Subject Categories:

  • Economics and Cost Analysis
  • Manufacturing and Industrial Engineering and Control of Production Systems
  • Ammunition and Explosives

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