Timing and Budget in Defense Project Management

Did you know that if you are a defense project manager, the two most common words you will hear in your work will not be 'secrecy' and 'national security', but will be 'when?' and 'the budget'!

And these two words are exactly what any young man who proposes marriage to a girl hears.

But do you know why most defense programs around the world exceed their allocated budgets, experience delays in execution, and then show results that are below expectations?

This question is not a local exception, but it is a global pattern that repeats from America to Britain and Europe, and behind it lie economic and institutional reasons rooted in the very nature of the defense industry itself.

First, we must understand that weapons are not an ordinary commodity. In traditional economics, the market regulates itself through competition; the inferior or overpriced product loses its place, and the consumer moves to the competitor.

But in the defense sector, the equation is completely reversed. The only buyer is usually the state, suppliers are extremely limited, and every product — whether it is a plane, a system, or an armored vehicle — is so complex that it prevents the existence of real alternatives. And this makes the market semi-monopolistic, and the state as buyer has to continue even with the emergence of defects or enormous cost increases.

Due to the nature of this market, there is inflation in budgets and delays in deadlines, because the natural competitive pressure is not present, while the political and security commitment to the project is very high.

Secondly, there is a massive information gap between the two parties. I previously spoke about the theory of 'the principal and the agent,' where the state represents the 'principal' and the company represents the 'agent'.

This theory highlights the information gap between the two parties: companies possess precise knowledge of the actual cost, the required duration, and the technical complexities, while government entities have a partial view based on initial estimates. Consequently, the company can manipulate the state's expectations — i.e., "play with it" in simpler language — by presenting an ideal project plan at an unrealistic price and schedule, and the government often agrees because it faces political or military pressure to start, and because it does not know all the details.

And after signing the contract, the figures begin to change, and over time canceling the project or modifying it becomes almost impossible due to its political and security implications, as well as its additional cost.

Thirdly, the multiplicity of authorities within the same country creates institutional chaos; each authority desires a customized version of the product with different technical specifications, causing the list of technical requirements to swell, the software and components to change, the testing period to lengthen, and with all that the schedule extends and the cost rises.

This is in theory; now let us move on to the practical side.

Reports from the United States Government Accountability Office (GAO) on the F-35 aircraft program indicate that the principle of 'concurrency' between development and production — or Concurrency — was among the main causes of cost growth and delivery delays, because the aircraft was being produced before design stability, so every subsequent modification required re-manufacturing or testing. The result was an average delay of more than 200 days in 2024. But more importantly, the report noted the continuation of financial incentives as if performance were excellent, which highlights another institutional problem: the incentive system rewards the same activity rather than the actual results.

The American Nunn–McCurdy Act requires the Department of Defense to inform Congress if the project exceeds a specified percentage of the cost increase.

And when that happened in the Sentinel nuclear missile project, it was discovered that the cause of the delay was not purely technical, but related to the infrastructure itself — i.e., that some of the project's hidden costs had not been accounted for from the very beginning.

In Europe, the British armored vehicle Ajax is a clear example. The project faced technical problems and very long delays, and a report by the UK National Audit Office (NAO) indicated that fixing the program had become more expensive than creating an entirely new program.

But the project continued because what is called "Sunk Costs" (Sunk Costs) creates an illusion of continuing: "We’ve spent a lot, so it doesn’t make sense to stop now" — even if stopping would be more cost-effective.

From this it becomes clear that the delays in defense programs are not due solely to implementation errors, but to a complex governance system that brings together supplier monopolies, information opacity, the multiplicity of actors, and an institutional incentive system that encourages continuation rather than the result.

As long as the defense market is based more on national security imperatives than on its economic sector, cost inflation and delivery delays will remain a natural phenomenon in every large defense project.

But, since this is the nature of the market, the natural question arises: is this system doomed to stay this way? The answer: no. But any real reform must address the roots of the institutional dysfunction, not just the symptoms.

Some Western countries have tried to narrow this gap through stronger regulatory tools and periodic audits by independent bodies, with funding tied to measurable outcomes rather than initial promises.

Just as laws like the Nunn–McCurdy Act seek to break the automatic progression in large projects, and force the ministry to halt, justify, and reevaluate when costs exceed the defined limits.

Reforming the incentive system is also a crucial element; instead of companies receiving rewards merely for modifications or expansions, profits should be tied to adherence to timelines and the achievement of the required performance, along with the strengthening of technical and financial transparency to reduce information monopolies.

Any real solution requires redesigning the governance model itself — from defining requirements to oversight of implementation — and not merely swapping a contractor or modifying a contract.

Therefore, if the defense industry in any country continues to operate under the logic of "national security at any cost," without a smart governance system or disciplined incentives, the spiral of escalating costs and chronic delays will remain an inevitable consequence.

But if a model is built that balances military secrecy and organizational transparency, and balances speed in decision-making with rigor in accountability, then only can defense programs be transformed from a perpetual drain on financial resources into an effective tool for producing real military power.

This is an AI-generated en translation. The original text is in ar