When I landed my first major Pentagon assignment back in 2012, a senior defense official told me something I’ve never forgotten: “In this town, budget overruns aren’t accidents – they’re business models.” After a decade covering military spending, that cynicism has proven consistently well-founded.
Former President Donald Trump now appears to share that perspective. His campaign has unveiled a proposal targeting what many critics have long viewed as endemic waste in defense contracting. The plan would impose financial penalties on contractors who exceed budget parameters on major weapons systems and defense projects.
“Companies that go 25% over budget on government contracts will face a 5% financial penalty on the total contract value,” a senior Trump campaign adviser confirmed during a press briefing Wednesday. “Those exceeding budgets by 50% will face a 10% penalty.”
This proposal represents one of Trump’s first concrete defense policy initiatives as he seeks a second term in 2024, positioning himself as a fiscal reformer within the traditionally Republican-supported defense industry.
The Pentagon’s Cost Problem
Defense industry watchers will recognize this as addressing a persistent challenge. The Government Accountability Office reported in June that major weapons programs currently exceed their initial cost estimates by an average of 30.8%, totaling over $177 billion in cost growth.
“The systemic nature of these overruns suggests structural problems in how we budget, contract, and oversee defense acquisitions,” explained Todd Harrison, defense budget analyst at the Center for Strategic and International Studies, when I spoke with him Thursday.
Harrison noted that cost overruns occur across nearly all major platforms. The F-35 fighter program, initially projected to cost $233 billion in 2001, has ballooned to nearly $400 billion. The Ford-class aircraft carrier program exceeded initial estimates by 27%, while the Zumwalt-class destroyer saw costs rise by almost 45%.
A former Pentagon contracting officer, speaking on condition of anonymity, told me that the current system “practically incentivizes” cost overruns. “Contractors submit optimistic initial bids knowing they can renegotiate later, and program managers often underestimate costs to get programs approved.”
Industry Pushback
The defense industry’s response has been predictably critical. The Aerospace Industries Association, representing major contractors like Lockheed Martin, Boeing, and Raytheon, released a statement characterizing the proposal as “counterproductive.”
“Penalties don’t address the underlying complexity of weapons development or the changing requirements that often drive cost increases,” the statement read.
Executives from two major defense firms, speaking privately to avoid potential conflicts with a possible future administration, expressed concerns about the practical implementation of such penalties. One questioned whether the policy would distinguish between contractor-caused overruns and those resulting from Pentagon requirement changes mid-project.
“About 40% of cost increases stem directly from the military changing specifications after contracts are signed,” the executive said. “Would we be penalized for those too?”
Mixed Congressional Reception
On Capitol Hill, reactions have split along predictable lines, though with some surprising nuance.
Rep. Adam Smith (D-Wash.), ranking member of the House Armed Services Committee, characterized the proposal as “simplistic” but acknowledged the need for reform. “We absolutely need stronger accountability measures, though I’m skeptical that flat penalties alone solve the structural issues,” Smith told reporters.
Meanwhile, some Republican defense hawks expressed reservations about potential impacts on military readiness. “We can’t compromise national security in pursuit of budget discipline,” said Sen. Roger Wicker (R-Miss.) in a statement. “Penalties that potentially push contractors away from essential defense work could be counterproductive.”
However, fiscal conservatives within the Republican caucus have welcomed the proposal. “For too long, we’ve written blank checks to defense contractors,” Rep. Nancy Mace (R-S.C.) told me when I called her office Thursday. “This kind of accountability is long overdue.”
Implementation Challenges
“The devil’s in the details,” explained Mackenzie Eaglen, defense analyst at the American Enterprise Institute. “What’s the baseline for measuring overruns? Initial contract value? How do you account for inflation, supply chain disruptions, or necessary design changes?”
William Hartung, author of “Prophets of War” and a longtime critic of defense industry practices, suggested to me that penalties alone wouldn’t address systemic issues. “Without reforming how requirements are generated and how risk is shared between government and industry, we’ll just see contractors building penalty costs into their initial bids.”
Department of Defense data shows that approximately 22% of major acquisition programs experience cost growth exceeding 25%, while about 14% exceed initial estimates by more than 50%.
My years covering defense spending have taught me that no single approach will solve these entrenched problems. The procurement system involves thousands of pages of regulations, competing bureaucratic interests, and congressional priorities often driven by protecting jobs in key districts.
What remains unclear is whether Trump’s proposal represents a serious policy position or campaign rhetoric aimed at his “drain the swamp” base. When I pressed a campaign spokesperson about implementation specifics, they declined to elaborate beyond the initial announcement.
What’s certain is that tackling defense waste requires sustained political will that has proven elusive for administrations of both parties. Whether penalties would reduce overruns or simply change how contractors approach initial bidding remains an open question – one voters will likely be considering as defense policy discussions intensify ahead of the 2024 election.
