infrastructureScore 40/100Research
U.S. cost-plus defense procurement structure creates perverse incentives eliminating private-sector innovation in cost reduction and manufacturing optimization, requiring fundamental reform
Palmer Luckey· Anduril Industries· Robotics· 2026-05-26
“Nobody, not in academia, not in industry, was interested in figuring out how to cut production times in half or how to cut product prices in half, because if you cut the production time in half, then well, where's your plus gonna come on all that cost? If you make something that's $6 million into a $3 million thing, you're literally just losing money.”
Why it matters
Cost-plus contracts eliminate profit incentives for efficiency, cost reduction, or accelerated development. This structural economic model perpetuates expensive, slow weapons development and supplier consolidation around legacy contractors.
Investment implication
Anduril's product-company model threatens traditional defense contractor economics. Expect continued pressure on RTX, Lockheed Martin, Boeing, Northrop Grumman margins as Pentagon adopts efficiency-focused procurement. Opportunity for suppliers enabling cost reduction and accelerated manufacturing.