Thornton: Cost-plus contracts incentivized the defense industrial base to rot out
Ethan Thornton · FULL INTERVIEW: Ethan Thornton: War With China Will Be Over in DAYS · Feb 11, 2026 · at 16:30
Mach Industries founder Ethan Thornton critiques the pricing and procurement incentives that prime defense contractors like Lockheed Martin operate under.
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“The way I think about it, the defense industrial base has rotted out so bad. I mean, you think about the incentive structures for the last three decades. If you're Lockheed, and I'm your supplier, and you're out in cost plus, you're incentivized to have me charge you more per component. And then if you're my tier two supplier, I'm incentivized to have you charge me more. And so for the last three decades, 10 levels down the stack across the industry, you've just seen it rot out.”
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