OPINION:
Monopsony is a highfalutin word that sounds like monopoly but means almost the opposite.
Instead of one company cornering the market on some goods or services, a monopsony means there is only one buyer — a single customer so dominant that sellers have no meaningful alternative.
The U.S. government was the ultimate monopsony — until it decided to buy equity in its own suppliers, essentially buying from and selling to itself.
Nothing to see here, folks. No corruption will be involved.
As this newspaper reported last week, the government, through the Department of Defense, has purchased stock in more than 20 companies, including leaders in artificial intelligence and rare earth mining.
The government has not yet asserted ownership of any of these companies, but such nationalization could be only a step away.
The problem is that the U.S. acquisition system is based on competition. Under the laws and regulations governing American procurement, offers must be solicited and evaluated in “full and open” competition before a contract is awarded.
So, how is the government supposed to decide between offerors if it owns a stake in one of the companies? It cannot — and corruption is sure to follow.
We have to envy the British. Their scandals usually feature some minister having an illicit affair with some attractive woman whom the tabloids can display in dishabille.
The last major procurement scandal we had was more than two decades ago. It involved Darleen Druyun, then principal deputy assistant secretary of the Air Force for acquisitions and management, and a Boeing executive named Michael Sears. Someone had slipped a provision into an Air Force appropriations bill that allowed the Air Force to lease tanker aircraft.
In exchange for a postretirement job at a hefty salary, Ms. Druyun cooked the books to inflate Boeing’s price for the aircraft. Her guilty plea resulted in a nine-month prison sentence.
Boeing fired Mr. Sears. He was also convicted and sentenced to four months in prison and a $250,000 fine.
If Ms. Druyun and Mr. Sears could combine forces to corrupt a lease deal, then one can only imagine the corruption that the Pentagon’s purchase of equity in several defense firms will generate.
The Competition in Contracting Act requires “full and open” competition among companies offering to build aircraft, ships and even pencils and paper for the government. The system is probably the most overregulated in the nation.
Still, as the Druyun-Sears scandal proved, deceit and misconduct follow even the most overregulated systems.
The mind boggles at the thought of government partial ownership of competitors. How can any “full and open” competition be held between a company in which the government has an equity interest and one that does not? It is so improbable as to be impossible.
Government acquisition and contracting officers will always have the government’s investment in one company at the back of their minds. They will be susceptible to bribery and other malfeasance, including the leaking of details about one company’s offer to another, which also violates the law.
We are now fighting a war of attrition with Iran that is quickly depleting our munitions stores. Market forces should correct that situation, but our munitions manufacturers have to wait for more than a year to replenish parts and other materials. There must be a better answer.
That answer has three parts. The first is the Defense Production Act, which allows the president to require companies to manufacture defense products. That authority should be used to compel the manufacture of defense products and systems without hesitation.
The second part of the answer is in market forces. Congress can create them by increasing defense spending and pointing it at what we really need. Our defense budget for fiscal year 2027 is about $1.5 trillion, including $1.15 trillion in discretionary funding and an additional $350 billion in mandatory reconciliation funding for munitions, the defense industrial base, and other priorities.
Still, that does not cover everything we need most. Our Air Force, for example, is not getting more funding to meet the losses we are suffering in the Iran war. In 2027, it will retire more aircraft than it replaces. That needs to be changed, and soon.
The third part of the solution is straightforward: The Pentagon must immediately sell the shares it has bought in defense suppliers to reduce the corruption that will necessarily follow.
• Jed Babbin is a national security and foreign affairs columnist for The Washington Times and a contributing editor for The American Spectator.
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