In his farewell address on Jan. 17, 1961, President Eisenhower cautioned, “In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex (MIC).”

The initial draft of his speech used the term “military-industrial-congressional complex,” but he chose to placate Congress. Friedrich Hayek, in his 1944 book The Road to Serfdom, commented that after World War II, “The men who tasted powers will find it difficult to reconcile themselves with humbler roles.” It has been recognized throughout history that such unholy alliances between government and the strong armies and their industrial suppliers will exist and must be denied a place in society.

Total world spending on military expenses in 2006 was $1.158 trillion with nearly half, or $528.7 billion, spent by the U.S. In 2009, U.S. expenditures were $515.4 billion plus emergency and supplemental spending to total $651.2 billion.

Former Under Secretary of Defense and current Defense Science Board member Jacques Gansler said repeatedly since 1980, “Government must implement a set of coordinated policies aimed at creating a viable market economy in the defense industry.” In 1993 he said, “If the Pentagon does not implement such a strategy soon, defense contractors will remain specialized, highly subsidized, inefficient and ineffective at doing anything except building a few expensive weapons systems.” Today, the defense industry continues to consolidate – with small business getting less while large defense contractors perpetuate themselves at national expense. Let me give you examples from personal experiences.

Lockheed Martin, Northrop Grumman, Boeing, Raytheon, General Dynamics or BAE Systems each offer cases for study, but the following example is crystal clear. My friend Ted developed new technology under an Air Force contract and demonstrated this “game changer.” I called folks at Warner-Robins AFB to explain, and they went to see what Ted had and were very pleased with what they saw. They suggested that we see their major supplier, BAE Systems, about the technology and about teaming to extend development under the Air Force contract that originally sponsored the work.

BAE’s office in New Hampshire would be the partner, without financial obligations, and received demonstrations. They were quite pleased with the technology, with its applicability and with being a teammate. Ted then got a message from BAE that the company “cannot make a business case” to support or participate in the project.

I called and e-mailed Rick Diamond, VP of North American sales (of over $25 billion), but never got the courtesy of a reply. The Air Force was stiffed and so far does not have what it needs. It is obvious that BAE does not want little companies “homing in on their turf,” disturbing how the MIC does defense business, or presuming to have something better than what large, entrenched DoD contractors offer at excessive prices.

This is not good for America. And it is not good that defense contractors pay no penalty for arrogance and willful discouragement of innovation that is not in the selfish interest of those with a hammer. All large defense contractors mentioned, and others, have a selfish interest to exclude new technology that is not of their own initiative. What’s worse is these corporate giants inhibit innovation.

At meetings where new defense technology is presented, these usual suspects are fully represented. My view is that the big defense firms send “losers with a nice personality” to say nice things to small businessmen who attend thinking they can obtain meaningful attention and assistance to discuss innovation. My complaint strikes a sour note. However, attend a DoD trade show and see if you can construct anything meaningful.

My suggestion to avoid this dilemma is to change federal contracting procedures to penalize, not incentivize, large businesses for failure to deal with small, innovative firms. The incentive is gamesmanship, which is clearly done by the large defense contractors. My suggestion is to require the large contractors to acquire or otherwise partner with small business to enroll new technology in DoD contracts (anything over $50 million) and commercialize it. If they don’t, they will not get contract renewals or, on larger contracts, they will lose the fee. To assure that MIC players do not “game the system,” they must be accountable with such penalties for failure to perform.

It is to American’s advantage that this DoD contracting processes be improved. Many readers have some contact with the MIC, but most are many tiers removed from these issues. Ultimately, however, these problems will come home to haunt when America loses its gifts of innovation and historical role of technological leadership. IH