Military-Industrial Interaction, 1884–1914 289ronment. Special relationships with procurement officials and with
technically innovative officers often mattered more than prices in de
ciding who got a contract and who was passed over. Yet this cozy rela
tionship among experts was also subject to jarring disturbance from
outside when overtly political pressures to economize, or to spread
the work by helping some depressed region or firm, were brought to
bear.
Conventional cost accounting was an imperfect instrument for any
one trying to manage an arms firm under these circumstances. A con
tract to built a piece of machinery that had never been seen on earth
before commonly required capital investment of a substantial sort.
But whether the new facility would continue to be used or would in
stead have to be discarded after the completion of a single contract be
cause some new device or design had come along in the meanwhile
and rendered it obsolete—this no one could ever know for certain.
What then was the proper cost to assign to such an undertaking?
Could and should a firm expect to recover its entire capital costs from
a single contract? If so, the price would have to be very high; and any
subsequent utilization of the new capital plant would be sure to bring
in those swollen profits of which armaments producers were later to
be so vigorously accused. But if capital costs were instead amortized
over a longer period of time, what guarantee was there that fresh con
tracts would be forthcoming so that the new plant would not simply
stand idle after the initial contract had been fulfilled? Neither Admi
ralty officials nor private entrepreneurs could answer such questions
with any kind of precision in a world of rapidly changing techniques. It
was, therefore, a high risk business—inevitably.
To be sure, foreign sales could make such problems far less acute
for the private firm, but only as long as the Admiralty did not impose
restrictions upon letting foreigners share technical secrets that derived
from research and development which had been funded, at least in
part, by public monies.^47 Collusive bidding among competing firms
was an even more obvious way to reduce risks. The Admiralty coun
tered by looking around for new firms and inducing them to enter the
arms trade as a way of expanding supply, lowering prices, and fore
stalling monopoly. This was how Vickers entered the arms business in
- Restrictions of this kind became increasingly important. Secrecy, indeed, tended
to supplant patents as a mode of protecting new technology, if only because the public
deposit of plans and drawings required to support a patent allowed rival firms and
countries to borrow what they liked (perhaps with minor variations to make patent
infringement legally debatable), or to develop a superior device with full knowledge of
the performance characteristics of the rival product.