Weapons Contractors Thrive

[v. 8-28-16]

Weapons Contractors Thrive Amid the Silence of Presidential Campaigns toward Federal Weapons Spending—The Example of Lockheed Martin

Richard Krushnic and Jonathan King

The single largest component of the discretionary Congressional budget is Pentagon spending, some 55% of the total $1.15 trillion, about $625 billion dollars last year (excludes Trust Funds Medicare, Medicaid  and Social Security).  Much of these expenditures go to corporations for military operations,  weapons development, manufacture and maintenance.  Many of these contracts are “cost-plus”, guaranteeing profit margins regardless of cost overruns or corporate  inefficiencies. It is this enormous expenditure which constricts investment in every other sector of the federal budget addressing social and economic needs of Americans – housing, transportation, healthcare, education, biomedical research, environmental protection, and sustainable energy development, to name a few.  Yet both Donald Trump and Hillary Clinton are silent on this largest payout of taxpayers dollars. Even Senator Sanders, in his “Our Revolution” national address (August 24th, 2016) to his campaign supporters made no mention of the bloated Pentagon budget, on continued needless weapons purchases, such as the F-35 fighter, or the planned upgrade of the thousands of nuclear weapons still on hair trigger alert. Even Bill McKibben, in his otherwise excellent opening remarks to the Sander’s talk, left out the threat to the environment from tens of thousands of nuclear weapons deployed within the US and around the world. We argue below that this unwillingness to take on the major weapons contractors reflects their ubiquitous and dangerous  fiscal and political influence operating out of sight of the public.

The economic and political power of military corporations drives continuing high military spending.  While military high command and the intelligence agencies (CIA, NSA, NRA) also press for this, private corporate profits may be the most powerful driving force (supported by members of Congress with military R&D and production facilities in their districts).  Here we explore this thesis and explore the example of Lockheed Martin’s nuclear weapons contracting. Lockheed is  the world’s largest military firm and probably the most significant US nuclear weapons firm.

Buried in the Congressional 2017 $625 miitary authorization is spending of some $350 billion over the next decade for upgrades of our nuclear weapons ($35 billion/year) – land-based missiles in silos, long range bombers and their bombs,  new Trident submarines and upgraded Trident missiles and new nuclear-capable cruise missiles. The so-called “modernization” program projects spending more than a $Trillion - a thousand billion - dollars over the next 30 years.

                  Given that the Soviet Union no longer exists, that China has become a capitalist economy, and that the major difficulty faced abroad are ISIS and related groups, it is deeply questionable why the Congressional budget still devotes tens of billions of dollars to cold war-era nuclear weapons. These weapons cannot be used to combat terrorism in the US or Europe, or ISIS or the Taliban.  The presence of thousands of US nuclear weapons on hair trigger alert hasn’t prevented the North Koreans from moving ahead with their nuclear programs. Britain’s nuclear weapons did not prevent Argentina from occupying the Falkland Islands. Russia’s nuclear weapons haven’t deterred the Chechen rebels from attacking Russia. Neither India nor Pakistan’s arsenals has deterred each nation’s militants from attacking each other across the contested Srinagar boundary in Kashmir. Yet the administration is proposing to spend $1 trillion dollars or more over the next three decades upgrading the U.S. Nuclear Weapons Triad: Where does the pressure for these wasteful and provocative programs – which almost certainly decrease national security - come from?

                  When challenged nuclear hawks break out the standard phrases of “National security”, “Nuclear deterrence”, “Mutually Assured Destruction”, “Pre-emptive strikes” and related mumbo-jumbo calculated to activate cold war fears of our citizenry. We share with many defense experts, such as former Defense Secretary William Perry,  that this modernization will increase the anxieties of Russia, China and other nations, and increase the chance of an accidental launch. Rutgers climate scientist Alan Robock and colleagues have shown that even a limited exchange – for example between India and Pakistan – would generate firestorms throwing enough soot and particles into the upper atmosphere to generate a nuclear winter, lowering the Earth’s temperature and creating worldwide famine for decades following. This would result in the deaths of hundreds of millions around the world. Rather we suspect this “modernization” – more accurately escalation - is in large part a  dangerous and irresponsible effort to maintain the profits of a small but politically aggressive subset of US corporations.

                  In his Prague speech in April 2009 President Obama had called for serious action toward global nuclear disarmament :  “… as the only nuclear power to have used a nuclear weapon, the United States has a moral responsibility to act. We cannot succeed in this endeavor alone, but we can lead it, we can start it.” Sadly, the President has retreated from such a critical course of action. His 2017 budget introduced in the fall continued funding for all components of the nuclear weapons triad upgrade.

We have described the substantial and protected contractor profits associated with nuclear weapons contracts (“Privatizing the Apocalypse:  How Nuclear Weapons Companies Commandeer Your Tax Dollars”). This follows from their monopoly nature – they cannot be outsourced so are not subject to such competition; the contracts are in general cost plus so that no matter how inefficient the corporate operations are, significant profits are guaranteed, and audits are extremely rare since the contracts are shrouded by national security claims. To understand more clearly how this system operates, we explore more closely below, for the largest weapons contractor in the world, Lockheed Martin, the coupling between corporate profits and the continuation of nuclear weapons delivery programs.  

Lockheed Martin Exemplifies How Nuclear Weapons Contractors Continue to Promote Nuclear Weapons Upgrades, Delivery Vehicles and Potential Use

Corporations that contract with the Department of Defense (DOD) for nuclear weapons complex work do not report revenues and profits from this work separately from their other military work, although they do break out government work from civilian work, and sometimes break out military work from other government work.  Hence, it is not possible to determine profits made from nuclear weapons complex work from the Annual Reports and SEC filings of large military corporations.  However, it is possible to estimate, and to demonstrate how a significant amount of military research and development (R&D) and production not recorded as nuclear weapons work, is, in fact partially nuclear weapons work.  One can also show how nuclear weapons work financed by the US Department of Energy (DOE) is done in a semi-secret sort of insiders club that insulates it from public knowledge and oversight, and therefore increases the dangers to the planet that the nuclear weapons complex threatens. The first contracts for the upgrading of the nuclear weapons triads have already been awarded – one to Northrop Grumman – for a new generation of long-range bomber. But the public remains in the dark as to how many tens of billions of their tax dollars will be spent on the project.

Over the three years 2012-2014, according to the Lockheed Martin’s 2014 Annual Report, they realized an average of $46 billion a year in revenue, with an average of $3.2 billion in profits—7% of revenue, and a 76% return on $4.2 billion of investor equity.  The Annual Report informs us that 59% of 2014 revenue came from the Pentagon.  We know from other sources that $1.4 billion a year is coming from the DOE for operation of the Sandia nuclear weapons lab, and we are estimating that an additional $600 million a year is coming for DOE nuclear weapons complex work.  Information in the Annual Report indicates that around $6.1 billion came from foreign military sales.  This adds up to around $35 billion of military revenue, or 75.3% of total 2014 revenue.  The single biggest revenue earner in recent years is the F-35 jet fighter, bringing in $8.2 billion, 17% of total corporation revenue, in 2014. (William Hartung’s recent report describes additional aspects of Lockheed-Martin’s military business, and his book “Prophets of War: Lockheed Martin and the Making of the Military Industrial Complex” provides extensive background).

The only references to Lockheed’s nuclear weapons complex work in its 2014 Annual Report is a sentence noting provision of infrastructure and site support to the Department of Energy’s Hanford complex, and a phrase noting continuing work on the Trident Missile.  The words nuclear weapons never appear in the report.  Lockheed is no longer producing new Trident Missiles, but it continues to be involved in their maintenance and modernization.    

Lockheed Nuclear Weapons Operations

In spite of the lack of mention in the Annual Report, Lockheed is a partner with Bechtel ATK, SOC and subcontractor Booz Allen Hamilton in Consolidated Nuclear Security LLC (CNS), in running the Department of Energy’s Pantex Plant and the Y-12 Complex.  Pantex does nuclear weapons life extension, dismantlement, development, testing and fabrication of high explosive nuclear warhead components.  Y-12 stores and processes uranium, and fabricates uranium weapons components.  

Lockheed produced the Trident strategic nuclear missile for the US Ohio-Class Nuclear Submarine and for the British Vanguard-Class Submarines.  The 24 Tridents on each Ohio class submarine each carry either 8 or 12 warheads, all of them 20 to 50 times more powerful than the bombs dropped on Hiroshima and Nagasaki.  Each warhead is capable killing most of the people in any one of the world’ largest cities—either immediately or later, from radiation, burns, other injuries, starvation and disease. If the warheads fired from only one submarine detonated over land, a global nuclear winter would result, leading to global famine, and the deaths of tens of millions including Americans. The US has 14 of these Trident submarines.  Lockheed is not producing new Trident Missiles now, but it maintains and modifies them.  Previously Lockheed and its subcontractors received $65 million for each of the 651 Trident missiles, in addition to the $35 billion in earlier development costs. 

The other primary strategic nuclear weapon delivery vehicle is Boeing’s land-based Minuteman III Strategic Missile, also with many warheads per missile.  450 of them are in silos in Colorado and northern plains states.  Lockheed produced and continues to produce key systems for the Minuteman, and plays a large role in maintaining them.  It was awarded s $452 million contract for this work in 2014.

Lockheed’s Secret San Francisco Nuclear Warhead Assembly Plant

Without its neighbors knowing, Lockheed was in 2010 (and today?) assembling Trident nuclear warheads, each capable of destroying much of the San Francisco Bay Area, in a secret 5th and Mathilda Avenues plant in the Bay Area’s Sunnyvale.  The W88 warheads assembled there each have an explosive yield 30 times greater than the Hiroshima bomb.  If Hiroshima’s “Little Boy” could wipe out a city of over 100,000 people, just think what one W88 could do to San Francisco and the Bay Area.

Lockheed’s Sandia Subsidiary

Regarding the Pentagon’s nuclear weapons upgrades planned for the next decade; particularly important is the role of Sandia National Laboratories (SNL).  Outside of Albuquerque New Mexico, this Department of Energy lab’s 10,600 employees make 95% of the roughly 6,500 non-nuclear components of all seven US nuclear warhead types.  Components arm, fuse, fire, generate neutrons to start nuclear reactions, prevent unauthorized firing, preserve the aging nuclear weapons stockpile, and mate the weapons to the missiles, planes and ships that deliver them to targets.  Sandia Corporation LLC, wholly owned by Lockheed Martin, operates Sandia.  DOE is spending at least $1.4 billion a year on Sandia nuclear weapons work.  The secret Lockheed nuclear warhead assembly plant uncovered in Sunnyvale in 2010 is an extension of Lockheed Sandia operations.  Again, none of this received any mention or revenue numbers in Lockheed’s 2014 Annual report.

Conflict of Interest at Sandia

           In our previous article, “Privatizing the Apocalypse:  How Nuclear Weapons Companies Commandeer Your Tax Dollars”, we discussed the profitability of the nuclear weapons work, and how the corporations involved use part of their profits to lobby for more nuclear weapons, and modifications of existing ones.  As further indications that this is the case, we illustrate with two aspects of the Sandia case:  First, there is an inherent conflict of interest in that the Government’s Director of Sandia—the lab is owned by the DOE  (Department of Energy)—is also president of the executive board of the Lockheed Martin subsidiary the government pays to operate the facilities.  The same is true; by the way for the other two key nuclear weapons labs, Los Alamos and Livermore, operated by other corporations.

The Sandia Lab (and the Los Alamos and Livermore Labs) are owned by the government (DOE), and the three heads of the government lab are also the three heads of the private corporations the labs hired to operate the labs (GOCO- Government Owned, Contractor Operated).  Thus in each case the head of the government lab is the same person as the head of the company the government lab hired to operate the lab.

No Penalties for Lockheed-Martin’s Prohibited Use of Pentagon Contract Dollars for Lobbying Congress for More Nuclear Weapons Funding

One of the uses of the billions of dollars from these contracts is to recycle them back into lobbying the government to push for additional conventional and nuclear weapons spending, as reported by William Hartung and Stephen Miles. Of course in addition these funds are used to support a general environment of fear, and insecurity, through contributions supporting hawkish think tanks. Technically the federal government does not allow military contracting firms to use awarded funds to lobby Congress.  Lobbying funds must come from other parts of the companies’ businesses.  In reality, this is a non-functional restriction, since profits from various business segments are fungible; that is, once they are profits they are intermingled, so in reality the firms CAN use the profits from military contracts to lobby congress.  But Lockheed went ahead and spent military contract funds from 2008-2012 as part of the contract expenditures.  It didn’t even bother to book the lobbying expenditures as expenditures of profits.  The US Department of Justice required Lockheed Martin’s Sandia subsidiary to repay in 2015 $4.9 million of a Sandia contract award to the Pentagon that the firm had spent under the contract for lobbying of Congressmen, the DOE Secretary, and the Secretary’s family and friends ().  This, of course, will have no effect regarding future contract awards to Lockheed and its Sandia subsidiary. 

The Revolving Door

Such flouting of regulations is consistent with the revolving door between the military, Congress and the military companies.  For example, Norman Augustine served as the Pentagon’s assistant director of defense research and engineering from 1965 to 1970, when he became vice president of LTV Missiles and Space Company.  Three years later he became the Pentagon’s Secretary of the Army.  Four years later, in 1977, he went to work for Martin Marietta Corporation, and became its chairman in 1988.  In 1993 Martin won the contract to run the Sandia labs and merged with Lockheed in 1995.  Augustine became president of Lockheed at the merger.  In 1997 he retired as president and became chairman of the board of directors.  In 2014 he was appointed to the congressional advisory panel on the National Nuclear Security Administration (NNSA) oversight of the DOE’s nuclear weapons labs.  The NNSA is a semi-autonomous arm of the DOE that oversees the nuclear weapons labs, including Sandia.

Donald Cook was a top official at Sandia National Laboratories from 1997 to 2005, when he became chief executive officer of the Atomic Weapons Establishment of the United Kingdom.  In 2010 he became deputy administrator for defense programs at the NNSA.

Former Secretary of Defense William Perry’s and Former Senator Sam Nunn’s Warning

The profitability of nuclear weapons manufacture should not be permitted to obscure the ways in which this “modernization” program decreases national security. Former US Secretary of Defense for three years (1994-1996) William j. Perry thinks that “We are facing nuclear dangers today that are in fact more likely to erupt into a nuclear conflict than during the cold war.”  He notes that the new US nuclear weapons modernization program and Russia’s modernization program, along with confrontations in Eastern Europe and the Middle East have begun a new nuclear arms race more dangerous than the cold war.  Such upgrades make it far more difficult for the US to convince other nations to forego development of their own arsenals. Those diplomatic efforts have succeeded with Iran. However, Korea, Israel, Pakistan and India continue with their nuclear programs. Perry is concerned that the vastly increased accuracy of nuclear weapons, making it possible to take out strategic targets with smaller warheads and less collateral damage, makes their use much more attractive and likely.  He sees “an imperative to stop this damn nuclear race before it gets underway again, not just for the cost but for the danger it puts all of us in.”

          Perry thinks the movements in the US-Russia relationship, the US-China relationship (in the South China Sea), North Korean and Pakistani nuclear weapons developments and instabilities, and the likelihood of ISIS or other groups obtaining nuclear weapons all combine to make actual use of nuclear weapons more likely in the coming decade than during the cold war.

        Former US Senate Armed Services Committee head Sam Nunn, former Russian Minister of Foreign Afairs Igor S. Ivanov, and Des Browne, former British Secretary of Defense, are so concerned about accident or confrontation resulting in US-Russian military escalation to nuclear weapons use, that they founded the Nuclear Threat Initiative. This includes a proposed a US-Europe-Russia European Atlantic Leadership Group which would restore a trusted communications system to deal with accidents or confrontations in real time, in order to deal with escalation scenarios that could result in nuclear missile launches within a few minutes of triggering events. In the course of the Ukraine crisis, nearly all aspects of US-Russia nuclear security cooperation have been terminated, and the Red Emergency Phone line has been cut.  Two decades of various types of nuclear weapons security cooperation has ended.   

                  The planned development of a new generation of upgraded nuclear weapons with enhanced destructiveness fails to address any of the real security issues faced by our nation – ISIS, Al Qaeda, domestic terrorists, or streams of refugees. It drains billions of dollars from the real economic needs of upgrading our infrastructure, investing in high speed rail and public transit, developing energy sustainability at much more rapid rate; tackling the chronic disease scourges such as Alzheimer’s and Parkinson’s.  We need subways not submarines, books not bombs, healthcare not warfare. Contrary to accepted national security doctrine as it may appear, we maintain that a major driving force for nuclear weapons upgrades is coming from corporations trying to maintain their enormously profitable pentagon contracts.

                  Efforts to communicate to voters the role of weapons contractors in distorting national security policy are getting underway, following the lead of the European-based “Don’t Bank on the Bomb” campaign.  Last Spring the Cambridge City Council voted unanimously to request that the Cambridge Pension funds divest from stocks in companies involved in the manufacture of nuclear weapons. This is a small but important first step in focusing attention on these corporate drivers of dangerous and costly nuclear weapons policies.

Richard Krushnic is a former Federal Contracts Adminstrator for the City of Boston, and author of numerous essays on national security; Jonathan King is Chair of the Nuclear Disarmament Working Group of Mass Peace Action and Prof. of Molecular Biology at MIT.

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