This paper proposes a model for new weapons system development based on a cost‐minimizing program manager who must specify a time profile for research and development and procurement costs that minimizes the total discounted cost of system development. Because of the explicit time dependence of the problem as posed, optimal control methods must be applied to determine the optimal time paths of R&D expenditures, procurement expenditures, and system inventory. Threshold effects of R&D on procurement and the effects of learning of procurement costs are included in the model. The model is tested against actual data for recent U.S. Navy torpedo development programs; the optimal time paths from the model are broadly consistent with the empirical data.