u/AudibleNod

Justin Hammer is a paltry facsimile to Tony Stark. That can easily be agreed upon. Justin is a premier weapon supplier to the US military however. The DOD has high standards for accepting weapons and don't just go with the first guy. There's quality control, checks and rechecks. Generally they tell weapons suppliers what they want and not the other way around. So the "Ex-wife" projectile probably wouldn't be just something Justin Hammer has lying around. He wants to be the next Stark. He's going to put his best foot forward with the refitting of the War Machine.

So what went wrong? Ivan Vanko. Ivan is no slouch. He's no Tony Stark, either. But he's a few rungs higher than Hammer. We see him reprogram the drones for his own purposes and we see he reprograms War Machine as well. If he can hack into a computer system ... at the logon screen, it's clear he can reprogram anything Justin Hammer gives him access to. Up to and including the Ex-wife. At the final battle Rhodey, tells Stark that he's going to fire the Ex-wife. Ivan, in the Whiplash armor, doesn't even bother to put the helmet back up. Because he already reprogrammed the Ex-wife to NOT detonate. Likely as a failsafe whereby if Rhodey regained control, the Ex-wife would cease being functional.

Tony assumed that the failure was a hallmark of Hammer Tech in general. But given standards the DOD requires and Hammer's reputation being on the line, this was doubtful.

TLDR: Whiplash reprogrammed the Ex-wife to be a dud.