Contractor mergers save DoD billions

Defense industry mergers have saved the Defense Department more than $2 billion, according to a new General Accounting Office report.

The GAO review of seven major defense industry mergers, including those of Northrop and Grumman and Lockheed and Martin Marietta, showed that each saved the government hundreds of millions of dollars by streamlining operations and cutting personnel. Defense contractors passed on those savings to DoD.

In return, the Pentagon has paid $856 million to the companies to cover the costs of mergers, including expenses associated with closing facilities and relocating workers and equipment.

DoD has projected that net savings from the seven mergers will total $3.3 billion between 1993 and 2000. The new report, "Defense Industry: Restructuring Costs Paid, Savings Realized, and Means to Ensure Benefits" (NSIAD-99-22) said DoD has already saved $2.1 billion.