Pentagon to assess impact of policies on top contractors

The Pentagon has asked the Defense Science Board to assess the impact of Defense Department acquisition policies on the health and competitiveness of the defense industry.

In a Jan. 20 memorandum, Jacques Gansler, undersecretary of Defense for acquisition and technology, asked the board to form a task force to recommend changes in DoD policies and practices that would ensure the viability of major defense contractors.

The task force will review the impact of price-based contracting, cost accounting standards, sole-source contracts and other procurement practices on prime vendors. The memorandum asks for a final report by April 10.

Over the past year, top defense contractors, including Lockheed Martin, Northrop Grumman and Raytheon, have been criticized by investors and observers for financial problems and operational miscues. The Pentagon met with industry executives several times last year to discuss ways to keep defense contractors healthy.

In a speech last November, outgoing Deputy Defense Secretary John Hamre said the government needs to provide stable funding to contractors and ensure that "we don't, in the budgetary pressures of the moment, adopt some acquisition practices which turn out to be very tough on industry with unintended consequences."

Philip Odeen, vice chairman of the Defense Science Board and an executive at defense contractor TRW, will head up the task force.