Contractors respond warily to Pentagon vow to preserve industrial base

Top acquisition chief invites struggling companies to talk.

Just days before the expected Feb. 13 release of President Obama’s fiscal 2013 budget, the Defense Department’s top weapons buyer sought to reassure nervous contractors that the White House will protect vital industries even as it implements major cuts in procurement and personnel spending.

Frank Kendall, acting undersecretary of Defense for acquisitions, technology and logistics, told a Monday forum at the Center for Strategic and International Studies his highest priorities include beefing up the federal acquisition workforce, strengthening the military industrial base, preserving technical superiority, and buying into only affordable and dependable programs.

He also suggested that the Pentagon might intervene to help key contractors that are struggling in the current economy. “When people see that there’s a supplier who is in trouble, or they’re in trouble themselves, they need to come let us know,” he said, according to an account in National Journal . “When they look out and see their business base eroding, or see that they’re not going to be viable for whatever reason, we need to know that. Then we can do assessments that look at whether we need to maintain competition there, whether it is a nice capability that we need to continue to support -- how we might intervene.”

Fred Downey, vice president of national security at the Aerospace Industries Association, told Government Executive that “ongoing reductions in defense spending coupled with the threat of sequestration cuts are causing a great deal of concern among smaller companies in the supply chain. Many of these companies have unique capabilities that could be lost if their workflow is interrupted by cancellations and delays.” He added, “Kendall’s comments could lead to positive action to sustain critical small suppliers. We look forward to more discussion about how the Pentagon would go about executing such support.”

Alan Chvotkin, executive vice president and counsel of the Professional Services Council, which represents contractors, said the comments were “reassuring in that they demonstrate renewed attention at high levels. But a bailout, for lack of a better word, should not be counted on as a strategy by companies as the Pentagon takes steps to make sure the supply chain is not disrupted.”

Both the budget cuts now being prepared by Obama defense strategists and the additional reductions that could be mandated next year under the 2011 Budget Control Act have fueled concern about long-term dwindling of the nation’s defense-related industrial infrastructure.

House Armed Services Committee Chairman Howard “Buck” McKeon, R-Calif., sounded the alarm in January after the Pentagon released its latest strategic guidance. A fact sheet his committee released warned that “industry cannot be turned on and off like a light switch [and] requires a steady, enduring partnership that allows for innovation, expertise and growth.”

It said the Pentagon’s planned cuts would result in delays or a shutdown of production lines that would cost highly skilled manufacturing jobs.

Two defense analysts who spoke to reporters Wednesday at the Center for Strategic and Budgetary Assessments expressed similar worries. “The industrial base is not like Wal-Mart, where you can count on things being on the shelves when you walk in,” said Andrew Krepinevich, CSBA’s president. “The industrial base is a strategic asset, a weapon” that imposes enormous planning problems on potential enemies, he added, noting the British allowed their air and maritime industrial base to decline in the 1930s and again in the 1990s. “These companies trade on Wall Street, and eventually the money will go somewhere else.”

Todd Harrison, a senior fellow in budget studies at CSBA, said the number of prime defense contractors has shrunk from about 30 in the 1990s to five or so today, creating a near-monopoly in the industry. He predicted that severe cuts would prompt some companies to “get out of the defense business or consolidate, and you may see a reduction in capacity, in the number of factories.”

Kendall stressed the importance of leadership to create a cost-conscious acquisition workforce. But both defense analysts said they were skeptical that the Pentagon will succeed in its goals of achieving $60 billion over 10 years in savings through “efficiencies” in areas such as operations and maintenance. “It’s long been tried, but they don’t end up getting anywhere near what they’d hope for,” Krepinevich said.

The Pentagon’s initiative to insource more contractor work and build up the acquisition workforce, Harrison said, was a priority of former Defense Secretary Robert Gates, and might well become unworkable because of coming budget cuts. “We’re likely to see significant reductions in the DoD civilian workforce,” he said. “It’s hard to bring contractor expertise in-house when contractors have higher paying jobs.”

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.