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DoD’s Kendall: Pentagon Not Opposed to Contractors’ High-profit Margins ‘If Earned’

Frank Kendall, DoD; Photo: Defense.gov

The Defense Department’s second-in-command for acquisition said yesterday the Pentagon doesn’t begrudge contractors’ profit margins, but that, in an era of compressed budgets, companies will have to earn them.

“I am not opposed to high [profit] margins at all if they’re earned. I am opposed if they’re not,” said Frank Kendall, principal deputy undersecretary of defense for acquisition, technology and logistics, at an Aviation Week-sponsored conference yesterday.

“We’re entering a new era because of what’s happening with the budget,” which means profit rates should not be exorbitant, Kendall said, according to a report in Defense News. Last month, the White House indicated it would seek $400 billion in Pentagon cost-savings in addition to departmentwide efficiency initiatives.

“We’re not after everybody’s profits,” he added. “What we are after is better performance.”

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