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Carter: DoD Will Block ‘Short-term Focused’ Defense Mergers

Ashton Carter, Photo: Defense.gov

The Defense Department’s acquisition czar, Ashton Carter, said the department frowns on further defense consolidation at the level of the big players, adding DoD would even go so far as to block potential mergers between industry giants.

“We would not allow any further mergers of the big ones,” said the undersecretary of defense for acquisition, technology, and logistics, in an interview with National Journal. “On occasion, we will intervene by blocking a transaction if we thought it was excessively short-term focused and had done a poor long-term risk analysis.”

Carter said he understands the defense industry will undergo a significant restructuring as the Pentagon begins cutting back.

But, “It won’t be like in the 1990s,” he added.  “I don’t expect [the industry] to contract any further.”

During the ‘90s, the government-contracting industry experienced an M&A boom, ushered in by an era of military scaleback and reduced defense spending.

Then-Defense Secretary Les Aspin delivered a now-legendary speech, known as the “Last Supper,” calling on the heads of companies to begin consolidating to survive.

While he has rejected those historical comparisons, Carter said industry will have to do its part.

One of his prescriptions for better defense acquisition is the use of share lines — or Fixed-Price Incentive Firm Target contract — which aim to more evenly share the risk of multimillion dollar defense deals.

“Businesses all over the country are constantly, ruthlessly routing out unnecessary costs and making themselves leaner,” he told National Journal.  “We have to provide incentives for [defense contractors] to do that. “

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