Statement by AIA President and CEO Dave Melcher on recent DOD comments regarding mergers and consolidation
Arlington, Va. — While we understand Undersecretary Kendall’s broad concern regarding the impact of defense industry consolidation on competition, we feel consolidation is occurring as a natural result of decades-long trends in defense acquisition. Consolidation is market-driven and enhances the efficiency with which we deliver the world’s best equipment to the American warfighter.
We’re seeing fewer and fewer new programs which start farther and farther apart. With fewer programs for which to compete, the stakes for individual companies grow ever higher – loss of a contract competition could mean the end of a company’s ability to compete for defense work. In this environment, it’s no surprise that industry is looking to become leaner and more efficient. We’ve seen how this works in the past – sweeping defense industry consolidation happened during the last downturn in defense spending in the 1990s. Many of the same conditions are apparent now. Companies should be judged based on their performance. The size of the prime contractor shouldn’t matter in any case, as most of the work flows into the supply chain through subcontracts.
Budget Control Act caps combined with frequent use of continuing resolutions are causing significant uncertainty in defense budgets. To encourage competition and a healthy and strong industrial base, we need stable, predictable and sufficient budgets to support our national security strategies. We urge Congress to overturn the Budget Control Act caps, enact a budget deal that supports investment in American capability and return to a budgeting process that promotes stability and predictability in contract awards.