Report on the State of Competition within the Defense Industrial Base

Brian S. Gocial, Sara N. Gerber, and Tjasse L. Fritz

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As the federal government prepares to roll out infrastructure grants and contracts in amounts not seen since the New Deal and the defense industrial base (“DIB”) gears up to support billions in new spending to support Ukraine, a new Department of Defense (“DoD”) report raises serious concerns about the state of competition within the DIB. The report recently released by the Office of the Under Secretary of Defense for Acquisition and Sustainment analyzes the state of competition within the DIB and concluded that it can be summarized in one word: poor. The report discusses the causes for the lack of competition and makes recommendations for improving the solicitation process to increase competition, inspire innovation, reduce prices, and improve quality.

Consolidation

Foremost among the causes for the lack of competition identified by the report is consolidation of the DIB. Of 51 aerospace and defense prime contractors in the 1990s only five exist today. Although the report failed to find significant correlation between this consolidation and increased pricing, the consolidation raises additional concerns for DoD, such as national security, mission risk, and strategic technology innovation. The report notes that “having only a single source or a small number of sources for a defense need can pose mission risk and, particularly in cases where the existing dominant supplier or suppliers are influenced by an adversary nation, pose significant national security risks.” The report recommends that when a merger is likely to harm one of these interests, DoD work closely with the Federal Trade Commission and Department of Justice to take structural or behavioral measures deemed necessary, up to and including blocking the merger.

Continue reading “Report on the State of Competition within the Defense Industrial Base”

CARES Act: Significant Funds for Defense Department and Defense Contractors

Adam Proujansky

The recently enacted coronavirus COVID-19 Coronavirus Aid, Relief, and Economic Security Act stimulus package (the “CARES Act” or “the Act”) includes billions of dollars earmarked for the Department of Defense (“DoD”) and defense industry contractors. It does this in two ways:

    1. By providing billions of dollars in loans, loan guarantees, and other financial assistance to businesses through the Department of the Treasury, including up to $17 billion specifically for businesses “critical to maintaining national security;” and
    2. By providing $10.5 billion in supplemental appropriations to DoD, much of which is likely to go to procuring goods and services from federal contractors, including in areas ranging from healthcare to information technology. The Act also contains provisions intended to streamline DoD contracting during the present emergency.

Although the procedures to obtain these loans were not established by the Act, the Secretary of the Treasury is required to publish procedures for applying for these loans within 10 days of enactment. It is expected that DoD will issue solicitations very soon to meet these pressing needs. We expect many contractors in the defense industry will be eligible for these loans, or for the parallel loan program for small businesses being administered by the Small Business Administration under the Act. Continue reading “CARES Act: Significant Funds for Defense Department and Defense Contractors”

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