Defense Consolidation Catches the FTC’s Eye

From the start, the CDA has been raising the alarm about consolidation in the defense space. In his Defense One piece entitled: Biden Should Shoot This Acquisition Down, CDA President Hank Naughton rightly points out that the type of acquisition being proposed by Lockheed Martin to purchase Aerojet Rocketdyne will clearly reduce competition, drive down innovation, cost jobs, and ultimately mean a greater burden for taxpayers.

There have been renewed concerns about more defense M&A to come in the years ahead, but this has been a trend for years in the making. In 2015, then-Undersecretary of Defense for Acquisition, Technology and Logistics Frank Kendall raised concerns about consolidation in the defense space: “The trend toward fewer and larger prime contractors has the potential to affect innovation, limit the supply base, pose entry barriers to small, medium and large businesses, and ultimately reduce competition — resulting in higher prices to be paid by the American taxpayer.”

FTC commissioner Rohit Chopra said during a Senate Commerce Committee hearing this week that the “consolidation in the defense industry has been very problematic for public procurement. We’re spending more and more money for the same exact services. Making sure that the FTC polices those defense mergers with the DoD is critical.”

The CDA also requests that the FTC and DoD take a real close look at the proposed Lockheed/Aerojet merger for the same reasons Commissioner Chopra mentioned. We also believe that Congress should holding a hearing on this merger to ensure we do not repeat the mistakes of the past.

Ultimately the CDA is hopeful that the Biden administration will work to reverse some of these trends and prevent these oversized defense contractors the ability to dictate our national security and budget parameters.