Breaking upthe five “super primes” in the
“In general,where we are, relative to the horizontal part, we’re pretty much down to two [competitors]in each sector and two is enough for competition — particularly if you injectforeign companies,” Gansler said in an interview yesterday.
Verticalintegration, however, is a different problem. It happens when one of the majorprimes abuses its power and proposes a “system” consisting mainly of in-house components.This forces the Pentagon sometimes sub-par technology at high mark-ups.
“A seniorofficial at DOD who I won’t identify even recommended that” we should break upthe vertical integrators, Gansler said. His task force, ultimately, rejected that proposal.
Instead,the task force recommended that the military customer flex its own power andforce its contractors to use the best technology.
Themilitary buyer “can get involved in the ‘make or buy’ decisions after they pickthe prime if they want,” Gansler said. “Thegovernment will say to [the vendor]: ‘You didn’t do an adequate job. Review it.Make a different choice.’ A monopsony buyer can do a lot of those things. Theytend not to but they can and should.”
- The Gansler interview, part 1: The coming crisis
- Time to unbreak the defense industry
- How the defense industry subverts competition, the small guy and the taxpayer
- Defense Science Board: Tanker competition is perverted