The Gansler interview, part 2: Don’t de-consolidate

Breaking upthe five “super primes” in the USdefense industry – Boeing, General Dynamics, Lockheed Martin, Northrop Grummanand Raytheon — into smaller chunks is not a good idea, according to JacquesGansler, who chaired the Defense Science Board task force on the defense industrial base.

“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.”

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2 Responses to The Gansler interview, part 2: Don’t de-consolidate

  1. eg 12 August, 2008 at 8:14 pm #

    “Vertical integration, however, is a different problem. It happens when one of the major primes 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 senior official at DOD who I won’t identify even recommended that” we should break up the vertical integrators, Gansler said. His task force, ultimately, rejected that proposal.

    Instead, the task force recommended that the military customer flex its own power and force its contractors to use the best technology.”

    HA, HA!
    The last thing anybody in DoD wants to do is compete and make a choice.
    Look at NAVAIR; they award a contract for support and sustainment to Boeing. Boeing then goes to their vertical and ta-dah!
    The navy gets their part faster; Boeing makes more money, and who cares about small business any way? Never mind that the smaller company can respond faster and usually for less $$.
    It is simpler from an acquisition stand point. Please refer to my earlier response about qualifying parts for the air force.

  2. EG 13 August, 2008 at 5:02 pm #

    Jimmy,
    Thanks for the encouraging words. And I agree there will be some change within procurement.
    However, it is mostly civillan employees that do the work and because of that I will stand by my previous statement.

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