US DoD seeks more industry competition

The US Pentagon will try to increase competition in its industrial base. (Getty Images)

To spur innovation and lower costs for the weapon systems it buys, the US Department of Defense (DoD) plans to take several steps to boost competition in its industrial base, according to a report released on 15 February.

Defence industry consolidation over the past three decades has reduced competition by leaving the DoD “increasingly reliant on a handful of companies for critical defence capabilities”, the 30-page report said. For example, the number of US-based prime contractors shrank from 51 to five.

“Although consolidation has, in some cases, led to improvements in corporate efficiency, product quality, or internal costs, too much market concentration can negatively impact competition by providing the remaining companies with greater market power to potentially foreclose on competitors, reduce customer choices, limit innovation, and charge higher prices to DoD,” the report says.

To counter that trend, the DoD intends to strengthen its review of mergers and acquisitions; resist intellectual property practices that are anti-competitive; and make it easier for small businesses and new entrants to work with the department.

The DoD will also seek to bolster the resilience of five priority sectors: castings and forgings, missiles and munitions (M&M), energy storage and batteries, strategic and critical materials, and microelectronics. In the M&M sector, the department is particularly concerned that consolidation among hypersonics contractors could reduce or eliminate competition for this new technology.

The report's release came two days after the DoD's largest prime contractor, Lockheed Martin, announced it was ending its proposed USD4.4 billion acquisition of propulsion manufacturer Aerojet Rocketdyne, citing opposition from the US Federal Trade Commission (FTC).