The Pentagon released a report on Tuesday claiming that mergers and consolidation among its contractors represent a threat to the US economy and national security.
The document was previewed by senior Biden administration officials before of its release. The paper outlines methods to prevent mergers that are detrimental to the Department of Defense’s interests and lower barriers to entry for new contractors. It also tries to evaluate if a company’s intellectual property policies are anti-competitive.
The research urges five industries to make plans for long-term supply chains, which is a major worry after the coronavirus pandemic disrupted global supply lines for semiconductors and other items, causing shortages and inflation. Castings and forgings, missiles and munitions, energy storage and batteries, strategic and critical materials, and microelectronics are among the fields.
According to the paper, mergers have left national security in the hands of private businesses. There are just five prime contractors in the aerospace and defense industry, down from 51 in the 1990s. Ninety percent of US missiles come from just three sources.
Consolidation may harm taxpayers since contractors are no longer under pressure to innovate in order to win government contracts.
The report is part of President Joe Biden’s broader government push to encourage competition in the US economy. Biden’s executive order and the competition panel he constituted have as their ultimate goal raising salaries and lowering prices.
Antitrust agencies are already taking steps to prevent mergers that are regarded to be detrimental to the national interest. The Federal Trade Commission filed a lawsuit in January to block Lockheed Martin Corp.’s $4.4 billion acquisition of Aerojet Rocketdyne Holdings, claiming that the deal will result in higher missile component pricing and less competition.
Because of the FTC’s efforts, Lockheed Martin stated on Sunday that it would no longer pursue the acquisition.
Image Credit: Getty
You were reading: Merger of contractors pose greater risks to US economy and national security, warns Pentagon