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Perry Warns Against Industry Consolidation; Wary Of French Response to ISIL

Posted by Colin Clark on


WASHINGTON: Perhaps the most respected living Defense Secretary, Bill Perry, sat down with reporters today to tout a new book and give the American people a shot at one of the finer brains to have led the Pentagon.

Perry is renowned for having hosted the so-called Last Supper with defense industry chiefs, which set the stage for the enormous amount of consolidation that happened after the end of Cold War. Today, he issued a clear warning against further defense industry consolidation during a Defense Writers Group breakfast, saying the current huge and dominant companies have led to “less effective competition”.

I asked him what could be done to ensure we don’t see another round of consolidation (Lockheed, of course, recently bought Sikorsky, Harris bought Exelis and ATK and Orbital merged). “Maybe we should be more explicit in saying we already have enough consolidation,” he said. The Pentagon has made some efforts in this direction. Frank Kendall, undersecretary of defense for acquisition, technology and logistics, made his position pretty clear after the Sikorsky purchase was approved by the Justice Department.

“The Department of Defense (DoD) is concerned about the continuing march toward greater consolidation in the defense industry at the prime contractor level. While the Lockheed-Sikorsky transaction does not trigger anti-trust concerns of having a negative impact on competition and we understand and agree with the basis upon which the Department of Justice (DOJ) decided not to issue a request for additional information about the transaction, we believe that these types of acquisitions still give rise to significant policy concerns,” Kendall said in an October statement.

Whether that will be explicit enough is open to question since Lockheed took the extraordinary step of contradicting  Kendall. “There is no evidence to support the view that larger defense companies reduce competition or inhibit innovation,” Lockheed spokesman Dan Nelson said at the time. “We believe that defense contractors should continue to be assessed based on the performance and effectiveness of the products and solutions offered, not on the size of their company.”

Perry did say that, while his efforts at acquisition reform had largely failed, one thing did work. Overhead costs came down, which was a primary goal of the Last Supper.

I asked him if he thought the French should emulate our response to the terror attacks of 911 by treating terrorist groups like an opposing military. Perry was cautious, noting that he doesn’t get the briefings he used to get. But the short answer (something for which Perry was justifiably famous) was: “I don’t think so.”

Given the British Parliament’s vote yesterday to approve air strikes against Daesh (aka ISIL) and the continuing French strikes in Syria, it seems likely Europe will elevate Daesh’s followers to the status of an enemy state.

What do you think?