Defense Department Officials: Declining Budget Will Not Hurt Industrial BaseMay 06, 2011

 

Senior Defense Department officials said that the Pentagon will assess the health of the U.S. defense industrial base as the Department of Defense slashes spending.

The analysis will be wrapped into the Pentagon's missions and capability review, Defense News reported.

"The department has made it clear that they want industrial base issues to be considered, but what framework they're going to take … we still haven't gotten any guidance on that," Brett Lambert, deputy assistant secretary of defense, manufacturing and industrial base policy, said after a May 3 hearing of the Senate Armed Services subcommittee on emerging threats and capabilities, according to the article.

In addition, Michele Flournoy, U.S. undersecretary of defense policy, said the Pentagon will examine whether it can fully implement its Quadrennial Defense Review (QDR) given the budget cuts set for the next decade. Frank Kendall, principal deputy undersecretary of defense for acquisition, said the 2010 QDR was the first to consider the impact of a budget overhaul on the industrial base, Defense News reported.

Kendall told the subcommittee that even if the defense budget remains flat over the next few years, it does not spell doom for the defense industry. "Even given the reductions the president has asked us to examine, we believe that there will be large and fairly stable markets available for the defense industry," he said at the hearing. "We do not see a precipitous decline like the one the department and industry experienced at the end of the Cold War."

But the post-Sept. 11, 2001, environment saw the defense budget grow to a point where cost discipline took the backseat to urgency. That's going to change, said Kendall.

"Individual companies, however, if they do not provide the government with quality products that meet the department's requirements on time and at reasonable cost, should expect to make reduced or no profits," he wrote in a prepared statement. "In the high budget environments of the past, many companies have grown to expect high margins independent of the quality of their performance. As budgets shrink, this practice must stop."