November 29, 2012
Credit: Credit: DoD photo by Master Sgt. Ken Hammond, USAF
The Pentagon’s chief weapons buyer on Wednesday reassured industry executives and investors that there was still “a lot of money” to be made in the defense business, despite mounting budget pressures that will limit spending on new arms programs.
Frank Kendall, defense undersecretary for acquisition, technology and logistics, said the budget outlook had clearly changed after a decade of continuous increases in U.S. military spending.
But he said the Pentagon’s annual budget remained quite large -- and even a worst case scenario that would cut defense spending by an additional $50 billion or around 10 percent in fiscal year 2013 -- was “not the end of the world.”
“We’re going to work our way through this,” Kendall told an investor conference hosted by Credit Suisse. “There’s a lot of money still to be made.”
He said the U.S. military’s new strategy which sees a pivot to the Asia-Pacific region, and calls for increased investment in cybersecurity and space, would result in new growth opportunities for defense companies.
The department was also mindful of the need to maintain critical design skills in aerospace, he said.
“We’re in this together. The health of the industrial base is very important,” he said.
Kendall told participants that the department’s latest “better buying power” initiative factored in feedback from industry, and vowed to better align profits paid to defense contractors with improved performance.
He insisted the department was not out to cut industry’s profits, saying that the Pentagon viewed weapons makers as part of its overall “force structure” and was looking for more “win-win” deals that save money while rewarding good performance.