The Pentagon unveiled the initiative earlier this month, saying the U.S. military needed to “wring every possible cent of value” from the dwindling dollars in the U.S. defense budget.
Lockheed Martin Corp, Boeing Co, Northrop Grumman Corp, General Dynamics Corp, Raytheon Co and other defense firms are carefully watching the Pentagon’s approach to contracts as they brace for lower defense spending after more than a decade of growth.
President Barack Obama and Congress agreed last year to cut projected national security spending by $487 billion over the next decade. The Pentagon faces another $500 billion in across-the-board cuts beginning in January unless Congress can agree over the next month on an alternative.
Kendall said he expected Congress to avert the additional budget cuts, but added that even if they kicked in as scheduled, they would not result in massive, instantaneous layoffs.
“It’s a devastating thing to do to the department, but it is not something that happens overnight,” he said.
Wes Bush, chief executive of Northrop Grumman, said he welcomed the Pentagon’s new initiative, and was encouraged by the overall tone of Kendall’s remarks at the conference.
“I think they’ve made a really positive step forward here,” Bush told Reuters after Kendall’s speech. He said he was particularly encouraged by the Pentagon’s focus on maintaining a technological edge, even as budgets declined.
“We can’t let go of technological superiority in a tougher environment,” he said.
Michael Strianese, chief executive of L-3 Communications Holdings Inc, said Congress was likely to avert the full brunt of the budget cuts that are due to take effect in January.
“I think there’ll be a much smaller version that gets enacted -- orders of magnitude smaller,” he told Reuters.