DOD tries to calm industry fears

Government contractors shouldn't fear the looming defense budget cuts, the private sector still has a critical role to play, said the leader of the military's acquisition arm on Jan. 6.

Frank Kendall, undersecretary of defense for acquisition, technology and logistics, said in a conference call that the department convened a joint DOD-private sector task force to determine the potential effects on industry of impending budget cuts and the military drawdown in Southwest Asia.

The task force has helped guide some of DOD’s strategy outlined Jan. 5 by President Barack Obama and Defense Secretary Leon Panetta, Kendall said. He was optimistic despite a new report from the task force that revealed worries over the projected spending decreases.

“The industrial base was considered throughout the review as part of total force structure,” Kendall said. “The department is dependent on the industrial base as a partner in the defense enterprise. But less is less…you cannot expect the market to continue to grow as it has in the past.”

But despite his optimism, defense industry executives are worried about the cuts. Their concerns were outlined in a report dated Nov. 11, 2011, but released Jan. 6.he

“This report paints an alarming picture for the future of the aerospace and defense industry,” Marion Blakey, president of the Aerospace Industries Association, said in a release. “Yesterday Secretary Panetta outlined very severe reductions in the defense budget. Any further cuts will cripple crucial industrial base capabilities in the national security sector.”

AIA was part of the Defense Industrial Base Task Force; other groups included the Professional Services Council and the National Defense Industrial Association.

Kendall said technology remains one area that likely will still see investment and the private sector’s partnership would remain critical to military operations.

“Our continued dominance will rely on technological superiority,” he said. “While we will be taking budget cuts, there will be high priority areas of investment,” including cyber, intelligence, surveillance, reconnaissance and space.

The task force’s report assessed the effects of two scenarios: the $480 billion defense spending reduction over 10 years that Obama and Panetta outlined Jan. 5, and the $1 trillion across-the-board cuts that could result from sequestration triggered by the congressional supercommittee’s failure to agree on federal budget cuts.

“Cuts beyond $480 billion…would render major segments of the defense industry unable to produce critical products and components, leaving wide gaps in the domestic capacity needed to sustain an acceptable margin of military superiority in the future,” the report stated.

According to Kendall, he and Deputy Defense Secretary Ashton Carter have met with the task force, and Panetta is slated to meet with members in two weeks.

Kendall stressed that he believes the cuts and strategy implementation are doable, and that industry has a seat at the table as DOD's leadership determines strategy.

“I believe we can execute the strategy within the context of budget constraints and still preserve military and industrial base,” he said.