Pentagon seeks to boost competition in shrinking defense contractor base

WASHINGTON (Reuters) – The Biden administration released a report on Tuesday detailing recommendations to boost competition in its defense industrial base because rapid consolidation has created a national security risk.

The number of aerospace and defense prime contractors to the Defense Department – ​​a group known as the defense industrial base – has shrunk from 51 to just 5 since the 1990s, the report said. It added that 90% of missiles come from 3 sources.

Having only a small number of sources for defense needs “can pose mission risk and, particularly in cases where the existing dominant supplier or suppliers are influenced by an adversary nation, pose significant national security risks,” the report said.

The document, mandated by a July executive order signed by President Joe Biden, added that a lack of competition also limits incentive for firms to innovate, and results in higher costs to taxpayers.

The paper comes on the heels of US arms maker Lockheed Martin Corp calling off plans to acquire rocket engine maker Aerojet Rocketdyne Holdings Inc for $4.4 billion amid opposition from US antitrust enforcers.

The document recommends the Pentagon work with antitrust regulators to prevent an excess of mergers, entice newcomers into the marketplace, and stop a handful of firms from withholding key intellectual property.

The report also urges the Defense Department to shore up its supply chain in crucial areas including missiles, batteries, critical materials and microelectronics.

(Reporting by Alexandra Alper; Additional Reporting by Mike Stone; Editing by Karishma Singh)

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