Pentagon acquisition chief Frank Kendall delivered some muddled pronouncements on defense mergers last week, suggesting that companies like Lockheed Martin shouldn’t be allowed to get too big even if their size raises no antitrust issues. That view doesn’t seem to have influenced the Justice Department review of Lockheed’s plan to acquire Sikorsky, but if it is taken seriously in other quarters it could still have undesirable consequences. First, it will have a chilling effect on the operation of market forces within the defense sector. Second, it will reduce competition by discouraging big companies from pursuing new defense opportunities. Third, it will reward under-performers in order to limit the market share of the best performers. Fourth, it will open the door to misguided legislation in Congress. And fifth, it will distract Pentagon leaders from the impact of their own policies — which is the main reason why military contractors behave the way they do. I have written a commentary for Forbes here.
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