While sequestration still remains uncertain, defense industry consolidation is expected to have a significant effect on smaller companies, defense officials and analysts said at the Bloomberg Government Defense Conference.
Officials at the conference discussed ways to help lessen the blow of sequestration, but warned that a consolidation will most likely stifle innovation that often comes from small defense contracting companies.
"Government and DoD should be very wary that they let market economics totally shape this industry…. That could really hurt us in a very serious way,” said retired vice admiral Philip Balisle, now president of Washington operations at DRS Technologies. “[Technological innovation] is one of our leading edge discriminators [for] how we can dominate on the battlefield for years to come."
He called upon the government to help ensure that smaller defense contractors survive the spending cuts. The acquisition of smaller cybersecurity companies by large defense companies is one area of concern, since it could stifle cybersecurity innovation, said the Pentagon’s assistant secretary of defense for research and engineering, Zachary Lemnios. "During that acquisition, do you in fact break the culture?"
The Pentagon is looking to nurture key research and development areas through the spending cuts, which include cybersecurity and drones and other robotics, Lemnios said. The Defense Department’s limited R&D budget will be "much tighter coupled with academia and with industry," including government laboratories, he said.
“We’re trying to build a much stronger relationship with industry so we can help them inform their own IRAD [internal research and development]," he said.
