Defense contractors fight for their slice



4/27/14 10:22 PM EDT

Defense contractors are going back to war to protect their slice of a shrinking Pentagon budget.

Gone are the days of unity when giants like Lockheed Martin and Northrop Grumman banded together in 2012 to fight automatic defense cuts in a campaign called Second to None. Now, with another round of sequestration ahead and an uncertain post-war era looming, contractors are back to skirmishing with one another over every last scrap of the defense budget.

Lockheed backers are publicly sniping at Boeing over the Pentagon’s potential purchase of Navy EA-18G Growler aircraft, while Boeing advocates are dissing Lockheed’s F-35 Joint Strike Fighter. Lockheed also wants to save the iconic U-2 spy plane, while Boeing hopes to stop the mothballing of the A-10 attack plane — both are on the chopping block.

The latest battles among the defense giants signal a shifting landscape for contractors, in which new programs are far from guaranteed, legacy programs are no longer sacred cows and defense hawks are getting beaten by budget hawks. It’s also a sign that the most powerful government contractors in Washington — pejoratively dubbed “Beltway Bandits” back in the 1980s — are losing some of their sway in a city where they’ve practically had a license to print money in recent years.

What hasn’t changed are the market demands: Defense contractors are still under pressure to keep profits high even as sales decline, so they are slashing personnel and cutting their Washington lobbying shops. In the first quarter of this year, lobbying spending by a dozen of the largest defense contractors hit its lowest level since the first quarter of 2011.

The infighting could get worse. This is the first year that the Pentagon has proposed a budget that adheres to the spending caps of the 2011 Budget Control Act and last December’s budget deal, which gave the Pentagon $9 billion in relief from the sequester in fiscal 2015.

“There’s going to be a lot more losers this year,” said Michael Herson, a lobbyist with American Defense International who works for several defense contractors.

Congress has said it also plans to keep its defense bills under the budget caps this year, and top defense lawmakers have warned they may not be able to spare worthy programs from the budget ax.

“After a while, it becomes pretty much a zero-sum game,” House Armed Services Committee Chairman Buck McKeon (R-Calif.) told reporters earlier this month. “You can’t come and say, ‘We gotta cut everything,’ and then, ‘Save my stuff.’ That doesn’t work.”


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