If nothing else, we may be seeing what can happen when a little more competition gets introduced into government contracting. A few weeks ago, Donald Trump publicly complained about the price of the F-35, being produced by Lockheed Martin, calling it “out of control,” and suggested that he’d check in with Boeing on whether they could do any better. This wasn’t too long after Trump slammed Boeing for the cost of the new Air Force One fleet, and suggested that he’d cancel the program and look for someone else to build it.
How did all that work out? Boeing and Lockheed both pledged price cuts to keep their contracts — and Lockheed CEO Marillyn Hewson topped it off with an announcement of 1800 new jobs in Texas. It’s not a bad way for a president-elect to end a weekly news cycle:
BREAKING: Lockheed Martin CEO says company will add 1800 jobs at its Ft. Worth operation pic.twitter.com/EHExBdGoGR
— CNBC Now (@CNBCnow) January 13, 2017
Lockheed Martin Corp (LMT.N) is close to a deal to significantly lower the cost of its F-35 aircraft, Chief Executive Officer Marillyn Hewson said on Friday after meeting with U.S. President-elect Donald Trump.
“I certainly share his views that we need to get the best capability to our men and women in uniform, and we have to get it at the lowest possible price,” Hewson said to reporters in Trump Tower.
Hewson had previously assured Trump she would drive down the cost of the company’s fighter jet, after he tweeted last month that he was asking rival aerospace company Boeing Co (BA.N) whether it could offer a cheaper alternative to the F-35.
This kind of pressure could raise eyebrows when applied to private-sector firms, but this is unlike Carrier and GM. The federal government is the customer for both the Boeing and Lockheed deals, and so this is more of a direct negotiation context rather than outside interference by a regulator. It raises the question about just how well the government performs in negotiating deals with its contractors. Donald Trump hasn’t even taken the oath of office yet and he’s restructured two multi-billion dollar deals and got a commitment for almost two thousand more jobs out it. That doesn’t exactly speak well for previous administrations on contracting, and not just the most recent.
Of course, this process will only work to a limited extent. The DoD needs significant reform in its contracting processes, part of which has been worsened by consolidation in the industry. For job creation, downsizing regulation and putting Congress back in control of lawmaking will provide a better incentive than Oval Office wheeling and dealing, but the point has been made by the latter.
Update: My headline initially had F-15; was a typo, and it has been corrected.