New contracting guidelines are being set out for the billions of dollars worth of international contracts being awarded in Afghanistan. And, they’re designed with one thing in mind: greater oversight. In issuing the new guidance with NATO command, General David Petraeus said that without proper oversight, money could end up in the hands of insurgents and criminals. Under the new guidelines, the Pentagon’s new “contractor’s transparency clause” requires that lead contractors begin listing all subcontractors on a project. They require that anyone who bids on U.S. military contracts has to provide a list of all their subcontractors, provide licensing, personnel and banking information. Afghans have been complaining that too many contracts are awarded to the same contractors. The new guidance says contracts should go to Afghans first. If the military cannot contract with an Afghan company, the guidance says the company that is awarded the contract should be encouraged to hire Afghan subcontractors. But, Petraeus says DoD has got to especially guard against fraudulent ‘front businesses’. He asks commanders to use their intelligence resources to learn more about the companies they’re dealing with and determine the effect of each contract on “security, local power dynamics and the enemy.”
Are we seeing yet another big wave of consolidation and cost-cutting in the defense industry? DoD Buzz reports we might be, and that its effects might be felt for decades. Lockheed Martin just announced that about 600 of their executives would be leaving, including 25 percent of its leadership team. And, rumors are surfacing that Boeing might buy Northrop Grumman, or merge with BAE, DoD Buzz reports. You remember the big wave of mergers back in 1993. When the dust cleared, there were only a few firms left standing. Some of the speculation lately over a Boeing-Northrop Grumman merger has come out of the great amount of work being done on the Joint Strike Fighter program, which Boeing lost out on. Northrup CEO Wes Bush recently said at a Reuters event though that he “would not forecast any large-scale activities on the near-term horizon.” And, DoD Buzz quotes a finance expert who says a Boeing-Northrop merger seems unlikely, mainly because of likely antitrust concerns. Loren Thompson is the defense analyst at the Lexington Institute. He says, instead of a merger, breaking Northrop into pieces would probably yield higher prices and make it easier to avoid antitrust objections. Thompson also points out that a merger between Boeing and BAE may be problematic for Boeing. He says the move would saddle Boeing with a bunch of activities that aren’t related to their current line of products.