Lockheed CEO "Defense Cuts Threaten National Security"

Senior executives of major defense companies rarely seek publicity. They also seldom openly criticize their customer, the Department of Defense, or the organization that provides that customer with funds, the U.S. Congress. So it is noteworthy when Robert Stevens, the outgoing CEO of Lockheed Martin feels it necessary to publicly warn of the consequences of sequestration, not just for his company or the defense industry but for the U.S. military and the nation’s security.

Mr. Stevens has been sounding warning about the particularly severe problems that sequestration will create because of the legal and regulatory requirements imposed on defense contactors. In a recent speech to media representatives, he pointed out that sudden and serious cuts in major defense programs will require prime contractors such as Lockheed Martin to change the terms of their agreements with the thousands of vendors in its supply chains. These vendors, in turn, would have to spread their costs over fewer items, causing the price of each to rise. Lockheed Martin would be required by acquisition regulations to pass these costs on to the government. In addition, according to Stevens, these vendors would have the right to make a claim against Lockheed Martin for the adverse impact to their business of this unplanned reduction in demand for their products and Lockheed Martin would be required to pass those claims on to the Pentagon.

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