Experts: Government stake in defense firms could harm industry

Defense industry experts are warning that a potential government stake in major firms such as Lockheed Martin or Boeing could stifle innovation, create conflicts of interest, and lead to more contract award protests, following comments from a top administration official considering the move.

Commerce Secretary Howard Lutnick on Tuesday sparked discussion of whether the Trump administration could broaden the government’s efforts to take slices of vital private firms into the defense world. Speaking with CNBC about the government’s recent acquisition of a stake in Intel, Lutnick indicated that Pentagon leaders could be looking at similar arrangements with other companies.

“There’s a monstrous discussion about defense,” Lutnick said on CNBC. “Lockheed Martin makes 97% of their revenue from the U.S. government. They are, basically, an arm of the U.S. government. … What’s the economics of that? I’m going to leave that to my secretary of Defense and the deputy secretary of Defense. These guys are on it, and they’re thinking about it. There’s a lot of talking that needs to be had about, how do we finance our munitions acquisitions.”

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