Trump strikes fear into defense contractors

Trump strikes fear into defense contractors
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President-elect Donald TrumpDonald John TrumpHouse Democrat slams Donald Trump Jr. for ‘serious case of amnesia’ after testimony Skier Lindsey Vonn: I don’t want to represent Trump at Olympics Poll: 4 in 10 Republicans think senior Trump advisers had improper dealings with Russia MORE is putting a target on the defense contracting industry. 

Trump’s criticism of projects from Lockheed Martin and Boeing has put contractors on notice, suggesting that the incoming administration intends to put a new emphasis on cost cutting at the Pentagon.

"There's a lot of concern within the industry," one defense industry official told The Hill. "You don't want to get your program called out by the president."  

"This may well be the new reality that we all have to get used to — he is inclined to call out programs where he thinks there might be concern for the taxpayer," the official added.

On Monday, Trump bashed production of the F-35 Joint Strike Fighter jet, made by Lockheed Martin, as having “out of control” costs that he will seek to rein in as president. 

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The broadside via Twitter came just a few days after the president-elect went after another contracting giant, Boeing, over the production of a new Air Force One for the president.

"Costs are out of control, more than $4 billion. Cancel order!" Trump tweeted.

Defense companies are taking Trump's threats seriously, viewing them as a preview of what they should expect under his administration.

While Trump campaigned on rebuilding the military, he has also called into question the costly weapons systems being produced by the defense contractors that dominate Washington.

Drawing on his business background, Trump signaled during a rally in Grand Rapids, Mich., last week that he will seek as president to cut costs across the government.

"Why are the cost overruns so high? And I could name so many different — you look at some of the fighter jets that are being built, you look at things that are happening, and I'm not just talking about the military, I'm talking about so many other purchases," he said at the rally.

Retired Gen. James Mattis, whom Trump has tapped as his Defense secretary nominee, has not talked extensively about his views on acquisition, but he has been on the board of directors of General Dynamics since August 2013.

General Dynamics consistently ranks among the top five defense contractors in the country and had Pentagon contracts worth $11.8 billion in fiscal year 2015, according to the most recent Government Services Administration data. 

Andrew Hunter, director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies, said Trump is “definitely sending a message that he's going to be tough on government spending.”

"There's still a general belief he'll be increasing the size of defense, but he's also saying, 'Hold your horses, this is not going to be an uncritical embrace of every defense expenditure,'" he added.  

Should Trump choose to make contracting overruns a majority priority, he could have powerful allies on Capitol Hill.

The leaders of the two Armed Services committees in Congress, Sen. John McCainJohn Sidney McCainGOP strategist donates to Alabama Democrat Meghan McCain knocks Bannon: 'Who the hell are you' to criticize Romney? Dems demand Tillerson end State hiring freeze, consult with Congress MORE (R-Ariz.) and Rep. Mac Thornberry (R-Texas), are critics of the contracting system and have talked of the need to reform it. 

At an April hearing, McCain called the F-35 “both a scandal and a tragedy with respect to cost, schedule and performance, and it’s a textbook example of why this committee has placed such a high priority on reforming the broken defense acquisition system.”

Alison Lynn, a House Armed Services Committee spokeswoman, said in a statement that Thornberry “shares the President-elect's determination to have the Pentagon get weapons in the hands of our troops faster, while getting more defense for the taxpayer dollar.” 

Both McCain and Thornberry have spoken about the importance of fielding the F-35, however.

The F-35's stealth design is made to evade enemy radar, allowing it to operate in contested environments. The capability is particularly important since so-called near-peer competitors like Russia and China have improved their capabilities to deny the U.S. access to areas close to their borders. 

A push by Trump to curtail the F-35 program could draw heavy pushback from Congress, as Lockheed has spread work on the F-35 to hundreds of subcontractors in 45 states. 

Sen. Richard Blumenthal (D-Conn.), a member of the Senate Armed Services Committee whose state includes Pratt and Whitney, the company building the F-35's engine, hastily arranged a press conference after Trump’s tweet about the program, calling his assertions “just plain wrong.” 

Blumenthal said costs have gone down 70 percent since the beginning of the program, with the price per aircraft dropping to $100 million and slated to go down further.

"It is a critical job creator and sustainer in Connecticut, but equally if not more important, it is vital to national security," he added. 

Rep. Martha RobyMartha Dubina RobyBrooks’s prior attacks on Trump could hurt in Alabama Senate race How the GOP came to dominate, and be dominated by, rural voters House GOP not sold on Ryan’s tax reform plan MORE (R-Ala.), a member of the House Armed Services Committee who has been working to bring the F-35 to the 187th Fighter Wing based at Dannelly Field in Montgomery, Ala., also defended the program. 

“The F-35 issues took place mainly in the research and development phase of the program, and that’s over and done — and paid for. The F-35 is in production,” she said. 

And Rep. Marc Veasey (D-Texas), another member of the House Armed Services Committee whose district includes parts of Fort Worth, where Lockheed is a major employer, said he’d support cost-savings efforts "if it does not compromise capabilities, the safety of our service members or jobs in North Texas.” 

Supporters of the aircraft argue there is currently no alternative to the F-35, which is meant to replace Cold War-era fighter jets. They also note that other countries have also purchased it.

“International allies are relying on this,” a second defense industry official said. “And the more we sell overseas, the more our costs come down as well.”  

Critics of the F-35 consider it the poster child for wasteful spending at the Pentagon.

Winslow T. Wheeler, a defense analyst, pointed out in an email to The Hill that the cost to build the F-35 is two to seven times what was initially promised.  

In 1994, the Pentagon promised the aircraft, depending on model, would cost between $31 million and $38 million each. The unit cost now runs between $112.7 million and $241.1 million, he said. 

Hunter, of CSIS's Defense-Industrial Initiatives Group, said the F-35 is so expensive because it’s one of the most technologically advanced aircraft ever built. The cost was also driven up by a Pentagon decision to begin production before starting flight tests, forcing costly fixes on already-purchased aircraft.

Another driver of the cost is that the aircraft has to fit the specific needs of three different services. The Marine Corps requested a F-35 capable of a short-take off and vertical landing, which has made it more expensive for the Air Force.  

Still, the second industry official said Trump's warnings about the cost of the F-35 could have a positive side, helping manufacturers negotiate subcontractors down on costs of parts.  

“It’s part of the art of the deal.”

And ultimately it’s up to Congress, not Trump, to decide the future of the F-35, since lawmakers have the power of the purse. 

“At the end of the day, Congress is going to decide whether to appropriate the money,” the first official said.