President-elect Donald Trump has surprised defense contractors with his proactive approach to negotiating individual weapons contracts, leaving many wondering what the future holds for the industry.
With thousands of defense contracts set to expire next year, and a president likely to take an active role in negotiating price, defense experts are wondering how to approach the administration.
Defense industry analysts were optimistic immediately following the Nov. 9 election that Trump would bolster military spending to accomplish his goals for the armed forces. Trump said he wants to increase the size of each branch of the military, including increasing the size of the Navy to 350 ships from about 276, which is an expensive proposal. (RELATED: Defense Industry, Analysts Expect Major Spending Increase Under Trump)
Trump has an opportunity to negotiate a number of better deals, as more than $210 billion worth of contracts are set to expire next year, according to a study from corporate analyst Govini. But the president-elect also appears to be looking at existing contracts to cut federal spending.
“Expiring contracts will be seen as low-hanging fruit by the incoming Trump Administration looking to begin implementing its agenda immediately,” the report says.
The 100 companies that hold 50 percent of the value of expiring contracts will have to compete more to retain contracts, particularly in IT and cyber services contracts.
“With the Trump Administration assuming office on January 20th, there is little time to prepare for the imminent changes that are looming,” the report says.
Trump has already met face-to-face with the CEOs of top defense contractors Boeing and Lockheed Martin. After tweeting that the F-35 program costs were “out of control,” the president-elect met with the head of Lockheed Martin, the manufacturer of the jet.
“We’re just beginning; it’s a dance,” Trump told reporters after meeting with Marillyn Hewson, CEO of Lockheed Martin, at Mar-a-Lago, Fl., Wednesday. “It’s a little bit of a dance. But we’re going to get the costs down, and we’re going to get it done beautifully.”
“I appreciated the opportunity to discuss the importance of the F-35 program and the progress we’ve made in bringing the costs down,” Hewson said in a statement.
Lockheed makes the F-35, a fifth-generation fighter jet that has become the most expensive weapons program in U.S. history with total program cost of around $1.45 trillion. Each jet costs between $100 million and $132 million, according to a recent contract.
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