THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, August 20, 1996 TAG: 9608200003
SECTION: FRONT PAGE: A14 EDITION: FINAL
TYPE: Letter
LENGTH: 44 lines
A great deal of confusion surrounds a long-standing government policy that encourages U.S. defense contractors to consolidate and restructure in order to cut overhead expenses and, in turn, reduce contract costs to the government. ``Benefit or boondoggle'' (editorial, July 29) was largely accurate but did not detail all of the benefits this policy provides to the government and taxpayers:
Fact 1: Defense-company mergers and acquisitions (which are part of the industry consolidation almost all experts agree is necessary in the post-Cold War world) are paid for entirely with corporate assets - absolutely no government funds or subsidies are used.
Fact 2. Federal regulations provide for reimbursement to contractors for reasonable restructuring costs - only if they yield overall cost savings to the government or preserve a critical industry.
Fact 3. Contractors pay restructuring costs upfront; the government reimburses them from the savings generated - and in proportion to savings the government receives - over several years, through future contracts (which is effectively an interest-free loan for the government's share of restructuring).
Fact 4. The government requires and implements extensive auditing, reporting and certification to assure company compliance, cost data and overall savings.
Fact 5. Lockheed Martin restructuring actions from mergers and acquisitions since 1993 are estimated to cost $2.3 billion, pro-rated across all customers. But the payoff is substantial: estimated savings to those customers - and U.S. taxpayers - of more than $6 billion from 1995 through 1999 and $2.6 billion every year thereafter, plus enhancing Lockheed Martin's global competitiveness and job opportunities for Americans.
Some have called this policy a boondoggle. At Lockheed Martin, we call it ``win-win-win-win'' for customers, taxpayers, employees and a critical national industry.
CHARLES P. MANOR III
Vice president
News & Information
Lockheed Martin Corp.
Bethesda, Md., Aug. 2, 1996 by CNB