Springtime For The Military-Industrial Complex

The FT erroneously concludes [13] that the boom-times are over for the military contractors:

The wars in Afghanistan and Iraq have been a boon to US contractors. The US has used so many of them in the conflicts that at times they outnumbered the military they supported. But the boom times are coming to an end and military service companies in particular are being squeezed.

Moody’s, the rating agency, expects revenue and margin pressure on defence service companies to become visible soon as the US Department of Defence, the world’s biggest military spender, negotiates tougher terms for contractors, reduces spending on them and brings its troops home from Afghanistan in time to meet the end 2014 deadline set by President Barack Obama [14].

In Iraq and Afghanistan the top contractor was Kellog, Brown & Root [15], the engineering and construction services company. It earned $40.8bn during the past decade, while Agility, the logistics company, and DynCorp [16], which specialises in security, earned $9bn and $7.4bn respectively, according to a US government report.

After a decade of unrivalled prosperity thanks to war and a booming global economy the defence service sector will have to work harder through innovation, as well as lean and well-focused management, to prosper.

In a word, nope. What cuts? The Obama budget aims [17] to increase military expenditures far-above their already-puffed-up status quo:

Offering a military budget designed to head off charges that he’s weak on defense, President Obama unveiled a Pentagon spending plan [18]that fails to cut any major procurement programs and calls for spending $36 billion more on the military in 2017 than it will spend this year.

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