Lord eyes Northrop's purchase of Orbital ATK

Pentagon acquisition chief Ellen Lord is aware of Northrop Grumman's planned purchase of Orbital ATK, but may not take action on the deal, according to the Pentagon. 

"I know that Under Secretary Lord has got that for action," Pentagon spokesman Army Col. Rob Manning told reporters Monday morning at the Pentagon. "She's aware of it, but I don't know what the status is."

Last week, Northrop announced it plans to buy Orbital in a $9.2 billion deal. Northrop had informed Lord of the acquisition prior to sharing it publicly, according to a spokesman for her office. But he said he didn't know whether Lord would take any action on the transaction.

Rob Stallard, an analyst with Vertical Research Partners, said in a note to investors last week there could "be some overlapping activity or increased vertical integration that could prompt regulatory scrutiny.

"We have also not had a prime contractor acquisition under the current U.S. administration, and so this is a test case as to whether concerns over the scale of the primes is still an issue," he added.

In responses to advance policy questions released prior to her July confirmation hearing, Lord signaled support for the previous administration's policy of opposing mergers of the largest prime contractors, but leaving other mergers and acquisitions mostly untouched.

"Although I believe that the department should not have a blanket policy of discouraging further

consolidation or divestiture, or encouraging a specific industry structure, it is difficult to foresee

supporting further consolidation of our principal weapons-system prime contractors," Lord said in her testimony.

"However, if the Department wants more competition in the future, we may need to look at maintaining the right number of program opportunities that can keep multiple vendors in portions of the defense market," she added.

In February, the Pentagon issued a directive reasserting DOD's role in reviewing mergers and acquisitions of defense companies. The directive followed a public discussion of DOD's role in such deals in 2015 when Frank Kendall, the Pentagon acquisition executive at the time, raised concerns over Lockheed Martin's purchase of Sikorsky. 

"With size comes power, and the department's experience with large defense contractors is that they are not hesitant to use this power for corporate advantage," Kendall said in 2015. "The trend toward fewer and larger prime contractors has the potential to affect innovation, limit the supply base, pose entry barriers to small, medium and large businesses, and ultimately reduce competition."