Report: Consolidation has created 'haves' and 'have-nots'

The spin-offs and consolidation within the defense contracting industry have created two classes of contractors, according to a new report from Govini, a business intelligence company focused on the public sector.

The report says there are now "haves" and "have-nots," meaning companies that have intellectual property in the form of products and platforms and those that do not.

"This ownership becomes the differentiator between contractors able to dictate a premium based on their IP and contractors pinched to provide the lowest price," the document adds. "Competing on platforms and IP allows contractors to command a price that disrupts [lowest-priced, technically acceptable] efforts and boosts margins. Contractors in the middle offering only services will continue to be squeezed by [original equipment manufacturers], who can then lock in and service themselves at significantly lower costs."