Navy Secretary Roasts Defense Contractors Over "Excuses" and Profits

At the annual West defense conference last week, Secretary of the Navy Carlos Del Toro had harsh words for contractors who post profits without delivering the goods. Del Toro turned the conference's theme upside down, asking if industry is delivering enough value for the nation.

"I am committed to providing you in industry clear requirements, robust pipelines for the future, and strong stable investments. However, I need you to do your part as well to provide a proper return on investment for the American taxpayer," Del Toro admonished the crowd of defense executives. "I need you to deliver platforms and capabilities on time and on budget without excuses."

The secretary has long expressed frustration with contractors' inability to speed up production, but last week's remarks were more blunt. He admonished contractors to stop blaming COVID for supply chain shortages, do what is needed to recruit and retain their own workforces, and deliver performance matching their exceptional profitability. 

"Many of you are making record profits - as evidenced by your quarterly financial statements - and while I am happy for you, you can't be asking for the American taxpayer to make greater public investments while you continue to goose your stock prices through stock buybacks, deferring promised capital investments, and other accounting maneuvers that - to some - seem to prioritize stock prices that drive executive compensation rather than making the needed, fundamental investments in the industrial base at a time when our nation needs us to be all ahead flank," he exhorted the crowd. 

Del Toro made clear that this was more than a lecture, and that he has instructed the Navy's legal team to "leverage all legal means at our disposal to ensure that the American people are getting what they paid for," with particular emphasis on handing over the technical data needed for maintaining existing platforms. 

Del Toro also warned contractors that the Navy is doing a "deep dive" into "chronic poor performance and misconduct," not only at the company level, but at the level of specific personnel. 

"For those of you who think I will not hold firm, you obviously do not know me very well," he added.