Historically, antitrust enforcement has not been a significant factor in the government contracting (GOVCON) industry. However, the GOVCON industry has seen a recent increase in antitrust activity with involvement from the Federal Trade Commission (FTC) and U.S. Department of Justice (DOJ). Are these isolated incidents or the beginning of a new trend?
In February 2022, the U.S. Department of Defense (DoD) published a report on the State of Competition Within the Defense Industrial Base (DIB) to assess how well the DoD reaps benefits from competition through increased innovation of technologies, incentives for contractors to lower prices, and yielded improvements in quality. The report discussed the current state of competition, systemic challenges to expanding competition, and described actions DoD is taking to broaden its competitive base. This report is indicative of DoD’s interest behind increased antitrust interest.
Competition in Defense Industrial Base (DIB)

Figure 1: A 10-year trend for DoD competitive and non-competitive contract awards. Source: State of Competition within the DIB.
As seen from the figure above, the competition rate within DoD has remained relatively stable over the past 10 years but has decreased slightly overall. Factors impacting competition include consolidation in the defense industry began in the 1990s and continued today. Competition has been impacted by strategic buyers and private equity performing integrations of acquired business either in the form of vertical (when firms purchase companies in their supply chain) and horizontal (when firms acquire businesses that overlap) integrations. The report provided five recommendations to spur increased competition in the DIB, including strengthening merger and acquisition oversight.
DoD continues to assess each M&A transaction to analyze the effect on national security, the industrial base, innovation, or any other potential issue. DoD assesses whether adverse competitive effects have occurred or are likely to arise in the future and then to work with FTC and DoD to take action.
Lockheed Martin/Aerojet Rocketdyne: Blocked the kick
In February 2022, Lockheed Martin terminated its agreement to acquire Aerojet Rocketdyne following the FTC’s lawsuit seeking a preliminary injunction to block the acquisition. The FTC stated the acquisition would eliminate the last independent supplier of key missile propulsion inputs, cutting off competitor access to these components. This would ultimately result in higher prices, diminished quality and innovation, and harm programs critical to national security.
The FTC’s complaint alleged that Lockheed Martin would use Aerojet Rocketdyne to harm rival contractors and consolidate multiple markets critical to national security and defense. The enforcement action coincides with the DIB report recommending stronger merger oversight for the highly concentrated DIB.
Booz Allen Hamilton acquiring EverWatch: Flag on the play?
In June 2022, the DOJ filed an antitrust lawsuit against Booz Allen Hamilton to block the proposed acquisition of EverWatch, a company that builds and operates mission-critical classified platforms to defend national cyber threats. The DOJ alleges the merger agreement threatens competition for a contract to provide operational modeling and simulation services to the National Security Agency (NSA), called Optimal Decision. Booz Allen Hamilton and EverWatch previously competed head-to-head on this work; therefore, the consolidation of both companies would result in Booz Allen Hamilton becoming a monopoly bidder for this contract.
This month, FEDSCOOP reported that Booz Allen Hamilton submitted a proposal agreeing to both companies operating structurally separate and independent on the Optimal Decision contract. Booz Allen Hamilton would establish financial bonuses for the members of the winning contract team, incentivizing them to compete aggressively with one another, and would appoint an antitrust compliance officer to oversee implementation of the consent judgment. If agreed to, the judgment would expire once Optimal Decision is awarded or one year from the order’s entry, whichever is sooner.
Update: This transaction cleared per FedScoop once a Maryland federal judge denied the U.S. Department of Justice an injunction to halt the acquisition further. In the end, the acquiring business closed the deal and the beat of acquisition drums continues.
Other M&A antitrust actions and resolutions
Other GOVCON mergers and acquisitions involving antitrust lawsuits were able to proceed once they reached settlements through a range of actions. Relevant examples include:
Companies Involved | Situation | How was this resolved? |
United Technologies Corporation (UTC)/Raytheon (April 2020) | DOJ argued UTC and Raytheon are the only firms that develop, manufacture, and sell military airborne radios. It also alleges they are two of only three competitors that produce products such as military GPS systems for ground, aviation, and maritime applications. | Raytheon must divest their military airborne radios business and UTC must divest their military GPS business to BAE Systems, or another approved acquirer. UTC must also divest their optical systems business. |
L3 Technologies/Harris Corporation (October 2019) | DOJ alleged the merger would create the sixth-largest U.S. defense contractor and would also create a monopoly for image intensifier tubes for night vision devices purchased by DoD. | Harris was required to divest its night vision business within 45 days of the agreement to an approved acquirer. |
Northrop Grumman/Orbital ATK (December 2018) | FTC alleged the acquisition would provide Northrop the incentive and ability to harm competition for missile contracts by either withholding access to its solid rocket motors (SRM) or increasing SRM prices to competitors. | Northrop Grumman must make its SRMs and related services available on a non-discriminatory basis to all competitors for missile contracts and must separate the operation of its SRM business from the rest of the company’s operations with a firewall. |
Lockheed Martin/Boeing Company (May 2007) | FTC intervened in the formation of United Launch Alliance (ULA), a proposed JV between Lockheed and Boeing. FTC alleged the formation of ULA as originally structured would have reduced competition in the markets for U.S. government medium to heavy launch services and space vehicles. | ULA shall provide launch services on a non-discriminatory basis, which includes not entering into any exclusive Collaborative Agreement with any space vehicle prime contractor for launch services. |
General Dynamics/Sierra Nevada Corporation (SNC) (February 2007) | FTC alleged that bringing together two of only three competitors providing melt-pour load, assemble, and pack (LAP) services during manufacture of ammunition would undermine competition and increase prices. | General Dynamics was required to divest its interest in American Ordnance to an FTC-approved buyer within four months. |
Northrop Grumman/TRW Inc. (December 2002) | DOJ alleged the acquisition would decrease competition regarding payloads for U.S. government satellite programs. | Northrop Grumman must provide payloads for satellite programs on a non-discriminatory basis. |
The FedSavvy Strategies Takeaway
- The DoD appears to have an increased focus on supporting antitrust enforcement through the publication of the State of Competition report and recommendations to ensure adequate competition throughout the DIB, such as strengthening M&A challenges.
- Other mergers and acquisitions involving antitrust lawsuits were usually able to reach settlements through divestitures or non-discriminatory agreements.
- The Booz Allen Hamilton/EverWatch case was resolved in favor of Booz Allen Hamilton so the attempt by DoJ to block this failed.
- Is it possible the FTC tried to make Lockheed Martin make some concessions for “fair practices” and Lockheed Martin refused?
- Antitrust enforcement appears to focus primarily on OEMs rather than service providers likely because hardware and other goods account for most DoD contract obligations and higher barriers to entry.
The bottom line is we may be witnessing some escalation of antitrust activity, but it is too early to tell.
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