Summary: In response to declines in military spending, defense contractors have been trying to reduce costs through restructuring and consolidations. For the seven business combinations GAO reviewed, the Pentagon expects to save about $3.3 billion from contractor restructuring efforts, including layoffs, facility closings, and relocations of employees and equipment. GAO found that restructuring activities had lowered the operating costs at the seven business combinations by hundreds of millions of dollars. These reductions benefited the Defense Department (DOD) because military contract costs were lower than they would have been if the restructuring activities had not occurred. Determining the precise impact of restructuring on specific contract prices requires isolating the impact of these activities from nonrestructuring-related factors, such as changes in business volume, quantities purchased, and accounting practices. DOD, selected business segments, and GAO were generally unable to isolate the effects of restructuring from those of other factors.
