The ongoing debates over budget control and its negative impacts on Department of Defense programs lead many in the DoD to reassess the value of contractors. In analyzing this situation, one might conclude that reducing contractor payrolls is a no-brainer for cutting costs. While this will likely occur, based on historical trends, the expected value-add from this tactic may not materialize as envisioned.
A model from the business world helps to portray this environment and to notionally project value gained or lost. Porter’s Five Forces model categorizes these environmental threats from competitors, buyers, suppliers, substitutes and new entrants. Each of these can be qualitatively scored to assess the impact of these forces on a particular industry. This provides a situational awareness of the drivers influencing the aerospace and defense (A&D) sector.
