Administration Defends Policy of Helping Fund Defense Mergers

The Clinton Administration defended a Pentagon policy Wednesday that uses taxpayer dollars to help defense contractors merge.

Deputy Defense Secretary John Deutch told a House panel that the policy will save four to seven times what it costs.

Critics charge that the government is spending money to lay off workers under the year-old policy now under congressional scrutiny.

According to the policy, contractors that merge with competitors may bill the government for some of their restructuring costs. These may include the costs of shutting down a plant, workers’ severance pay and consolidation of production lines. Not covered are buyout costs, broker fees or “golden parachutes” for executives.

In testimony before the House Armed Services oversight and investigations subcommittee, Deutch said that if the government refuses to pay these costs, “we will pay dearly in the form of higher prices and reduced defense capability.”