Pierre Chao, an industry analyst and founding partner of Renaissance Strategic Advisors, has said many investors remain hesitant to make investments in the defense market due to lack of incentives, the National Defense magazine reported Monday.
Sandra I. Erwin writes Chao said at a Center for Strategic and International Studies-hosted forum that defense contractors consider incentives as return on investment and cash flows.
“If you provide the right tipping point types of incentives, you will get companies to do share lines and innovate on the process side,” he added.
The publication noted that the Defense Department introduced a final rule on Friday that seeks to prohibit the use of independent research and development investments in a competitive procurement process if the IRAD investment would be used to get a price advantage.
Byron Callan, an industry analyst from Capital Alpha Partners, said he thinks the final procurement rule is less likely to affect the contractors’ profits, but “points to a continued strong desire by DoD that heritage contractors invest in R&D.”