Lockheed's CEO: Efficiency push is 'an opportunity' for both industry and government

Lockheed Martin's Jim Taiclet at the Mobile World Congress on Feb. 28, 2023 in Barcelona.

Lockheed Martin's Jim Taiclet at the Mobile World Congress on Feb. 28, 2023 in Barcelona. Photo by Josep Lago / AFP via Getty Images

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In talking with Wall Street, Jim Taiclet sought to connect the Department of Government Efficiency's push for change with what he has talked about since becoming Lockheed's leader in 2021.

As chief executive of the world’s largest defense company, Jim Taiclet has an opinion on the push for reform that is emerging out of the Trump administration’s Department of Government Efficiency that became official on Jan. 21.

Taiclet shared his thoughts on DOGE during Lockheed Martin’s fourth quarter earnings call with investors Tuesday, at least from the standpoint of what he hopes to see.

“I look at DOGE as an opportunity because as far back as 2021, I've been advocating for a systemic change in the way that the defense enterprise operates, and that's meaning Congress, executive branch, Pentagon, aerospace and defense industry, commercial tech startups,” Taiclet told analysts. “We need to expand our ability to get everybody involved, I welcome DOGE’s effort and the administration's effort to reduce the bureaucracy, limit the administrative burdens that the Pentagon now puts on all companies, big and small, that want to work with it.”

During his four years as Lockheed’s CEO, Taiclet has pushed the company toward having a larger and more open aperture of partners outside of the traditional defense industrial base.

Taiclet cited as examples Lockheed’s collaborations with NVIDIA for artificial intelligence, Meta and IBM for large language models that run generative AI, Verizon for 5G networks, Microsoft for classified cloud computing, and Intel and GlobalFoundries for chips.

He once took that pitch for partners to the Mobile World Congress, a trade show often referred to as the wireless communications industry’s largest such event. Taiclet’s 2023 appearance may have been his first time there, but he saw it as being “in the right place.”

On the Tuesday investor call, the context for Taiclet’s perspective on DOGE was an analyst question on whether defense companies would have to take on more financial risk for large programs in a new Trump administration.

That would happen via an increase in fixed-price contracts, under which companies are responsible for costs running higher than forecasted. On the other hand, cost-plus contracts share the risk between the company and government customer.

Some federal buyers like the Space Development Agency have embraced fixed-price contracting in recent years as a way to keep acquisitions moving at pace. Other agencies obviously are not there yet.

Lockheed will have limits on what it is willing to do if the trend line moves toward more fixed-price contracts, Taiclet said. During his 16 years as CEO of American Tower, that company relied on a concept he called “risk-adjusted return-on-investment” to evaluate which business opportunities to pursue.

The key there is to “be honest about the risks upfront and price them in,” Taiclet said. “If the price doesn't meet the competition, so be it, we'll move on to other things, so I'm not concerned about that.”