By Joey Roulette and Mike Stone
WASHINGTON, Dec 16 (Reuters) – The Trump administration is planning an executive order that would limit dividends, buybacks and executive pay for defense contractors that are over-budget and delayed, according to three sources briefed on the order.
President Donald Trump and the Pentagon have been complaining about the expensive, slow-moving and entrenched nature of the defense industry, promising dramatic changes that would make the production of war equipment more nimble.
Industry groups have been on high alert about the closely-held proposal, which is tied to a Treasury Department initiative, two of the sources said.
Reuters could not determine exactly how the order would compel defense firms to enact any restrictions. The sources said the language of the order could still change.
The White House did not immediately return a request for comment.
Shares of Lockheed fell 1.6% and Northrop Grumman by 2% in after-hours trading after the news was first reported by online political news service Punchbowl.
U.S. Secretary of Defense Pete Hegseth unveiled sweeping changes in November to how the Pentagon purchases weapons, allowing the military to more rapidly acquire technology amid growing global threats, in accordance with an executive order signed by Trump in April.
The Pentagon restructuring will have direct authority over major weapons programs to eliminate bureaucracy. The acquisition chain will run directly from program managers to these portfolio executives to military service branch acquisition leaders, with no intermediate approval layers.
The November reforms target what Pentagon officials call “unacceptably slow” procurement, which they blame on fragmented accountability and misaligned incentives that have hampered the military’s ability to field new technology quickly.
The defense industry has lobbied for changes to the procurement process.
In June, an industry group that represents defense and aerospace companies said it identified over 50 regulatory requirements that discourage companies from doing business with the government.
In a June 3 letter to Hegseth, the Aerospace Industries Association, which represents defense companies including RTX, Boeing and General Dynamics said its members want to eliminate burdensome regulations related to cybersecurity compliance, cost accounting standards, intellectual property rules, and commercial acquisition requirements.
(Reporting by Joey Roulette and Mike Stone; Editing by Chris Reese)
Comments