That's what Shay Assad, the department's director of procurement and acquisition policy, said at the recent Credit Suisse 2011 Aerospace & Defense Conference, according to the Federal Times.

The Pentagon has said its concerned with cost reduction, not margin reduction. For his part, Assad said he would be surprised if contractors' profitability decreases even as spending drops. He went on to say he wouldn't be upset if operating margins go up — if they are paying less.

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