Why are defense companies downsizing when the government is giving them more money?

Question

The U.S. is in the midst of a transformation of its armed forces and as far as I can see, there are a lot more defense projects going on now then in the 90's. Yet defense companies like Northrup Grumman and Lockheed Martin are downsizing or are not growing any. Northrup Grumman, for example, is considering laying off or firing 1000 employees now, despite just winning a massive tanker deal for the U.S. air force.

Answer 1

Contract awards and employment numbers don't necessarily track hand-in-hand.  Like any other business, defense contractors are always looking for ways to do more with less.  Many subcontract out parts of their defense work.