Washington-area Defense Contractors Worry Over Sequestration Cuts

02.21.13

Washington-area Defense Contractors Worry Over Sequestration Cuts

02.21.13
Ashton Carter

The looming March 1 deadline for across-the-board government spending cuts (known as “sequestrations”) is on everyone’s minds and everyone’s lips these days, including the Presidents. As President Barack Obama explained in his recent State of the Union Address, “In 2011, Congress passed a law saying that if both parties couldn’t agree on a plan to reach our deficit goal, about a trillion dollars’ worth of budget cuts would automatically go into effect this year. These sudden, harsh, arbitrary cuts would jeopardize our military readiness.”

While a deal was reached to prevent sequestration from taking effect last December, the outlook for a Congressional agreement on how best to bridge the political impasse looks far from certain. In fact, it is leaving many small and large businesses conducting business with the U.S. Government on edge as they attempt to navigate an uncertain future and ensure contingencies.

Impending budget cuts will hit local economies and businesses providing services and products directly, as well as indirectly, to the US government – especially area defense contractors. Elsa Lee, founder of Advantage SCI, LLC a prime contractor and a Service-Disabled Veteran-Owned Small Business and Woman-Owned Small Business, with offices in Virginia and California explains, “The most significant impact sequestration will likely have on government contracting will be a decrease in the number of new contracts awarded, as agencies eliminate programs that are not critical to their missions.” Adding, “It could also potentially impact existing contracts that are up for renewal as well. If contracts are cut, defense contractor employers will have to let go thousands of employees. This will have a direct impact on unemployment and the local economy.”

The level of uncertainty extends beyond contract volumes. Lee, who started Advantage SCI in 2000, following two decades as a U.S. Army Counterintelligence Agent investigating and capturing terrorists, spies, and other nefarious criminals, says, “Sequestration could also potentially impact the types of new contracts awarded as well. For example, we may have more firm fixed price contracts versus cost plus.” Further, as Lee explains, “Agencies may restructure their contracts in an effort to defer any possible costs in the future and restructuring could result in not exercising their option periods, or exercise option years with fewer positions being available down the road.”

The direct impact on defense contractors remains unclear. It appears that the level and magnitude of sequestration will be dependent upon the impact to the contracting agencies and departments. With unemployment remaining stubbornly high, employee morale and job security concerns remain an ever-present reality for those working for defense contractors. “We strive to provide our team as much information as we possibly can. Timely dissemination of verified information between the government and their defense contractors and employers with employees is vital and are a top priority, as it acts like cold water on speculation,” Lee notes.

“We are in daily contact with all of our Federal contracting officers so we can remain abreast of the developing situation and adapt work schedules as necessary. We already have a good sense of the impact it will have at the government agencies we support. Many of our employees already know to remain flexible in the critical operations they support. However, I don’t think anyone knows for sure the full effect that sequestration will have on everyone.”

Most employees from defense contractors along with the military, however, will remain in place and run government agencies, possibly unpaid, if and when civilians are impacted by sequestration. With nearly one hundred employees concerned about the impact of sequestration, Lee concludes, “Ultimately, I tell my team it is ‘business as usual’ and that it is essential to remain focused on mission support.” When or if Congress will act remains up in the air, but time is running out. In the end, Elsa Lee and countless other defense contractors in Virginia and around the US will have to wait and see. Excellence remains the deliverable as always – even when patience is in short supply.

This article was originally posted in The Washington Times.

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