Contractors Say 'We've Been Sequestered Already'
Sen. Tim Kaine spoke with defense contractors Monday about the early effects of sequestration on Northern Virginia jobs, spending, research and development.
About 30 representatives of defense contractors from Northern Virginia met with Sen. Tim Kaine Monday for a roundtable discussion and agreed on one fairly simple message to Congress: Make a decision.
Nearly 200,000 Virginia jobs are on the line, and for some the very idea of sequestration hadn't come to epitomize the dysfunction on Capitol Hill. If lawmakers fail to reach a compromise, then $1.2 trillion in automatic cuts, half to the defense industry, will go into effect. The latest deadline is March 1.
The contractors talked about the various ways the threat of sequestration was "paralyzing" the industry: Companies are delaying orders whenever they could. They aren't hiring to fill vacant positions. They aren't investing in research and development or making major acquisitions. Some are looking to expand into private sector markets outside of Virginia so they can be sure they will get paid and that they, in turn, can pay their employees. The uncertainty in the federal government is causing Wall Street to invest more in companies that don't do business with the government.
Federal agencies are preparing for sequestration and acting as if it has already happened, said John Hillen, president of Sotera Defense in Herndon. Companies can spend significant dollars on project proposals only to find those projects put on hold or canceled before a contract is awarded.
"We've been sequestered already," Hillen said. Later, he added, "If you think about the downstream impacts, it's happened already."
Dynamis, the Arlington-based defense contractor that hosted the roundtable, found out Monday a contract that was supposed to be renewed for 12 months was instead only being renewed for two.
"That's one-sixth of what I was expecting," Dynamis President John Braun told Patch.
Disinvestment in research and development and technology now will hurt the entire industry in the long-term, the contractors said, in their ability to produce and their ability to attract and retain talent.
Debate on the Hill is more and more taking an "us versus them" tone, with some lawmakers already targeting federal employees or benefits — which means contractors could be next, said Stan Soloway, president of the Arlington-based Professional Services Council.
Companies Need Certainty
Defense contractors may not like the decisions made by Congress to reduce certain expenses, but at least once a decision is made then companies can plan their own futures, Soloway said. That pill would be a bit easier to swallow if the cuts were done all at once, planned out, rather than piecemeal every few months, he said.
Companies essentially want certainty, Soloway said.
Kaine said he would take the conversation to Capitol Hill. "Let's fight off the resignation that this has to happen," he said.
Kaine said he would propose paying down a small part of the sequester — enough to get the country to mid-April — and then letting any further cuts be a part of a broader budget discussion. Both houses have committed to having a budget by mid-April. Kaine wants the two conversations to align.
"We've got to get out of this cycle where we keep pushing these decisions down the road," said Fred Wahl, vice president of government relations for L-3, which has a lab in the Virginia Tech Advanced Research Center.
"We may not like the decisions, but it will at least give us something people can plan against," Wahl said.
Generally, the industry — and the region — would benefit from Congress putting together an annual budget, the contractors said.
"That's something Congress could take care of itself," said Bill Gardepe with Falls Church-based General Dynamics. "You don't need any contractors' advice."