Sequestration

DOD unlikely to cancel contracts for savings

military businessman

Companies with existing DOD contracts can count on getting paid during sequestration. (Stock image)

Defense Department Controller Robert Hale said Feb. 20 he does not foresee DOD canceling contracts if sequestration takes effect. Instead, DOD is more likely to deal with budget pressures by declining to pick up contracts' option periods and simply not awarding new contracts.

"I would like to say, to reassure them, if you've got a contract with us, we're going to pay you," Hale said. Even under sequestration and with employees taking furloughs, he added, DOD will keep making payments on time.

A contract option period allows agencies to buy additional quantities of supplies or work without further negotiation between the agency and company.

Defense officials are delving into specifics on what the department really needs to buy and what projects to continue.

"It takes a lot of work to figure out what we won't do to accommodate sequestration cuts and similarly in the service-contract area," Hale said during a Pentagon press conference in which he announced plans for civilian employee furloughs.

DOD needs to cut $45 billion to $46 billion this fiscal year spending if, and when, sequestration takes effect. Workforce costs cuts, via the furloughs, could save DOD $4 billion to $5 billion. The rest of the cuts will have to come from other areas.

"There will be very substantial effects on the private sector as well," he said. As DOD officials try to find ways to save the money, the defense industry will inevitably suffer, he said.

DOD's notice issued Feb. 20 serves to start the clock on a 45-day countdown until the furloughs can begin. The next move will come in March, when a 30-day notification would be sent to all employees who may face furlough.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Thu, Mar 28, 2013

The defense industry can get in line with everyone else for all I care. They have sucked up enough no bid contracts and cost over runs. Frankly I want more firefighters, schools and safe bridges.

Fri, Mar 1, 2013

Agree, Senate and House should all be replaced. At least half are millionairs so what do they care about us.

Wed, Feb 27, 2013 MK

Here is my plan. Every week they don't have a budget or Sequestration deal you send half of them (Congress) on Furlough. By the time we get down to 1 perhaps he/she can make a decision.

Tue, Feb 26, 2013

send home all congress mebers, all senate members, don't pay these worthless people while they are off the job, discontinue their benefits, give them the same insurance, pensions that they expect the general public to survive on. This would save millions of dollars per month.

Mon, Feb 25, 2013

Cutting the federal spending by 2% is NOT going to be the end of the world. Sheesh, the way it is being hyped (just like TARP, QE1,2,3,..., Fiscal Cliff, etc.) is to just gin up the complaints to Congress and have them keep kicking the can down the road. What the H ever happened to a year with a BALANCED budget? The rest of US have to live that way, the feds should too.

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