March 04, 2013

National Defense Magazine interviews John Cooney on sequester’s impact on defense industry

2 min

Venable partner John Cooney was interviewed in the March 1, 2013 issue of National Defense Magazine on the impact of the sequester on the defense industry. The sequester, an across the board cut of $85 billion from the federal budget, went into effect on Friday. More than half of the budget cuts are slated to come from the Defense Department.

Commenting on the impact of the mandatory budget cuts, Cooney said, “In the defense sector, service contractors will feel the pain immediately, whereas weapons manufacturers will take the hit more gradually, as the cuts filter down the food chain.” Cooney advised the defense industry to brace for more uncertainty as the cuts take effect. “There will be little advance public disclosure of which specific contracts will be cut and on what schedule,” he said. “That information will be provided to contractors on an individual basis by the contracting officers, as they are given their instructions from above.”

“Contractors are not going to know precisely which programs will stay and which will go until agencies’ senior policy leaders have had a chance to analyze their priorities,” Cooney said. Starting in April, the government is expected to issue furlough notices to civilian employees and contractors could start sending layoff notices to employees. According to Cooney, these moves will “increase the anxiety level of everyone involved in the government contracting process, but will provide companies little in the way of actionable information about whether their contracts are on the chopping block.”

Cooney expects the Defense Department and other agencies to sequence their reductions so cuts will occur after April 1 in hopes of Congress reaching a deal on spending. “The bill providing appropriations for the second half of fiscal year 2013 would provide a logical vehicle for suspending or further deferring the sequestration,” Cooney said. He added that “The Department of Defense is explicitly advocating a strategy in which Congress would use the continuing resolution to modify or abolish the sequester.” He explained that the cuts announced by the Pentagon are timed not to have their most significant impact until April which would “afford Congress and the White House the maximum time to act before the cuts really start to bite.”