The Specter of Sequestration

The nation’s capital is riddled with buzz-words, and one you’ll hear most frequently this summer is “sequestration.”  Sequestration-the mandated across-the-board budget cuts of over a trillion dollars—is the sword that Congress hung over its own head to ensure that last year’s Budget Super Committee would not fail. 

Well, they did fail. So, whether you’re on Capitol Hill, at the Pentagon, or participating in industry events, it’s the first subject mentioned everywhere you go. Depending on which part of the defense sector youwork in, you may be talking about sequestration for different reasons. Your focus may be how to avoid the political landmine, or the thought of restructuring the entire defense force, or what an across the board cut in defense will do to our country’s industrial base. 

Each of these perspectives has one thing in common: No one knows when, if and how sequestration will take effect. If sequestration does take effect, defense appropriations will take a $55 billion dollar hit annually over the next decade.  To add insult to injury, as it stands now the cuts will be taken from every program, project and activity.  Everything will be reduced equally, regardless of mission requirement or consequence.

Before we even discuss the impacts of another $500 billion dollars in additional budget cuts, the conversation and apprehension should be focused on the effects of so-called “soft sequestration” is having on industry, the Department of Defense and ultimately the taxpayer right now. Soft sequestration is the lingering confusion surrounding the threat of sequestration and its subsequent ramifications that are happening now.  While members of Congress are waiting out their lame duck session, DoD and industry are left dealing with the “what-if.” 

As a result, government and private sector organizations are taking significant actions forced on them by the threat of such sizable cuts. Government organizations are trimming existing contracts, hesitating to spend already appropriated funds, and down scoping future programs.  Companies are reducing their workforces and decreasing forward leaning investments.  Procurement and contracting divisions are describing the current environment as mass confusion. 

Without clear direction on timing and (of course) on funding, contracts are being modified or forced to operate under short term resolutions, which ultimately could mean increased costs to the government.  Requests for proposals are being delayed, and in some cases cancelled, not because the requirement has been annulled, but because the government cannot move forward in an atmosphere of uncertainty due to the threat of sequestration. 

DoD officials have said they aren’t planning for a sequester, and Congress is punting the issue until after the election. But in the meantime, industry is being forced to make the tough decisions.  In declining budget environments, the government should work with industry and encourage their investment of technology, new capabilities and innovation.  Unfortunately, under the auspices of the unknown, industry will naturally be apprehensive to make such investments.    

We would hope that Congress can realize the consequences of not only the sequestration itself, but also the consequences of delayed action.  For every day that these decisions are postponed, more people are losing jobs, programs are delayed, and innovation is sacrificed. 

In a time where innovation is critical to national security, Congress’ actions, or rather inactions, are destructive and disappointing.  No one denies that the budget environment requires that tough decisions be made, but Congress needs to make them. That’s what an elected legislature is supposed to do.

Only then can government and industry really begin to work together and find ways to innovatively cut budgets while at the same time ensuring our nation’s security.