Sequstration could cut off some suppliers for agencies

One aspect of sequestration that agencies should brace for is the effect of the budget cuts on small business, according to a report from the Aerospace Industries Association and other experts. The Defense Department and NASA will feel the effects of sequestration as small suppliers and innovative companies will face closures, the report warns.

“As contracts are canceled, re-negotiated, or otherwise reduced, small-business leaders will have limited flexibility in adjusting their business model. While some will seek to diversify, others will just downsize, and still more may simply have to close their doors,” reads the report, issued Sept. 20.

To read the report, click here.

Small companies don’t have the deep pockets and diverse business investments of the major federal contractors, experts say. Large contractors have sufficient scales of operations to survive tight times, even if it means they have to adjust their business processes or cut jobs. Small firms usually lack the ability to adjust.

Steve Fuller, George Mason University professor and director of its Center for Regional Analysis in the School of Public Policy, told the House Small Business Committee on Sept. 20 that small businesses will bear a disproportional impact of the federal spending reductions under sequestration.

Richard Ginman, director of defense procurement and acquisition policy at DOD, told the committee small businesses won’t be the target when defense officials begin their cuts. The department simply will have less money so there will be fewer opportunities going forward, if sequestration takes effect.

“What we buy is what we need for our warfighters,” he told Rep. Nydia Velázquez (D-N.Y.), the committee’s ranking member, who wanted an assurance that small businesses won’t take the hit first. “If there is something that we don’t need, that will be what we stop spending on first.”

He added too that DOD won’t change its small-business set-aside policies in light of sequestration.

The sequestration wouldn't take effect until January, unless Congress and President Barack Obama can reach some accord beforehand. To some, it looks bleak and the clock is ticking loudly.

At a speech Sept. 17, Adm. Mike Mullen, former chairman of the Joint Chiefs of Staff, stopped short of saying he is certain sequestration to happen, but he was not optimistic.

“I’m not as hopeful as others that we won’t drive off this cliff. I’m worried sick about it, quite frankly,” he said.