Why the government isn't ready for sequestration

As sequestration looms increasingly large on the horizon, Washington remains paralyzed, at least for the moment: Congress is out, agencies have received little or no guidance on cutting spending and a number of deadlines – including those for notifying employees of impending job cuts – are rapidly approaching. With so many different factors involved and so much at stake, what does it mean for the agencies and companies who face impact?

So far, government decision-makers have given agencies and private companies little to work with. One reason is that leadership is looking to Congress to make an eleventh-hour decision that would avert sequestration. Another, according to one source, is because there are many ways the cuts can be implemented – and the timing is tricky.

“We’re so far away from actual decision-making that the speculation of the how-to-be-implemented gets really dicey and problematic,” said Alan Chvotkin, executive vice president and counsel at the Professional Services Council. “There are lots of options, any one of which can be more harmful than the others.”

At the Defense Department, which would be among the hardest hit by the budget cuts, officials have also said planning too early or too late could have a devastating effect on national defense. In August, DOD Deputy Secretary Ashton Carter indicated no preparations are under way.

“While we can foresee the harmful impacts of sequester, as I have described, we cannot devise a ‘plan’ that eliminates, or even substantially mitigates them. Sequester defies rational ‘planning.’ It was designed to be irrational,” Carter testified before the House Armed Services Committee. “We are working with [the Office for Management and Budget] to understand this complex legislation, and we are assessing impacts.”

An Aug. 24 report from the Center for Strategic and Budgetary Assessments indicates that DOD could shed as many as 108,000 civilian jobs in 2013 as a result of sequestration, while defense contractors avoid immediate effects.

Chvotkin said those losses are possible, if leadership decides to go that route in implementing the roughly 10 percent cuts to fiscal 2013 budget resources. But with little guidance from Congress or the White House -- although a recent memo from OMB Acting Director Jeffrey Zients did advise agencies to begin 'discussions' -- so far, it’s not clear which of the many options in the vaguely defined legislation will be exercised.

“The cuts are at the program, project and activity level. All the Budget Control Act [which enacted sequestration] requires is to reduce budget resources by the given mathematical percentage,” Chvotkin said. “How a program office achieves that reduction is up to them – they could, for example, reduce the size of program offices, reduce the scope of contracts, defer spending on contracts or push work from current fiscal year into fiscal 2014, which will have different guidelines.”

That means the contracting community isn’t immune to near-term losses caused by sequestration. According to Chvotkin, the defense contracting community is already being affected as the budget ax swings through the Pentagon, and it’s just the beginning.

“We are already seeing effects, irrespective of sequestration, reducing the amount of spending on services contracts. Some have been imposed on DOD and other agencies by OMB to reduce spending on services, so we’ve seen that impact already,” he said. “But we are still weeks, if not months, from knowing how DOD will implement a sequestration that nobody wants to have.”