With the debt ceiling crisis resolved for now, sequestration is the next big looming budget battle. But TPM Reader SP reports in on the effects he’s already seeing in the defense industry:
I’m a defense contractor supporting the Navy. I thought you’d be interested to hear that we’re feeling the effects of sequestration in advance of the actual event.
The process of getting funding sent out from resource sponsors through all of their various wickets and out from Navy contracting shops is torturous at best, but because of impending sequestration, they’ve added another step: now all funding coming out of NAVSEA (the Naval Sea Systems Command - the DoN organization that buys the Navy’s ships and many of their weapons and combat systems) requires an approval at the flag officer/SES level - and because there really isn’t any process in place for that, it’s had the effect of shutting off funding altogether. The intel we have indicates that it’s likely that this is going to amount to just an additional administrative hurdle (meaning that the flow of funding would restart with some delay), but the possibility is there that the flags/SESers will deny/reject some of these requests.
As a result of the uncertainty involving this, some contractors in our market are stopping work on tasks that are out of funds … which means people are being laid off right now.
So far at my outfit, we’ve been able to juggle things around, avoiding the need to do any layoffs … but it’s unclear how long this can go on. Things will become very dicey here within about a month - we are having to carefully evaluate whether we are going to trigger the provisions of the WARN Act (involving advance notification requirements for mass layoffs). …
The net result of all this is a fairly high level of chaos in the defense contracting world. We don’t know how much we’re going to be funded beyond what we already have, which makes it more or less impossible to plan anything. I can’t help but believe that similar things are taking place elsewhere within the federal government … so how long before we start seeing actual economic impact from all this?
David Kurtz is Managing Editor and Washington Bureau Chief of Talking Points Memo where he oversees the news operations of TPM and its sister sites.