News & Events

Benefits of Sequestration – Cup Mostly Empty, but a Little Left to Drink?


As the State of the Union address and Republican response clearly highlighted, the size of the government is a hot topic right now.  Interestingly, however, while this fiery debate rages in Washington, a recent trend has occurred: the government has been shrinking.  Well, to be clear, the portion that many people would consider “government”—employees on the public payroll—has been shrinking.

To put things in perspective, in January, the ranks of Federal, state, and local government workers hit its lowest level since early 2006.  Federal employment has declined for four straight months, and on a month to month basis, for nine of the past 13 months.  These declines are not only due to the largest drop in defense spending in 40 years and sequestration preparation bringing about potential furloughs, but notably, the increasing percent of employees eligible for retirement. 

As seen in the figure below, nearly 30% percent of the Federal workforce at the end of fiscal year 2011 will become eligible to retire by 2016—and this does not include the recent incentives for early retirement offered in preparation of sequestration.  With around 58% of senior executives and 45% of GS-15s becoming eligible during this period, critical skills are eroding; thereby limiting the ability of agencies to carry out their vital missions. 

According to the GAO, the potential loss of expertise is especially worrisome for select agencies, including the Small Business Administration and the Department of Housing and Urban Development.  In addition, certain crucial occupations are at risk, including cybersecurity experts, FAA technicians, and acquisition management officials.

What does all this mean for contractors?

Well, it means that there is potential for contractors to actually see benefits in two areas from sequestration.  First, much of the workload that would have been performed by Federal employees is not likely going away; thereby creating the potential for new contracting opportunities necessary to support the government’s needs.  And second, if the Federal government continues to downsize, contractors may be positioned to hire well-seasoned government professionals with strong qualifications and intimate knowledge of agencies’ needs.  Times of crisis, can often yield opportunity.