Continued Uncertainty – Congress Punts Budget Until After Election
Despite heavy criticism, the U.S. House of Representatives has scrapped its planned one-week session at the start of October and instead, remain on recess until after the November election. Majority Leader Eric Cantor, (Rep. VA) announced that the decision not to return in October was made given the Senate’s anticipated passage of a stopgap funding bill recently approved by the House. The bill will set a $1.047 trillion funding level for the first half of the year; in essence, keeping last year’s spending policies in place for another six months. Unfortunately, the bill does nothing to avoid the start of sequestration and end to Bush-era tax cuts set to take effect in January.
With Congress’ continued procrastination towards sequester mitigation, the impact on contractors is unclear. “While we can foresee the harmful impacts of sequester…we cannot devise a ‘plan’ that eliminates, or even substantially mitigates them,” stated DoD Deputy Secretary Ashton Carter in testimony to the House Armed Services Committee. To date, the OMB has advised agencies to begin “discussions” around sequestration, however, little guidance has been provided around which of the many implementation options in the vaguely defined legislation will be exercised.
In order to meet budget reductions, the DoD could shed as many as 108,000 civilian jobs in 2013. On the other hand, agencies could reduce the size of program offices, reduce the scopes of, or defer spending on contracts, or push work into GFY2014. No matter the decision, Virginia contractors should brace themselves, as Virginia, specifically, Northern Virginia and Hampton Roads, is expected to have the highest per capita cuts of any state in the U.S.