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Defense Officials: Sequestration Impacts Contractors More Than Troops

Nearly a million jobs in the defense contracting industry are at stake if sequestration takes effect, Aerospace Industries Association President and CEO Marion Blakey said in a Thursday statement.

Pentagon leaders told the Senate Armed Services Committee Thursday that the $1.2 trillion set to be automatically cut from the budget would disproportionately affect industry, Federal News Radio reports.

The officials said sequestration could lead to large-scale defense industry layoffs, but it would also lead to the Pentagon cancelling Pentagon projects and undoing the progress the government agency has made regarding business deals, the report said.

The Budget Control Act calls for the Pentagon to reduce spending by $487 billion over the next ten years.

Frank Kendall, nominee to become the Pentagon’s acquisition chief, said sequestration would likely double Pentagon cuts and change the picture entirely.

Kendall said sequestration would mean taking an additional $50 billion plus the $50 billion the Pentagon is already deducting from its yearly budget.

House Armed Services Committee Chairman Buck McKeon (R-Calif.) introduced a bill in December that would scale back the federal workforce to create savings.

The resulting cuts would most likely fall on industry as a result of the President’s authority to exempt military personnel from the additional cuts, Kendall said.

President Barack Obama would exercise this authority to avoid service member layoff, but Kendall suggests the impact would be devastating and increase the burden on the research and development, and investment accounts of the Pentagon.

Heidi Shyu, acting assistant Army secretary for acquisition, logistics and technology, said the action would save military jobs but would shift the savings into another area of Pentagon spending.

Shyu said the procurement accounts that impact the Army’s prime contractors as well as second, third, fourth-tier companies are all going to be significantly impacted.

Shyu said the Pentagon will lose contract accounts because it will be unable to pay vendors the amounts it agreed to.

Kendall said this will also diminish the Pentagon’s contract structures.

Kendall explained that the Air Force would have to renegotiate the contract price of their tanker as the department no longer has enough money to fund the project.

He said this would be difficult to do without competing bids.

The Pentagon is creating a record of the impact budget cuts are having on small and medium-sized businesses so the Pentagon can intervene if necessary.

However, Kendall said intervention could be rare due to budget constraints.

Kendall will return to Congress May 10 with a detailed report about the effects of the budget cuts already planned to third-and-fourth-tier contractors, according to Federal News Radio.

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