Contractors bracing for ‘fiscal cliff’

December 9, 2012

Capital Business, in partnership with the Northern Virginia Technology Council, last week sat down with five local government contracting executives to talk broadly about the industry — from how they’re preparing for the “fiscal cliff” to what they are doing to retain top employees. Here are edited excerpts from that conversation:

On the ‘fiscal cliff’

Wes Bush, president, chief executive and chairman of Falls Church-based Northrop Grumman:

“All companies have a responsibility to plan for the fiscal cliff. If we do find ourselves in a situation where whatever the ultimate solution to the fiscal crisis turns out to be involves a substantial reduction in expenditures in the defense arena, I think we all need to be prepared for some very substantial local impacts.

It was pretty clear just a few years ago that the percent of [gross domestic product] that the deficit represented was continuing to go up. I don’t think it took a genius-level perspective to figure out things were going to have to change. As a result, we began to make some changes, driving operating efficiencies by reducing our head count, reducing our square footage.

On how companies are reacting so far

Sudhakar Kesavan, chief executive and chairman of Fairfax-based ICF International:

“Over the last two quarters, we’ve seen not only the federal business slow down, but our commercial business — which grew very significantly over the last year — has also significantly slowed down. Everyone’s waiting and seeing what’s likely to happen, so for us, diversification has not been as helpful as we thought it would be.

The uncertainty associated with what’s going to happen is more of an issue than the fact that the expenditures are going to come down.”

Bush:

“There’s a mind-set across the corporate environment in our country today that is still influenced by what happened in 2008. We saw large business failures that resulted from basically balance sheet issues. That was a product of not being ready for some dramatic changes that happened over a short period of time. Well, that sounds a little familiar, right?

Bobbie Kilberg, president and chief executive of the Northern Virginia Technology Council:

Networking is up. “It’s what I call the ‘hug factor.’ We saw this when the dot-com bust came in 2000, 2001. Strangely enough, when you have hard times companies need each other more, so they want to be together, they want to see each other, they want to know what each other’s doing. So our membership’s doing just fine.”

On how employees are reacting

Nelson Ford, president and chief executive of McLean-based LMI:

“Not only are companies cleaning up their balance sheets, but individuals are cleaning up their balance sheets. People are saying, ‘OK, if times get tough and I lose my job, am I going to be able to make it?’ I see that in our employees. I see people being more conservative in their views of what they’ll be able to afford in the future.”

Todd Stottlemyer, chief executive of Falls Church-based Acentia:

“It doesn’t go unnoticed by employees when they see companies laying people off. The out-migration from companies [slows down]. People may stop and pause a little bit and say, ‘This is a pretty good environment I’m in today.”

On finding opportunities

Jennifer Morgan, president of SAP Public Services:

“There are not going to be these big rip-and-replace projects anymore. People are not going to be starting up these massive transformation efforts. There’s going to be innovation around the edges. So we’re looking at other pillars of our business — mobility’s going to be big, analytics, cloud computing.”

Stottlemyer:

“We cannot cut our way to prosperity. We’re being very cautious and careful and aggressively trying to cut costs in one area, but at the same time making sure we’re innovating and investing so that we can build those solutions that really help differentiate us in the marketplace.”

Comments
Show Comments
Most Read Business