Staying calm as sequestration looms

Despite the concerns of larger defense contractors, smaller companies are taking a more measured and cautious approach to about $1 trillion in mandatory federal budget reductions set to start in January.

The cuts — better known as sequestration — has been roundly criticized by officials at the largest defense contractors. Perhaps the most vocal has been Robert J. Stevens of Bethesda-based Lockheed Martin, who has publicly said the company may have to notify all of its employees within months that they could be laid off if sequestration goes into effect.

Smaller contractors, which typically lack extensive government relations and lobbying teams, have been increasingly trying to figure out how the cut will affect their businesses. Arlington-based industry group Professional Services Council last week held an event attended by about 300 contracting representatives — in person and on the phone — in which it reviewed how sequestration might work.

“The potential reality is hitting home” as January edges closer and industry officials see it as unlikely that a deal could be made before the presidential election, said Stan Soloway, president and chief executive of the trade association.

Contractors are already seeing some federal agencies ready for sequestration by delaying awards or moving more slowly, he said, and many companies “expect that to become more acute.”

Still, professional services contractors typically have less certainty about what will happen. Because many of their services are embedded within programs — for instance, providing logistical help on a weapons program — it’s not always clear whether their particular function will be cut, even if the program is reduced, Soloway said.

“It’s much more difficult to determine with specificity what the effect on the services and technology sector will be,” he added.

Soloway said he doesn’t expect services contractors to send out potential layoff notices or to make reductions without first seeing whether the federal government changes their contracts.

At Fairfax-based Salient Federal Solutions, chief executive Brad Antle said the company has already been preparing for budget cuts and isn’t taking separate steps related to sequestration.

“I don’t think we have the same level of impact that the larger guys have,” he said, noting that he would not have to consider closing factories, for instance. “We don’t have a sense that we’re going to see huge layoffs in the services arena.”

Greg J. Baroni, chairman and chief executive at Attain, a professional services firm in Vienna, said he doesn’t expect significant damage.

“We obviously took sequestration and the threat of sequestration ... seriously,” he said. “But in terms of anything like what you see the ... larger aerospace and defense firms doing in terms of preemptive layoff notices, we’re not doing anything of that nature.”