Federal government pushes back on sequestration panic

August 5, 2012

The government last week pushed back against contractors on how they should brace for a nearly $1 trillion cut in federal spending, arguing that mass layoff notices are unnecessary and that warnings of contract terminations are overblown.

The frenzy over what’s known as sequestration — an across-the-board cut set to go into effect in January — grew more intense as contractors staged a rally last week featuring industry chief executives and local politicians while Obama administration officials appeared on Capitol Hill. Under sequestration, the cuts would be split between defense spending and all non-defense accounts.

In a guidance letter issued July 30, the Labor Department said the Worker Adjustment and Retraining Notification Act — better known as the WARN Act — does not require contractors facing sequestration to send notices to their workers that they could be let go. Contractors such as Bethesda-based Lockheed Martin have said they might send notices to all of their employees later this year.

The “WARN Act is designed to require employers to provide notice to those workers who are reasonably likely to lose their jobs or suffer other serious employment consequences, but not to those workers who will suffer no such consequences or who have only a speculative chance of suffering them,” the guidance said.

In a statement, Lockheed said it is reviewing the guidance.

At a hearing before the House Armed Services Committee on Wednesday, federal officials acknowledged the cuts would be damaging but also said some contractor worries may be overstated.

For instance, Ashton Carter, the deputy defense secretary, said he hasn’t seen Pentagon purchasing officials delaying their buys, even as some companies have said they’re concerned about spending slowdowns in advance of sequestration.

“We do not want to hold back on the obligation of funds — either for weapon projects or operating programs — that would have been obligated in the absence of a possible sequester, since this would introduce inefficiency and waste,” Carter said in prepared testimony.

He also denied that the government would have to terminate a wide range of programs, noting that many can move forward with funding that is already in place.

Jeffrey Zients, acting director of the Office of Management and Budget, in addressing the House on Wednesday, rebuffed congressional criticism that the federal government hasn’t been planning for sequestration.

“No amount of planning will mitigate the damaging effects of sequestration,” he said, arguing that Congress should instead spend its time coming to agreement to avoid it.

“The right course is not to spend time moving around rocks at the bottom of the cliff to make for a less painful landing,” he said. “The right course is to avoid driving off the cliff altogether.”

Contractors also ramped up their efforts to stop sequestration, staging a rally in Crystal City last week. Executives — including Wes Bush, chief executive of Falls Church-based Northrop Grumman; John P. Jumper, chief executive of McLean-based Science Applications International Corp.; and Brad Antle, chief executive of Salient Federal Solutions — stood on stage alongside local politicians, including Virginia Gov. Robert F. McDonnell (R), Rep. Gerald E. Connolly (D-Va.) and Rep. Frank R. Wolf (R-Va.).

Contracting employees gathered in a Crystal City hotel ballroom to don red T-shirts and wave signs in the shape of stop signs, cheering loudly as the executives and officials called for sequestration to be avoided.

Connolly in particular said Congress should cancel its upcoming recess and stay in session to handle the issue.

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