Contractors press Congress on sequestration

Chip Somodevilla/Getty Images - Defense contractor executives spoke to the House Armed Services Committee last year.

The pressure on Congress to act to avoid sequestration — a roughly $1 trillion across-the-board cut to federal spending set to go into effect in January — grew even more intense last week as contractors spoke out at a hearing and an industry-funded study increased its estimate of the number of jobs that could be affected.

At the same time, Northern Virginia defense contractors are preparing for a rally set to take place in Crystal City next week.

The House Armed Services Committee played host to contractors Wednesday, inviting several chief executives to talk about how they’re preparing for the possibility of a dramatic spending cut.

Robert J. Stevens, chairman and chief executive at Bethesda-based contracting giant Lockheed Martin, told representatives that the company believes it must issue layoff notices to workers within months.

He said the company has learned from the termination of its presidential helicopter program several years ago. The company took about 45 days after the termination to evaluate who to lay off and whether employees could be moved onto other work, but the Defense Contract Audit Agency has criticized Lockheed for not issuing immediate layoff notices.

“Experiences like that inform us,” he said.

Sean O’Keefe, chairman and chief executive at EADS North America, said the cut would ripple through the defense industry, increasing the cost of defense equipment, putting some suppliers out of business and resulting in layoffs.

The contractors’ claims were bolstered by a study commissioned by the Aerospace Industries Association. In the report, which was released last week, Stephen Fuller, director of George Mason University’s Center of Regional Analysis, estimated the across-the-board reduction could cost the country 2.14 million job and increase unemployment by as much as 1.5 percentage points.

“Other costs will occur over a longer time frame resulting from deferred or foregone innovation by both federal agencies and private entrepreneurs,” the report said. “These disruptions to the U.S. economy will have cumulative impacts with far-reaching and potentially more significant consequences.”

The tumult over sequestration is showing no signs of ending as Northern Virginia contractors ready for a July 30 rally.

The event, planned by a group of Northern Virginia-based defense contractors including Northrop Grumman, has been dubbed the Northern Virginia Stop Sequestration Rally and will be held at the Crystal Gateway Marriott, according to Northrop spokesman Randy Belote.

Wes Bush, chairman, chief executive and president at Northrop, as well as Marion Blakey of the Aerospace Industries Association and other chief executives are expected to attend, he said.

“The focus primarily is that Northern Virginia companies come together to ... draw attention to this issue,” Belote said. “This is not a political rally.”

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