Anticipating massive federal budget cuts, the government contracting and consulting industry has begun laying off workers -- so far only in small numbers -- and shifting its emphasis from social sciences to defense.
According to industry officials, defense looks like the only growth area in the lucrative federal contracting business, one of the Washington metropolitan area's principal private industries. Otherwise, the industry appears likely to shrink as a result of federal cutbacks, at least over the short term.
There are no complete figures on how large a share of the area's economy depends on federal contracting, but 1979 figures for the Department of Defense alone showed DOD spending $1.78 billion with companies doing defense contracting in this area, creating roughly 70,000 jobs, according to one analysis. That figure represents one out of every 20 jobs in the region -- more than the number of manufacturing jobs in the area and almost as many jobs as there are in construction.
Those figures go a long way toward explaining how the area's private economy is wrapped around the federal government.
According to the Metropolitan Washington Council of Governments, about 2,400 private contractors in the Washington area supply services and research to the government. The organization noted in a study last month that, although federal contracts worth billions of dollars to the Washington area face cuts, dramatic increased in the defense budget should compensate for some of those losses.
Those who depend on federal contract work agree that, although the short-term outlook for the industry is grim, the picture is likely to change as an administration intent on eliminating federal jobs is forced to depend increasingly on the private sector.
The immediate future is "rather bleak," said Christopher Cross, manager for federal markets for Westinghouse DataScore Systems and co-chairman of the Committee on Federal Contracting Practices, an industry trade group. "The agencies have responded to the cuts by shutting things down, and it's hurting a lot of people," Cross said.
For example, an official of Booz, Allen & Hamilton, the large nationwide federal contractor, has cut about 12 employes -- not an extreme cut, considering Booz Allen has a local staff of about 1,000. "We've just let a few people go at this point, but who knows?" the official said.
In addition, Booz Allen has shifted some staff away from the transporation and energy businesses and placed more emphasis on defense and management information systems, reflecting an industrywide trend.
For instance, IDM International Inc., a McLean company, disbanded an education and training group, in part in anticipation of the demise of the Department of Education.
Further clouding the picture for the industry, even in the thriving defense sector, is the new administration's failure to fill key policy jobs quickly.
"The delays in nominating and confirming deputy secretaries and undersecretaries in the Department of Defense and various services has caused a real slowdown in the processing of procurement paperwork," said Earle Williams, president of BDM. BDM received about 90 percent of its revenues over the past three years from defense-related contracts.
The cuts, particularly in the health and education sectors of the federal budget, are expected to result in the loss of thousands of federal jobs. The victims of those cuts already have begun aggressively seeking private-sector jobs, and the area's consulting business is the likely market.
"This is the time of year when we usually gear up to write proposals in response to announcements, and we've noticed a significant slowdown if not outright elimination of much of the work we expect," said Naomi Naierman, deputy director of Washington operations for Abt Associate Inc. She said that federal bureaucrats "who we usually seek out are now calling us for jobs."
Gary Jonas, president of University Research Corp., the other co-chairman of the consulting trade association, said his company's personnel office reports a 67 percent increase in unsolicited resumes. "And we're getting many more calls than before," Jonas noted.
In addition, many private researchers who had considered returning to school to further their careers are speeding up that process in light of the current job squeeze. "It seems for a lot of people to be a good time to go back to law school," said one economic consultant.
Although there have been only small layoffs at firms scattered around the metropolitan area, industry officials predict larger layoffs this fall when the federal fiscal year ends and after Congress has met budget-cutting goals by slicing specific programs
Because consultants also purchase services from similar firms, the layoffs are trickling down to other businesses. A representative of American Management Systems, a leading area computing firm, noted that some of the firm's trade association clients are beginning to cut back on purchase of computer time.
The industry's grim short-term prospects are not limited to the Washington area. Much government-funded research is done at sites scattered across the country. William Morrill, an executive with Mathematica Inc., a Princeton-based firm specializing in data evaluation and research, said his study of the budget indicates that the budget cuts show a 30 percent reduction in his company's traditional markets.
"Obviously in the face of a potential large decline, one looks at other sources of revenue," he said. "We have let some folks go, particularly data collectors, but this is an adjustment period."
Despite the federal dollar pinch, some contractors say that state governments and private industry will fill at least part of the financing void. Robert Reisner, a principal of ICF Inc., a firm specializing in energy, environmental and economic analysis projects, observed that industries that had expected marketing and other studies from the government are now looking to firms like his own for the work.
"If an industry is not getting the information they expected from the government, they are now looking to their trade associations and to private companies to do market research and other types of information gathering," Reisner said.
Also on the positive side, industry officials add that the Reagan administration is likely to look more favorably on private industry and the consulting busines than the Carter administration did.
"We will get a more open-minded hearing because I think there is a predisposition to look at the private sector as a potential supplier," said Cross. "The Carter administration seemed to look at the private sector as an evil."
Jonas said that new regulations at the Defense Department designed to make contracting more efficient reflect that.
Morrill of Mathematica also believes that any short-term crunch ultimately should prove beneficial to the industry. "I don't have any better clue than anybody else, but after a two-year trough, what will tend to happen is that they'll realize it's important to know things in the making of public policy. This admistration is going to believe that, too."