8 tools for surviving sequestration

As sequestration nears and Congress continues its partisan squabbles, government and industry are bracing for Jan. 3, 2013, when nearly $1 trillion in across the board budget cuts take effect.

While the public and private sectors are trying to plan ahead, they have different considerations and priorities that must be weighed – a key point that could mean the difference between surviving and falling victim to budget axe.

“We’re seeing that agencies are already getting nervous about how to implement, and that’s where we’re seeing more solicitations being delayed, more decisions being postponed and modifications being made,” said Alan Chvotkin, executive vice president and counsel at the Professional Services Council. “This will get worse as it gets closer to the event.”

Chvotkin spoke as part of a panel at a July 10 PSC event in Arlington, Va., that addressed sequestration issues.

Agencies are buckling down on spending, which creates a ripple effect through industry, but the private sector has to handle things differently in preparing for sequestration’s impact, according to Bill Roberts, partner at Wiley Rein.

“Because of the profit imperative to which government personnel are not subject, contractors simply cannot conduct business as usual and at the same time hope to remain in business,” Roberts said.

Here are eight keys to surviving sequestration:

  • Know your existing contracts: Take the time to do a full inventory and determine what types they are – indefinite delivery/indefinite quantity are increasingly common, time-and-materials less so. Determine what are severable and non-severable services: some will have to be carried over beyond the current fiscal year, but others may allow spending in fiscal 2013 for services carried out later.
  • Know your contract/program lifecycle: When does it expire, what are the option periods? “These can help not only with your planning but in discussions you have with federal agencies,” Chvotkin said. Also, contracts later in their lifecycle may be less flexible.
  • Strengthen your performance: “Nothing will succeed in this area like a well-performing program,” he said. Also, ensure relevant information in databases – such as past performance – are as accurate and favorable as possible.
  • Don’t forget implications for subcontractors and vendors: Determine what’s needs to continue, or what can brought in-house as appropriate or needed. Know where you stand in your small business performance record.
  • Engage your federal customers, both at the contracting officer and end-user levels: “This is about the importance of the work, the status, the performance, their plans and strategies going forward,” Chvotkin said.
  • After Oct. 1, maximize “run rates” because funds spent in the first quarter are exempt from sequestration, but contract action is still available, he said.
  • Also after Oct. 1, evaluate agency funding and spending priorities for both existing and new work. What must be saved, deferred or deleted?
  • Know the rules: There are lots of them to comply with, and knowing them will help. For example, there has been a lot of attention on the federal WARN (Worker Adjustment and Retraining Notification) Act – it applies to all companies with at least 100 employees; it covers a physical, single plant site closing that results in the loss of 50 or more employees in a 30-day period, or a mass layoff of either 500 employees or one-third of the active workforce at the location. It doesn’t apply to closing a temporary facility or program, and it requires a 60-day notice. Advising staff of impending sequestration doesn’t count as compliance with the WARN Act, Roberts said.

Reader Comments

Mon, Jul 16, 2012 TheSHOE TAMPA

This is just a typical cycle that may feel like a much different order of magnitude, but in essence is the exact same cycle we incur every 8-10 years. BLUF = we lose contractors or civilians or military, we enter into a declining economy, then a great economy is spawned a few years later. Civilian companies have hired all the excess capacity prior to government realizing the direction of the economy or effects on global politics. These effects catch up and the gov't now has to pay larger sums of money to attract talent..this talent is across the board (civilians, contractors, and military). This includes costs to recruit, train, sustain, and endure. As a cost estimator, I'll never get it, cause my math & logic is different than everyone elses.

Wed, Jul 11, 2012 Stephanie Amend Boulder, CO

I agree with your translation Jaime, and am fearful for the VERY small businesses who survive off a handful of contracts with a few FTEs on each. Most are reactive and not proactive and that particular "tool" in addition to cuts, will mean nothing but bad news for the tiny guys.

Wed, Jul 11, 2012 Jaime Gracia Washington, DC

Don’t forget implications for subcontractors and vendors: Determine what’s needs to continue, or what can brought in-house as appropriate or needed. Know where you stand in your small business performance record. Translation: Keep taking FTE away from small business subcontractors, even though you more than likely have a small business subcontracting plan with the government that doesn't get enforced anyway. There is nothing the small business can do, and enforcement is an afterthought. No consequences, and improves the bottom-line.

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