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Sequestration failure brings mixed bag

The sequestration delay, that was part of the deal to avoid the fiscal cliff, presents a mixed bag for contractors.

On one hand, there is somewhat of a sigh of relief, but two months isn’t much of a breather, especially when you add the new sequestration deadline to the expiration of the continuing resolution, and to the expiration of the debt ceiling. All three will be colliding in late March.

According to an analysis by Deniece Peterson at Deltek, the close deadlines for sequestration and the CR might be advantageous to force more controlled cuts to spending, instead of the meat axe approach.

Of course, Congress had the same opportunity back in September, when it passed the CR originally, and then failed to act.

Peterson’s analysis includes two positives for contractors in the fiscal cliff deal:

  • Agencies can continue to spend money, so that will give contractors some predictability for the next two months.
  • Agencies also have some more time plan for the sequestration cuts.

The big negatives to the deal:

  • Continued uncertainty and delays for agencies and contractors alike.
  • Contractors will continue to postpone investments such as mergers and acquisitions, research and development and hiring.

Uncertainty was the big theme of 2012, and it looks like 2013 might be a repeat, or at least through March and April.

A couple things to look for:

Will the brinkmanship continue?

Probably. Congress will not likely take a vote on any of the pressing issues in March until the midnight hour, or even a few hours later.

Who will lead? The Senate or the House?

My guess is the Senate, which just might – a big might – leave behind the extremism of recent years, and adopt it’s more traditional role of being the cooler, less emotional chamber. House Speaker, John Boehner, is reminding me more and more of the Dallas Cowboys' Tony Romo; he’s great during the regular season, but just can’t deliver the big win.

If that continues, any solution to sequestration will likely come from the Senate, after failing to come to a vote in the House.

What are the wild cards?

The budget won’t be the only battle of the new congress. Immigration, gun control, maybe energy and, of course, political appointees will be the topics of other contentious fights between the parties.

The next year will have plenty of opportunities for knock-down, drag out fights, but with so many issues to deal with, there also will be opportunities for deal-making.

Let’s hope the deal-making outscores the fights.

Contractors are still caught in limbo, so the basic blocking and tackling of business remain paramount – know your customers, understand their problems, understand your weaknesses, control costs and build strong partnerships.

Sequestration remains a short-term problem, so don’t lose sight of where you need to be afterward.
 

Posted by Nick Wakeman on Jan 07, 2013 at 7:24 PM


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