Lockheed CEO warns of sequestration dangers

Sudden funding cuts from sequestration might result in countless claims against prime contractors. But who ultimately will get the bill?

The drop-off in funding that would result from a possible sequestration might result in countless "requests for equitable adjustments for claims" resulting from modification to contracts up and down the defense supply chain that would be submitted to the federal government, said Lockheed CEO Robert Stevens at the defense giant's media day June 19, reports Philip Ewing at DOD Buzz.

Stevens warned that the drop-off in funding caused by the sequestration would effectively abrogate the contracts that the Defense Department has with its big prime contractors, which would, in turn force those contractors to abrogate the deals they have with their suppliers, the story said. The suppliers would charge a prime contractor, such as Lockheed, for the disruption, which would turn around and request that DOD compensate the company for all of the ripple effects of modifications or cancellations.

With such financial and economical crises looming on the horizon, Stevens added his voice to the chorus of DOD suppliers calling on Congress to find an alternative to sequestration.