Contractors and Trump's budget blueprint

We’re sure to hear a lot of hysteria over the coming days around the Trump administration’s fiscal 2018 budget proposal, or blueprint as they call it.

And at first blush the cuts are shocking even though the administration has been laying the foundation since the campaign over what areas of they would target.

So the proposed cut of $2.6 billion, or 31.4 percent, from the Environmental Protection Agency isn’t a surprise. But while deep cuts to the State Department were floated several weeks back it is still jarring to see a 28.7 percent or $10.9 billion cut proposed.

All told four agencies – EPA, State, Agriculture and Labor – all are targeted for 20 percent or greater in cuts.

Energy, Health and Human Services, Commerce, Transportation, Interior and Education all are seeing more than 10 percent proposed in cuts. The Army Corps of Engineers has a proposed 16.2 percent cut or $1 billion.

The cuts are driven by two considerations for the Trump administration. One is to fund an increase in defense spending of 10 percent and significant increases at the Homeland Security and Veterans Affairs departments. The blueprint proposes ending sequestration for the defense budget.

The Trump administration also is making cuts where it believes government activities has been a drag on economic growth or where the administration doesn’t believe the spending is crucial to American interests. The narrative also describes cutting programs that the administration sees as being duplicative of other programs.

The defense side grows by 10 percent along with a 5.9 percent increase to VA and a 6.8 percent increase to DHS. All the other civilian agencies are targeted for cuts.

Overall, the blueprint shows that Trump’s budget proposal only cuts 0.3 percent from expected 2017 spending.

Of course, the Trump blueprint is just the beginning of the process but it does send a clear signal of the administration’s priorities.

Will EPA actually see a 31.4 percent cut? Probably not, but it could see 20 percent or more.

At agencies that experience percentage cuts in the double digits, contractors will undoubtedly see an impact. But it is hard to pinpoint those at this stage.

But contractors doing a lot of business at these agencies will feel the impact of the cuts.

While we can’t say who is at risk and who isn’t, we thought it would be valuable to show the lay of the land as we see it today.

Using data from Deltek, we’ve identified the top contractors at the ten agencies facing the most proposed budget cuts by percentage.

The contract numbers are an aggregate from 2013 through part of 2017.

EPA (31.4% cut)

• CSRA $343.9M
• CGI Group $270.2M
• Environmental Restoration $218.6M
• TetraTech $202M
• Environmental Quality Management $187.2M
• CH2M Hill Inc. $171.3M
• ICF International $147.9M

State Department (28.7%)

• L. Harbert Intl $2.8B
• Undisclosed foreign contractors $2.5B
• PAE $2.3B
• DynCorp $1.9B
• Caddcell Construction $1.5B
• CGI Group $1.2B
• SAIC $922.1M

Agriculture* (20.7%)

• Clean Harbors Environmental Services $307.4M
• Neptune Aviation $253.4M
• SAIC $239M
• Crider Inc. $231.5M
• CSRA $226.1M
• Deloitte $222.4M
• Dell $195.2M

*The top contractor list was dominated by food companies, so I eliminated those.

Labor (20.7%)

• Management & Training Corp. $1.1B
• Adams and Associates $692.1M
• Onex Corp. $438M
• Owl Companies $408.4M
• Minact $362.7M

Energy* (17.9%)

• Lockheed Martin $9.8B
• Los Alamos National Security $9.4B
• AECOM $8.3B
• Battelle Memorial Institute $7.8B
• Bechtel Group $7.8B

*Doesn’t include nuclear programs which saw an increase)

HHS (16.2%)

• Schering Corp. $6.1B
• General Dynamics $3.7B
• GlaxoSmithKline $3.6B
• Leidos $3.2B
• Sanofi $2.7B

Commerce (15.7%)

• Raytheon $1.6B
• Lockheed Martin $1.5B
• Harris $1.4B
• Reed Elsevier $740.5M
• Ball Corp. $413M
• Northrop Grumman $244.9M
• IBM $226.2M

Education (13.5%)

• Navient Corp. $743.7M
• Accenture $694.9M
• Pennsylvania $690.6M
• Great Lakes Higher Ed $638.5M
• Nelnet $550.7M
• Dell $438.6M

HUD (13.2%)

• Carrington Mortgage Services $457.4M
• Selene Finance $11.5M
• K. Management $373.1M
• BAC Home Loans $287.6M
• Lockheed Martin $22.7M
• Deloitte $215.6M

Transportation (12.7%)

• Lockheed Martin $2.9B
• Harris $2.8B
• Raytheon $1.3B
• Mitre $607.2M
• CSRA $486.6M
• Parsons $471.7M
• Engility $418.9M

Just because a company is on one of these lists doesn’t mean they are facing cuts but at the very least their customers will be going through some significant turmoil. They could probably use a good partner right about now.