In a September 25, 2012 memo to DOD managers and office heads, Deputy Defense Secretary Ashton Carter states that military services should continue normal spending and operations as if sequestration will not occur starting January 2, 2013. The memo states, “to continue the defense mission under current laws and policies, without taking steps that assume sequestration will occur”. The idea being that Defense programs and activities should not suffer any detrimental actions of automatic spending cuts as long as there is a possibility they can be avoided. Additionally, the Office of Management and Budget (OMB) also sent a similar version to Federal Agencies last Friday.
What does this mean to contractors?
Running to stand still! There is no clear message to take for sequestration at the moment, as so much hinges on the election. However, short of making program changes, contractors should at least:
- Stay up to date on all the recent news
- Perform Scenario Analysis – Various forms of scenario analysis should be performed to consider various degrees of budget changes
- Create Contingency Plans – Create plans for potential scenarios, which are able to be implemented when concrete information surfaces
- Mitigate risk – Identify areas which could severely expose the company should sequestration come into play, evaluate options to mitigate risk
Though there is merit in heeding the advice of the Deputy Director, as there is no guarantee of sequestration, it would be wise to make some preparations to minimize any adverse impacts.