Companies already seeing fallout from restrained spending

The threat of layoffs is causing some employees of large defense contractors to move on to what they perceive to be more stable industries, said John Jumper, CEO of McLean-based SAIC Inc., in an interview with Washington Business Journal about the impact of pending federal budget cuts.

While all of the major contractors are voicing concerns about long-term impacts of sequestration, which will strip $1.2 trillion from the federal budget come Jan. 2, companies are already seeing a fallout from restrained spending by agencies, said chief executives who spoke Monday at a Northern Virginia Stop Sequestration Rally that drove hundreds of people in Arlington.

“As these contracts get delayed – contracts that led us to bring on a workforce in anticipation of the awards – jobs are in jeopardy. And we do have to let them go out of necessity,” Jumper said. “It makes the workforce very uneasy. Then what that leads to, is [other employees] that say, ‘I have an opportunity to go over here, and I’m going to take it before my turn comes.’ When that talent vanishes, it’s hard to build it back up.”

That point – that forced job losses drive an exodus of sorts from the federal market – was reiterated in comments made by Northrop Grumman Corp. CEO Wes Bush at the rally.

Sequestration “would damage our ability to attract the brightest minds, [which] we need to ensure we’re able to support our customers,” Bush said, echoing statements he included in a July letter submitted to members of the Senate Committee on Armed Service. “This is a bleak picture.”

A strained workforce will contribute to companies’ inability to meet contract requirements, leading to protests and program adjustments that will eat up any achieved savings, Jumper added.

“We’re very easily looking at 14 to 15 percent cuts in individual programs,” particularly if President Barack Obama opts not to trim military salaries, as most assume, Jumper said. “Some may argue that at least government isn’t killing programs completely,” he added. “But the fact is that those cuts would make many programs unexecutable, and then the litigation will replace the savings.”

More than 300 people, predominantly from the defense and aerospace industry turned up at the rally at Crystal City Marriott to hear Virginia company executives and members of Congress speak out against sequestration. Among the chief executives to speak were Bush, Jumper and Brad Antle of Fairfax-based Salient Federal Solutions Inc.

Also among the speakers were Virginia Gov. Bob McDonnell, Virginia Republican Rep. Frank Wolf, and Democrats Jim Moran and Gerry Connolly, both of Virginia.

“This grew out of a pandering Congress to deal rationally with the debt,” said Connolly, who called upon Congress during the rally to cancel its August recess to address sequestration. “We failed in that. And now we only have 11 or 12 legislative days left.”


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