Contractors Brace for Federal Spending Cuts

January 22, 2012

Even if sequestration, or a reduction of about $1 trillion in federal spending from fiscal 2013 to 2021, were to occur, companies shouldn't expect government contracting to come to a complete halt.

But they should be readying for a more difficult scenario in which the government is likely to negotiate more and may be less willing to start new projects or extend existing initiatives, according to industry experts. The Professional Services Council, an industry association, last week convened member companies to help them prepare. 

At the event, speakers acknowledged that sequestration remains only a possibility. Though the law was put in place last year during disagreement over whether to increase the debt ceiling, Congress still could stop it from happening at any point, before or even after it goes into effect in early January 2013.

If sequestration were to occur, half of the cuts are mandated to hit defense spending, an area on which many local contractors depend, while the other half would hit all non-defense accounts. 

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