Budget Cuts Could Lead to Costly Legal Disputes, Contractor Payouts

July 11, 2012

The government could be headed for costly legal disputes and contractor payouts as budget cuts force agencies reduce or terminate contracts in the coming year, contract experts said Tuesday.

Contractors are mostly concerned about the impact of automatic budget cuts, called sequestration, that are supposed to take effect Jan. 2. But if Congress wants to avoid those automatic cuts, it still will have to approve an alternate budget reduction plan, said William Roberts, a government contracts lawyer at Wiley Rein who spoke to contractors about the potential impacts of sequestration at a Professional Services Council event.

"The only way we're going to avoid sequestration is to have the major budget cuts," Roberts said. "There's no planning going on to speak of within the government. They're going to get caught flat-footed and have to deal with what programs to cut, what contracts to partially terminate." 

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