Surge in Canceled Deals Offers Preview of Sequester Damage Ahead

August 19, 2012

A surge in canceled U.S. contracts as war funding winds down may be a preview of the damage ahead for government vendors under looming automatic budget cuts.

The federal government terminated 13,579 contracts in the fiscal year ended Sept. 30, more than double the 5,692 it ended in fiscal 2006, according to procurement data. The value of canceled deals was $2.15 billion last year, compared with $416 million five years earlier.

The terminations, which included a $144 million deal with Oshkosh Corp. for battlefield ambulances last year, reflect the discontinuation of war funding that fueled a boom in contract spending in the past decade. Government agencies led by the Defense Department may back out of more deals if automatic cuts known as sequestration take effect Jan. 2.

“It’s like any business; if you’ve got major uncertainty in the marketplace, then you’ve got to tighten the reins and plan for the worst,’’ said Dan Jacobs, chief executive of the Federal Market Group, a Warrenton-based consulting company.

National security and domestic programs face $1.2 trillion in across-the-board reductions over a decade if Congress and the White House don’t reach a deficit-reduction agreement.

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