Pain of Defense Service Contractor Cuts Might Not be Felt Evenly

June 20, 2011

Cuts in Defense Department spending on contract services may not have a harsh effect on hiring and pay, according to observers.

The Senate Armed Services Committee last week approved its version of the fiscal 2012 National Defense Authorization Act, which freezes the department's operation and maintenance accounts for contract services at fiscal 2010 levels. The cuts, totaling $1.1 billion, are comparable to the limits on civilian employee spending, the committee wrote.

The cuts are significant but do not imply there will be an across-the-board hiring or pay freeze, said Alan Chvotkin, executive vice president of the Professional Services Council, a contractor trade group. Defense may award fewer contracts, and companies could cut staff or find other ways to reduce billings to the government, but the impact will differ across programs, he said.

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