Sequestration: An Inside Perspective

In two days, the sequestration axe will either drop, or it won’t.  Personally, I am about as close as you can get to the situation, and I have no idea how it will turn out.  While the “national security” argument against sequestration was gradually left behind, the arguments against the cuts have become increasingly economic in nature.  These arguments are problematic at best and disingenuous at worst.

A while back, I proposed a couple of ways to gradually cut more than sequestration does, therefore creating less pain in the current fiscal year; but as dieting often fails, cutting swiftly might be the only surefire method to actually cut spending.  Putting the cuts into perspective, as George Will did in his article this weekend, $85 billion from a $3.6 trillion budget, or 2.3%, is miniscule. The “draconian” cuts merely return us to 2006 levels.

I have been advocating deeper cuts for some time now, and as a defense contractor, am prepared to lose my job as a result (although I don’t expect to). I will try to be as objective as possible herein as I offer a couple of personal thoughts as we draw closer to the actuality of sequestration:

  • I am more concerned with the programs and capabilities we might be cutting arbitrarily than the amount of money we cut.  Although the Department of Defense had 18 months to prepare for cuts, sequestration planning began in earnest in November 2012. What the President calls a “meat cleaver” approach would not be so damaging if his Department had properly prepared for it. The time has come to choose what programs we want, and cut those we don’t - particularly when considering the programs like the F-35 Joint Strike Fighter, which the Pentagon recently canceled after spending $1.5 trillion - nearly twice the sequester - to develop over the past decade.
  • The Military Industrial Complex will finally be feeling the pain the rest of the economy has for five years. While defense contractors may lose their jobs due to sequestration, our military members are unaffected, and government workers will be furloughed, not fired (at least, not for now), as many in the private sector were after the 2008 financial crisis. While I feel for the government workers who will essentially get a 20% pay cut for an unknown period of time, it’s better than being fired.
  • Cuts made to defense contracting should match those the government is having to take. It may be tempting to cut defense contracting deeper; I understand that sentiment. The thought of war-profiteering during an economic downturn is sickening. Getting rid of a disproportionate number of contractors, however, would not give you a more efficient Military Industrial Complex.
  • If contractors were to be cut disproportionately, any remaining goods and services would have to be picked up by either military members or government workers.  Contracting responsibilities – whether building ships, aircraft, or radars, or developing software and process improvement tools - would not be more efficient if turned over to the military members, who operate – not build – this equipment. Nor should contracting services be turned over to government workers: Albeit to a lesser extent than the *actual* private sector, defense contractors have an added pressure to provide reliable goods and services. It is this pressure, after all, that makes goods and services better quality. Just as gasoline would not be cheaper or better quality if oil companies were nationalized, the defense industry would not benefit from insourcing all work.
  • While military members and government workers should not be doing defense contracting jobs, contractors should not be deployed to combat zones as a paramilitary force; combat is the military’s job. If we are to cut contracts, may I suggest we start with these kind first.
  • It is when contractors get too comfortable or “go native” that their products and services suffer. In this regard, sequestration is a good way to prune the industry.  I say, make the industry scramble. Shake things up a bit. Better valued products and services will survive. Comfortable pet projects, providing little to no return on investment, should not. Some contractors – and government workers, for that matter – should probably shift careers and enter the *actual* private sector.
  • A caveat: Bigger dogs get all the scraps when less is falling off the table. Somewhat counter-intuitively, big guys actually want the cuts. Don’t let them fool you. During hard times, industry positioning in the market can be critical for survival. Hard times present barriers to entry for the little guys, who often provide better services, but don’t have the financial cushion or other opportunities available that the larger firms do.

I’ve heard numerous times from DoD program managers that Congress should let the cuts happen so they can begin forecasting their budgets; they also say “kicking the can down the road” would be the worst thing that could happen. In the words of Dr. Tom Coburn, U.S. Senator from Oklahoma, it’s time to swallow the “bitter medicine.”

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