This blog post was authored by Beth Ferrell.
Unless Congress acts to prevent sequestration, beginning March 1, 2013, approximately $85 billion in budgetary resources across the Federal Government will be cancelled. The looming threat of sequestration creates significant uncertainty regarding the budgetary resources that will be available for the reminder of FY13. Industry is looking for guidance from the Executive on how agencies will implement sequestration. On January 10, DoD issued initial planning guidance on sequestration, and on January 14, OMB issued a Memorandum for the Heads of Executive Departments and Agencies on planning for the impact of a sequestration order. However, this guidance is top level and signals only that DoD and other agencies are planning to reduce civilian workforce costs and review contracts to determine where cost savings may be achieved. As agencies grapple with the prospect of sequestration and plan for cost-cutting, so must contractors be cognizant of the impact sequestration will have on existing contracts. With sequestration-mandated cuts in funding levels available for procurement, government agencies will be forced to change, restructure, or abandon programs and contracts. Contractors can expect partial or total terminations, de-scoping of quantities and capabilities, contract stretch-outs, breaks in production, and other efforts by the government to alter contracts and programs to align government spending with available funds. There are some specific steps contractors can take now to prepare the inevitable. See “Preparing for Sequestration-Driven Contract Terminations and Restructures.”