Cuts still uncertain for Defense, contractors

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Sequestration was predicted to be an economic disaster — affecting nearly every aspect of government across the nation, costing tens of thousands of jobs and bringing some government services to a halt.

In the first two months, that hasn’t been the case — at least in Colorado Springs, and at least for the defense sector of its economy. Sequestration, in place since March 1, has only brought more uncertainty and little action.

Cut Spending 2Civilian employees at the military installations were facing 22 days of furloughs by the end of September. Then that was cut to 14 and now the total stands at 11. About 5,000 workers in the Springs still face the furloughs, which represent roughly a 20 percent cut in pay for each affected week.

Otherwise, little action has been taken. The top defense contractors — Raytheon, Lockheed Martin, Boeing — have seen their stock-market prices increase since sequestration went into effect. So far, no employees in the Springs have received notifications of job losses at the world’s largest defense companies.

There’s been other good news. Congress passed legislation giving a break to air traffic controllers and reducing congestion and traffic delays at airports, for example.

And at Fort Carson, some money has been reinstated for the Mountain Post’s maintenance budget.

Fort Carson uses KIRA as the contract partner for facilities maintenance and construction. The contract took a big hit under sequestration, says Carson spokeswoman Meghan Williams.

About 125 employees were cut from KIRA’s payroll as part of sequestration because, originally, Fort Carson was to receive about $30.2 million less for its maintenance budget. That cut meant a $6 million reduction for KIRA. Now, some cash will go back into the budget, Williams said, but still totaling only 46 percent of its normal budget.

What that means remains to be seen.

“We are adding back scope to the base operations support contract, which will take several weeks to work through the contracting process with KIRA and our Fort Carson contracting office,” Williams said in a written statement. “We cannot provide any information at this point about how many contractor employees might be hired back or when they might be hired back.”

Contracting still busy

Despite dire predictions, Colorado Springs has been largely spared from the effects because of the types of defense operations conducted here, said Ken Knapp, executive director of the Colorado Procurement Technical Assistance Center. The Army committed to the Combat Aviation Brigade, keeping construction contracts intact and underway. Space and cyber security remain high national priorities, he said.

“We don’t build aircraft here,” he said, referring to the hundreds of jobs lost at Lockheed Martin and Boeing’s aviation divisions. “But we do have a robust cyber security mission. So, if local defense companies will be affected? It’s certain to depend on what they do. The government is spending money still — it’s just cutting back.”

And contracting itself, Knapp says, is busier than ever.

“We’ve seen a real increase,” he said. “A lot of agencies were waiting out the uncertainty to spend money. And now they’ve started fulfilling contracts that had been sitting for months. It’s good news for local companies.”

The PTAC’s federal funding wasn’t hurt either, but it represents a small part of the overall federal budget. Nationally, the federal government spends $32 million on 92 PTAC budgets across the country. The PTACs must raise money from state and local governments, and local businesses, to make up the rest.

Lockheed Martin officials are paying close attention to sequestration company-wide, said Larisa Cioaca, manager for media relations. As for its local operations, the company was hesitant to respond. “As we anticipated, it is taking time for our customers to determine how they will implement sequestration’s required cuts,” Cioaca said. “We’re working closely with them as they explore a host of potential scenarios.”

In other words, it’s too soon to tell. But it’s not too soon for civilian employees at military installations. Almost all the 1,500 civilian employees at the Air Force Academy will face 11 days of furlough for the rest of the fiscal year.

Even the Air Force Academy’s professors are subject to furlough, which means the AFA will spend the summer months jockeying schedules to allow professors to fulfill the furlough requirements.

“I expect our dean will be teaching,” AFA spokesman John Van Winkle said. “A two-star general will be teaching classes. But our real concern is the lower-wage workers, people who live paycheck to paycheck. That’s the major concern.”

Local uncertainty

The loss of 20 percent pay for a shorter time probably won’t have much of an impact on the local economy, said UCCS economics professor Fred Crowley.

“It’s really hard to know what the overall effects of sequestration might be on the economy,” he said. “But there’s a theory in economics — people only change their spending habits when they know a change of income is permanent. Since this isn’t permanent, it isn’t likely to change many habits.”

Overall, response to sequestration has been muted, said Andy Merritt, chief industry officer at the Colorado Springs Regional Business Alliance.

“I think it’s too soon for most companies to really be able to tell,” he said. “I certainly haven’t heard of any cuts. Many companies prepared for defense cuts as early as 2010, so they adjusted their businesses accordingly.”

Waiting is becoming normal for defense companies that have been seeking concrete guidance since the possibility of sequestration first passed in 2011. It’s a status quo that should not be maintained, says Marion Blakey, CEO of the Aerospace Industries Association.

“AIA calls for elimination of the sequestration caps and enactment of predictable and stable budgets for the Department of Defense, the Federal Aviation Administration, NASA and the National Oceanic and Atmospheric Administration,” Blakey said to Congress.

“It is essential to provide a sufficient level of investment in infrastructure, research and development, and acquisition of assets to support our national security and economy.”