-- When it comes to the contentious, politically-charged debate over how to address the half-trillion-dollar across-the-board federal budget cuts known as sequestration that could be triggered Jan. 2, there is at least one point on which nearly everyone agrees.
"No one wants it," said Alan Chvotkin. "It would have significant implications on the federal government across the board, on agencies that do business here in Huntsville and on the companies."
Chvotkin is executive vice president of the Professional Services Council in Washington, D.C., a national trade association representing more than 350 companies that provide professional and technical services to the federal government. He has been meeting with businesses and federal offices in Huntsville and, today, presented a "Sequestration Update" to members and visitors at the Huntsville/Madison County Chamber of Commerce.
The aim was to demystify the sequestration law itself, explain how it might be implemented and give companies some strategies to prepare, Chvotkin said. At least as much as they can prepare, given that almost nothing is known about where federal agencies might make their cuts, and which contracts might be affected.
"When will we know?" is the No. 1 issue that employers raise, he said. "The unknown is the hardest to work with."
There are a number of kinds of federal contracts: fixed-price, cost-reimbursement, indefinite delivery-indefinite quantity or IDIQ, and more. Anticipating what the government's possible strategies are for each type allows a company to make at least some plans. He would expect, for instance, that the government will simply reduce or stop orders under the IDIQ contracts, rather than take action to change the contracts themselves.
"That's a very different strategy than terminating ongoing work, and the implications for government and for contractors are different," Chvotkin said. "Knowing those rules can help the agencies and the contractors a lot in understanding what the flexibilities are and what actions they can take."
Employers are also concerned about the 60-day layoff notices they are required to provide workers under the Worker Adjustment and Retraining Notification Act and some states' laws. He said there is some confusion about whether the WARN Act is triggered in this instance, since it isn't yet known what contracts may be affected by sequestration, or whether sequestration will, ultimately, occur.
Because of that uncertainty, the Labor Department said sending the 60-day warnings to defense workers "would be inappropriate." But, in the past, companies have been penalized for not giving adequate WARN notices, and they don't want to pay fines or suffer other consequences.
Congress passed a "transparency" bill to force the Obama administration and federal agencies to tell how and what programs, projects and activities would be affected by sequestration. If and when produced, "I think the report will be a help," Chvotkin said.
In 2011, Congress passed the Budget Control Act, which raised the nation's debt ceiling but included the threat of sequestration as an incentive for a bipartisan "supercommittee" to hammer out an agreement on about $1 trillion in savings over the next decade. The supercommittee failed. Unless Congress takes other action, on Jan. 2, 2013 nearly $500 billion could be automatically cut from across the defense budget over nine years. And that's in addition to $487 billion in budget reductions already planned.
Among the results, according to an Aerospace Industries Association report, would be the loss of 2.14 million jobs nationwide, and about 38,000 in Alabama.
If sequestration is triggered Jan. 2, Chvotkin said all federal agencies - defense and non-defense - would have to achieve certain spending reductions by the end of the fiscal year on Sept. 30. Some reports put the additional defense cuts in 2013 alone at $55 billion. And more reductions would continue each year, unless Congress acts to change the law.
How likely is it that Congress can agree on a solution?
"Guessing at that is a real blood sport these days," Chvotkin said. "We've already delayed congressional action until after the November elections. That leaves a very small window for Congress and the president to come together and find an agreement on either eliminating the sequestration altogether or finding alternative mechanisms" for reducing spending.
"I'm not overly optimistic about the prospects," he said, "but I sure hope there is one."