Pentagon Official Urges Contractors’ Patience on Cuts

Pentagon Comptroller Robert Hale urged defense contractors to “stay with us” as the military starts to impose across-the-board cuts to squeeze $46 billion from this year’s budget.

“We need you, and we recognize you’re a valued part of” national security, Hale said in a plea for defense industry patience during an interview with Bloomberg Television’s Peter Cook for “Capitol Gains” airing March 3.

Democrats and Republicans are in a standoff over how and whether to replace the cuts totaling $1.2 trillion over nine years that were triggered today. With half of the so-called sequestration coming from defense programs, the Pentagon says it will have to reduce planned funding by about $46 billion in the remaining seven months of this fiscal year.

The Pentagon and military services also face the financial constraints of a stopgap fiscal 2013 spending measure that expires March 27 and may be extended for the year. The measure, which continued fiscal 2012 funding, concentrates money in weapons accounts and is less than what the Pentagon says is needed to pay for troop training, maintenance and readiness.

“I can’t sit here and tell you you will be unaffected,” Hale said of defense contractors. “You will. We will try to communicate with you as best we can.”

Hale said signed contracts would be affected only in rare cases “because we would experience heavy cancellation charges.”

“If there are options in the contract, they may not get picked up” or would be extended at lower levels, he said. “Certainly, new contracts would have to be reconsidered.”

The Pentagon plans to buy 29 of Lockheed Martin Corp. (LMT)’s F-35 jets, the costliest U.S. weapons system. “Under the current circumstances, we would probably end up reducing the buy size by several,” he said.

To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net; Peter Cook in Washington at pcook6@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

27:24

March 1 (Bloomberg) -- Defense Secretary Chuck Hagel speaks at a news conference in Washington about the impact of automatic federal spending cuts set to kick in today on U.S. armed forces. Deputy Defense Secretary Ashton Carter also speaks. (Source: Bloomberg)

9:43

March 1 (Bloomberg) -- Retired U.S. Army General Wesley Clark talks about impending U.S. spending cuts, defense policy and the economy. He speaks with Trish Regan and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)

7:56

March 1 (Bloomberg) -- William Cohen, chairman of the Cohen Group and a former U.S. Defense secretary, talks about the impact of budget cuts on defense contractors. Cohen speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)