Scientists and engineers working as contractors for the U.S. government and military may be the most vulnerable to across-the-board sequestration cuts, John Jumper, chief executive officer of SAIC Inc. (SAI), said.
“When you start to feel these pressures and it causes you to have to reduce your workforce, a lot of the people you’re laying off are scientists and engineers,” Jumper said in an interview in Washington. “These are people who have grown up as engineers and scientist in the defense or government service that are now the most vulnerable to being laid off.”
U.S. vendors including SAIC are dealing with the effects of automatic spending cuts known as sequestration even as federal contract spending has slowed. The government spent $516 billion on contracts in fiscal 2012, down from $533 billion a year earlier.
Under sequestration, the Department of Defense will cut $37 billion in spending in the fiscal year that ends Sept. 30. The Pentagon said this week that budget cuts will trigger 11 days of unpaid leave for approximately 680,000 civilian workers.
SAIC, the seventh-largest government contractor, provides engineering and technology services. The McLean, Virginia-based company is in the process of splitting into publicly traded companies: SAIC, which will focus on technical services and information technology, and Leidos, which will handle national security, health and engineering.
SAIC, which has surged 34 percent this year, extended its gains for a third day to $15.32 at 4:15 p.m. in New York trading.
Jumper will head Leidos as chairman and CEO, and SAIC Chief Operating Officer Stu Shea will act as president and COO.
Both executives said today that SAIC hasn’t received enough guidance from the Pentagon and other agencies to predict which programs or contracts may lose funding. They said the National Security Agency is the only office that has been able to provide them with clear examples of program cuts.
“I liken it to standing blindfolded in the middle of the interstate highway,” Jumper said. “You don’t know what hits you until it hits you and you take your blindfold off.”
The uncertainty over funding levels may lead scientists and engineers to stop working on government and military projects, Shea said. “They say, ‘I’m not going back to that risky environment.’ We may not get them back,” he said.
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