Small Government Contractors Are Confused and Scared About Sequestration

Budgeting is always a matter of hard choices, but the $85 billion (or $42 billion) in federal budget cuts for the current fiscal year present an additional layer of complexity: Small business owners who contract with the federal government don’t know which projects will be pared back, nor do they know precisely when the cutbacks are going to come.

As Karen E. Klein reported here in January, small contractors may be especially vulnerable because they tend to rely on a small number of government contracts and because they often work on smaller projects more likely to be deemed nonessential when federal agencies start making cuts in the weeks to come.

The result is the type of impossible decision that Mickey Boyer, president of Newport News (Va.)-based defense subcontractor UHP Projects, was forced to make. When Bloomberg political analyst Matthew Dowd interviewed Boyer, he said he’d been forced to lay off his own son.

And if the received wisdom in the days leading up to sequestration, as the cuts are known, is that the reductions aren’t going to have as widespread or catastrophic impact as, say, a full shutdown of the federal government, they’ll obviously have consequences large and small.

“The pain will be real,” President Barack Obama said during a press conference on Friday. “All of this will cause a ripple effect throughout our economy.”

The threat of sequestration has hampered small businesses such as Boyer’s for months, says Margot Dorfman, chief executive officer of the U.S. Women’ s Chamber of Commerce, forcing them to make contingencies for the likelihood of budget cuts with no certainty that their businesses will be directly affected. “People are talking about what they might have to do, whether it’s diversify their business, or cut staff, or something else,” she says.

It’s not just businesses that rely on federal contracts. Dianne Holte, whose Minnesota-based construction company has won contracts in the past for the Army Corps of Engineers and the U.S. Air Force, says she’s also concerned about contracts with state departments of transportation. Her contracts are still up for bid, but she worries about what will happen to the work once sequestration trickles down to the states.

“Do we bid the jobs?” she says. “And if we do, are we going to find out that the jobs we’ve been awarded aren’t going to happen?”

In the end, she says she doesn’t have much choice: “To not bid the jobs is suicidal if the funding isn’t cut. We have no choice but to proceed in anticipation of the jobs being awarded.”

Enrep, a 44-employee environmental consulting firm in Orlando is largely dependent on a subcontract to provide training at a U.S. Department of Energy nuclear cleanup site in Hanford, Wash. “The majority of my business is up there,” says owner Jennifer Dickerson. “Without that contract, we would hope to diversify our business at other DOE sites, but the money is tight everywhere. Hopefully we won’t have to close our doors.”

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