In 2010, U.S. Defense Secretary Robert Gates announced his plan to cut 10 percent in spending on support contractors and overall spending cuts over 5 years totalling over $100 billion. The move has not been without controversy in the government contractor community, the military and among political leaders. For starters, Gates proposal includes dismantling of Joint Forces Command based in Norfolk, VA, which impacts thousands of jobs. The proposed cuts on contractor work, which is expected to roll some work to full-time government positions, also is being felt across the country.
Why it matters to the GovCon space?
Written by: Rich Wilkinson, VP, Government Contracting, Deltek
During Mr. Gates August 9th speech, he made clear that “the task before us is not to reduce the department’s top line budget. Rather, it is to significantly reduce its excess overhead costs and apply the savings to force structure and modernization.” He offered new details about how that might happen:
- Reduce funding for service support contractors by 10 percent a year for the next three years
- Close JFCOM, a command that includes some 2,800 military and civilian personnel and 3,000 contractors
- Freeze the number of OSD, defense agency and Combatant Command billets at the fiscal 2010 levels for the next three years
- Freeze at FY10 levels the number of civilian senior executive, general and flag officer, and PAS positions
- Consolidate IT infrastructure facilities
- Freeze the number of DoD required oversight reports and cut the dollars for advisory studies by 25 percent
- Review of all outside boards and commissions for the purpose of eliminating those no longer needed and cutting overall funding available for studies by 25 percent in FY 11
Broad spending shifts and changing budget landscapes are nothing new for government contractors, particularly those supporting DoD. In fact, successful firms have developed an aptitude for observing and analyzing these changes and following the shifting flow of opportunity.
These cuts, however, are especially noteworthy and the #2 story of the year, because they go much farther and deeper than other funding cuts in past years. In fact, with the details that have emerged, contractors are coming to the realization that they no longer have the luxury of observation and analysis. We have seen the changes Secretary Gates has been looking to make since President Bush was in office. Gates is committed to cutting spending and reshaping the objectives of the military. Smart businesses started planning for changes a few years ago. Other companies, who may be playing catch-up, need to diversify and identify the core needs of government agencies, especially DoD and Homeland Security.
To get a more thorough analysis, please download the Clarity Advisory Report on the DoD Funding Cuts at: http://www.deltek.com/clarityadvisor