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Agencies outline deep cuts under sequestration

Feb. 19, 2013 - 11:04AM   |  
All FBI employees will face furloughs this fiscal year if sequestration is not averted.
All FBI employees will face furloughs this fiscal year if sequestration is not averted. (Getty Images)

If across-the-board budget cuts take effect as scheduled next month, every FBI employee, including special agents, will be furloughed for almost three weeks by the end of September. Ditto for many law enforcement officers at the Department of Homeland Security, where layoffs are also a possibility.

Furloughs for Agriculture Department food safety inspectors will mean temporary shutdowns of meat processing plants. At the Social Security Administration, more than 1,500 temporary workers and re-employed retirees will be shown the door.

The planned cutbacks, outlined by department heads in letters to Congress this month, provide the most detailed look yet at the potential repercussions of sequestration, as the cuts are officially known.

Totaling $85 billion, they are set to begin March 1 and last through the rest of fiscal 2013.

For defense programs, the effective impact almost halfway through the fiscal year will be a 13 percent cut; for most nondefense discretionary programs, the cut will amount to 9 percent, according to the Obama administration.

“There is no amount of planning that can avoid these damaging impacts,” Danny Werfel, controller at the Office of Management and Budget, said last week at a Senate Appropriations Committee hearing.

Lawmakers of both parties were quick to decry the cuts as “dumb” and “irresponsible,” but hopes were fading of any compromise that could stop them from becoming reality, at least temporarily. Congress is out of session this week, meaning that just four days will be left to come up with an alternative when members return. And some lawmakers dismissed the administration’s warnings as scare tactics.

“This is Chicken Little time,” Rep. Tom Price, R-Ga., vice chairman of the House Budget Committee, said in an interview last week after discussing sequestration at a National Press Club forum. “I think that’s the kind of demagoguery that we see when people aren’t interested in true spending reductions. They always put the worst thing out there that affects people’s gut.”

Price, who shared the podium with the budget committee’s top Democrat, Rep. Chris Van Hollen of Maryland, expects sequestration to take effect on schedule. But he also expects Democrats to then “come to their senses” and help find a way out.

In a separate interview, Van Hollen stopped short of agreeing that sequestration will in fact happen, but said he found it “disheartening” that some House Republicans seem to want it to. If sequestration does kick in, however, Van Hollen predicted a concerted effort to “reverse and replace it” with something else.

The cuts are required under the 2011 Budget Control Act unless lawmakers and the White House come to terms on some other course to reduce the deficit. Once they begin, OMB could cushion the short-term impact by temporarily propping up agency funding at normal levels in hopes that a deal can be worked out, perhaps as part of an agreement on overall fiscal 2013 spending levels after a continuing resolution expires March 27. The risk is that if a deal is not reached, agencies could have to absorb the reductions even later in the year, with proportionately harsher effects.

Werfel declined last week to discuss specific steps under consideration. “We’re going to do what’s necessary to protect mission as much as possible,” he said. “Whatever tools we have, we’re going to use.”

OMB, which is now working with agencies “around the clock,” is exploring whether to issue any additional formal guidance, he added. “If we need to, we certainly will.”

Headache for managers

The planning for sequestration has already become an enormous headache for agency managers.

“It’s taking an awful lot of time that people could, more productively, be doing things to move the research agenda forward,” Francis Collins, director of the National Institutes of Health, said at a recent town hall meeting for agency employees with Sen. Ben Cardin, D-Md.

Because NIH has had to conserve funding to prepare for sequestration, it is now approving 17 percent of grant applications, compared with a normal rate of 25 to 35 percent. If the cuts take effect, the rate will likely fall still further.

Some 20 other agency heads outlined their sequestration plans in letters this month to Sen. Barbara Mikulski, D-Md., chairwoman of the Appropriations Committee. The committee posted the letters on its website late last week.

For agencies, budget uncertainty looms. They still don’t know final funding levels for this year, and they still await the release of the administration’s proposed budget for fiscal 2014, which was originally due Feb. 4 but is now delayed until at least mid-March.

The resulting undercurrent of frustration bubbled up at last week’s Appropriations Committee hearing, when Sen. Jerry Moran, R-Kan., pressed DHS Secretary Janet Napolitano on whether the department was going to “fish or cut bait” on funding for a planned biodefense laboratory in his state.

Noting the difficulty of long-term capital planning amid chronic budget uncertainty, Napolitano replied: “You have made it almost impossible to manage this large department.” She quickly clarified that she meant “you” in the universal sense, not specifically Moran.

Contractors adrift

Contractors are also confounded.

“There’s so much uncertainty as to which programs will be funded, which ones won’t,” said Gary Lisota, CEO and principal owner of Valkyrie Enterprises, a Virginia Beach, Va., firm that provides engineering and other services to the Navy.

The company, with about 205 employees, so far hasn’t lost any existing business. But after planning to make 80 new hires this year, Lisota said, “I don’t know if we’re even going to come close to that.” New software investments are on hold, and overhead spending is being held down, he added, “because we just don’t know how much business we’re going to end up the year with.”

The threat of sequestration is stoking long-standing friction between contractors and federal labor groups.

Unions are calling on the White House to accomplish budget cuts by slashing contracts instead of putting federal employees on furlough. Agencies could find up to 90 percent of the $85 billion in cuts by scaling back spending on services contracts, according to a new report commissioned by the American Federation of Government Employees.

Charles Tiefer, a government contracts law professor at the University of Baltimore law school and a former commissioner on the Commission on Wartime Contracting in Iraq and Afghanistan, said in the report that agencies have several options for cutting contract spending that do not necessarily require breaching contracts or incurring penalties.

The easiest step, he said, would be to not award new task orders on some indefinite-delivery, indefinite-quantity — or IDIQ — contracts, or to award smaller and less frequent task orders. Under IDIQ contracts, agencies can choose to award new task orders once a minimum order has been reached, but they are under no obligation to do so. This could help agencies rein in their information technology services spending, Tiefer said.

But the Professional Services Council, which represents federal contractors, is arguing against such steep cuts to contract spending. PSC executive vice president Alan Chvotkin said in a statement that such cuts “would cripple the government and devastate the economy.”

Many government contractors are already reeling from cuts, he said. For example, Lockheed Martin this month said it is offering buyouts to midlevel managers in its information systems and global solutions unit.

Chvotkin told Federal Times that he finds the union rhetoric troubling. “This is not a question of pitting contractors versus federal employees,” he said. “Both of us have a critical role to play, and both of us are being adversely affected.”

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