Take Cover: Sequestration Looming on the Horizon

by Steve Charles, Co-founder and Executive Vice President

Like a distant tornado, the federal budget sequestration seems to have been looming on the horizon, but never quite comes into sharp focus.

Well, don’t wander too far from the storm shelter. In recent days, the likelihood of the sequester actually occurring has increased markedly. This remarkable development, the outgrowth of intractable political polarization, presumably means budgets will cut across the board.

OMB has been quite public in disseminating its preparation guidance to agencies. Its program-by-program impact analysis from last year simply drew a line of reduction of 7.6 percent to civilian spending and 10 percent for defense across the board. That now applies only to dollars unspent for fiscal 2013 ⎯ which is running under a continuing resolution at slightly below 2012 levels.

But, so many statutory exemptions to sequestration exist, and there is so much discretion given the White House, that the real effect of sequestration will be totally uneven across of the board. A new Congressional Research Service summary explains this phenomenon.

The law lets most entitlement programs off the hook. But the White House has a lot of leeway over administrative expenses related to these programs, so pay close attention to them. That’s where services and other contracting activities may exist.

In some ways, sequestration is preferable to Congress than actually doing the hard work of choosing which programs to kill, if it comes down to that. This way, everything continues, even if at temporarily reduced contract spending levels. But in this short term, sharpen your communications and sales calls focuses on the assumption your customers will be distracted by the simultaneous work of sequester planning and work — two months delayed — on the 2014 budget submission.