April 6 2012 Copyright (c) 2012 Business Research Services Inc. 301-229-5561 All rights reserved.

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The Outlook: Less Spending, More Uncertainty

Contractors should expect the worst of all worlds this fall: a series of continuing resolutions coupled with spending cuts.

That’s the assessment of Ray Bjorklund, chief knowledge officer of the research firm Deltek.

He said Congress is not likely to pass 2013 appropriations on time, given election-year rhetoric and a congressional calendar shortened by the fall campaign. Bjorklund delivered his annual budget outlook at a conference in McLean, VA.

“What’s likely is that we’ll see continuing resolutions with depressed spending levels,” he said, according to the company’s GovWin blog.

Deltek estimates that President Obama’s 2013 budget request would cut contract spending by about 8% below this year’s levels. Aerospace and defense would take the biggest hits, with a 21% decline. “For companies that are strictly in this space, it’s going to be a very tough few years,” Bjorklund warned.

“Many of you are competing for market share, and not new money.”

Republicans in Congress have already said they will seek deeper cuts. The wild card is “sequestration,” the automatic spending reductions that are scheduled to take effect next year unless Congress reverses them.

Bjorklund said the most successful contractors will be those that can win over new customers, because the cuts will affect agencies and programs differently.

He said contractors will need to hunker down and protect their human resources and intellectual property. “Recognize that your assets have to carry you through the next couple of years,” he advised.


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