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Contractors Still Avoiding Major Sequestration Damage

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Several recent earning reports from major contractors have confirmed that the post-sequester world is not as apocalyptic for major federal contractors as they anticipated, reinforcing the conclusion of a recent POGO blog. According to a Lockheed Martin earnings report released Tuesday, the company’s profit jumped 10 percent in the second quarter of 2013, despite a small revenue drop. The company profited $859 million in the quarter, according to a Washington Post article.

On Wednesday, Northrop Grumman, the fourth largest federal contractor, reported significantly higher profit and income outlooks than previously expected, according to an article in Bloomberg. The same article cites the Department of Defense’s (DoD) $1.3 billion acquisition of F-35 fighter jets as a main source of Northrop Grumman’s revenue. General Dynamics, the third largest DoD contractor, similarly reported Wednesday a significantly higher outlook for 2013, including a higher net earnings when compared to last year

The Project On Government Oversight recently blogged on a string of major federal contractors, who, despite complaining about the impending effects of the sequester, have seen profits and revenue remain relatively consistent and in some cases even increasing. POGO pointed out that among other major contractors, Lockheed Martin, Boeing, General Dynamics, and BAE Systems all complained about the sequester and sent their employees’ letters warning them that they would likely be fired in 60 days, as required under the Worker Adjustment and Retraining Notifications Act.

The Washington Post notes that contractors are still concerned about losses further along in the sequester:

Defense Department officials say they’ve approached this year’s budget with a “damage limitation” strategy — looking for short-term ways to avoid pain and sparing major spending programs. But they warn that their strategy will have to change if the sequester isn’t reversed by next year, because some big weapons programs could be pushed onto the chopping block.

We further commented that some of these contractors may have been politicizing the sequestration in order to win new contracts and extend old ones. Even though, as the Post points out, it is too early to conclusively judge the results of the sequester, it’s questionable for contractors to threaten jobs, particularly when many of these contractors are increasing executive pay and spending excessively elsewhere.

By: Andrew Wyner
Intern, POGO

andrew-wyner Andrew Wyner is an intern for the Project On Government Oversight.

Topics: National Security

Related Content: Budget, Defense, Sequester

Authors: Andrew Wyner

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