The Defense Department is seeing small businesses leave the industrial base because of defense spending cuts, according to a top official.
“We do see some evidence, in some particular elements of the sub-tiers, that conscious decisions, from a business point of view, are to exit the industry,” Brett Lambert, deputy assistant secretary of defense for manufacturing and industrial base policy, said yesterday during panel at a Bloomberg Government defense conference in Washington.
Lambert said already-established defense cuts like the $487 billion over 10 years required by the Budget Control Act are starting to take effect on the industrial base supply chain.
“We’re seeing that ripple throughout the supply chain, throughout the lower tiers,” Lambert said. “There are some companies in the mid- to lower-tiers who are exiting.”
The effect of looming sequestration cuts on the defense industrial base was the topic of discussion yesterday. Sequestration cuts for defense spending would total $55 billion per year over a period of nine years starting in 2013 (Defense Daily, May 11).
Lambert said sequestration’s biggest challenge to the base was the uncertainty it brings.
“We need to give our industrial base certainty so they can play six, 12, 18 months in advance, so they can provide goods and services to the warfighter. Sequestration removes that because it introduces a huge amount of uncertainty and, absent certainty, people will tend to gravitate to the most negative behaviors, particularly when Wall Street is involved,” Lambert said, referring to possible layoffs that could result if Congress can’t reach a deal to avoid sequestration by January.