Washington-area contractors are worrying that lean times have begun after Defense Secretary Robert Gates announced he would trim the Pentagon’s budget by $100 billion.
The region is home to Lockheed Martin, the nation’s biggest defense contractor, as well as General Dynamics, SAIC, CACI International and SRA International. Northrop Grumman, which is moving to Falls Church, and Raytheon also have major local presences.
Shares of the companies’ stocks all dipped on Tuesday.
Gates said Monday that he would close the Joint Forces Command — which employs about 6,000, including 3,000 private contractors –cut spending on contractors by 10 percent and freeze spending on his own office.
The announcement sparked a fury on Capitol Hill as members of Congress lined up to protect their constituents from the ax.
“Anybody who is in sort of the ideas business or the intellectual support business should probably view it as belt-tightening news,” Brookings Institution scholar Michael O’Hanlon said.
The Pentagon has come to rely heavily on outside contractors to do everything from background checks to security. Some estimate that there are nearly 800,000 contractors at work. The Defense Department is worth about $25 billion to Northern Virginia’s economy alone, economist Stephen Fuller said. “There’s serious concern that at a minimum, it’s going to significantly slow growth and at the worst, it’s going to cause huge job losses,” said Rob Burton, a top contracting official in George W. Bush’s Pentagon who now works at a major Washington law firm.
“We know small businesses have been hit hard,” Burton said.
Lockheed Martin spokesman Jeffrey Adams said Tuesday that “it is far too soon to gauge the potential impact” of Gates’ cuts, but Lockheed officials are confident the company is “well positioned.”
Winslow Wheeler, a former Hill aide who now analyzes the Pentagon for the Center for Defense Information, said “it’s bad news for the kind of Beltway Bandits that contract out support work,” but Gates’ plan “is really quite modest.” “It’s not rape, pillage and loot,” he said. Contractors will “scream and yell, but it could have been a lot worse.”
If Gates’ plan is bad news for defense contractors, it’s good news for lobbyists, said Dave Levinthal of the Center for Responsive Politics, a nonprofit group that tracks lobbying and campaign contributions. “They’re going to come full force,” he said of defense lobbyists. “Any time you have an industry that’s in Congress’ crosshairs, you’re going to get a major reaction from them.”
Defense lobbying expenditures have risen steadily since 2000, but peaked in 2008 at nearly $151 million, figures kept by the center show.
