Sequestration would increase costs.
While Harrison’s analysis finds the impact of sequestration on contract spending would mostly be put off, it doesn’t deny that contractors will eventually be hurt. And he agrees with defense executives who argue that the renegotiation and cancellations of contracts that will inevitably accompany sequestration will translate into more costs to the government.
“This is not good policy. DoD would have to go back and renegotiate their contracts to buy in smaller quantities,” he said.
For example, the Pentagon has been planning to buy two Virginia class submarines next year. Under sequestration, it would have only enough money in the Navy’s procurement account to obligate itself for the cost of 1.8 submarines under the previously-negotiated contract with the shipyard. But since building eight-tenths of a submarine makes little sense, the Navy would probably build just one submarine instead of two.
“Then you have to go back to your contractors and say we’re only going to buy one sub this year. If you’re only going to build one a year, that price is going to be higher,” he said. “We know what that cost is, and it’s much higher.”