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SENATORS SEEK INFORMATION ON IMPACT OF SEQUESTRATION ON DEFENSE INDUSTRY
July 5, 2012
Washington, D.C. – U.S. Senators John McCain (R-AZ), Joe Lieberman (I-CT), Jim Inhofe (R-OK), Saxby Chambliss (R-GA), Kelly Ayotte (R-NH), Lindsey Graham (R-SC) and John Cornyn (R-TX) sent a letter asking for information on the impact of defense sequestration to 15 major contractors: Lockheed Martin Corporation, Raytheon Company, L-3 Communications Holdings Inc., Northrop Grumman Corporation, Huntington Ingalls Industries, the Boeing Company, General Dynamics Corporation, Honeywell International Inc., CSC, SAIC, BAE Systems Inc., ATK, ITT Exelis, EADS North America Inc. and United Technologies Corporation.
Text of letter below.
June 29, 2012
Dear Sir:
According to current law, sequestration will go into effect in six months. Yet, significant questions exist regarding the implementation of these automatic budget cuts and how they will impact federal government operations, our economy, and the defense industrial base. In light of these questions, the Administration’s apparent unwillingness to conduct any meaningful analysis or planning for sequestration is alarming.
For this reason, the United States Senate unanimously adopted a provision of law that would direct the Secretary of Defense to provide Congress by August 15, 2012, with a detailed assessment of the actual impacts of sequestration on our National Security. While this report will be essential in Congress’ analysis of the effects on defense operations, activities, programs and facilities, we also need your input to help Congress understand the impact on the industrial base, including the impact on the contracts you service and your workforce.
Therefore, and recognizing that you, like the Congress, have received no guidance from the Administration on implementation of sequestration, we would appreciate your answers to the following questions:
1. What is your estimate of the total number and total dollar value of contracts you currently hold with the Department of Defense that could be terminated or restructured in the event automatic cuts were executed on January 2, 2013, in accordance with the Budget Control Act?
2. What impact would termination or restructuring of those contracts have on your employees, partners, and suppliers?
3. Given that the Worker Adjustment and Retraining Notification (WARN) Act requires employers to provide employees sixty days’ notice in advance of layoffs, when do you expect to issue such notifications, given that sequester is scheduled to take place January 2, 2013?
4. Have you experienced a slowdown in new contract awards that may be attributable to the uncertainty of funding available for those contracts due to the threat of sequestration? Please estimate the impact of that slowdown on projected business.
5. What is the impact of the impending threat of defense sequestration on your company’s strategic plan, capital and research investments, and workforce recruiting and development?
We believe that the Administration and Congress must readdress sequestration as a deficit reduction tool as soon as possible to avert the disastrous economic consequences of the automatic budget cuts due to take effect on January 2. In addition, we must have a full understanding of the implications of budget sequestration on the defense industry in order to make fully informed decisions on defense programs and activities as we move forward in the Fiscal Year 2013 budget review. We look forward to your responses.
Sincerely,
John McCain
United States Senator
Joseph Lieberman
United States Senator
James M. Inhofe
United States Senator
Saxby Chambliss
United States Senator
Kelly Ayotte
United States Senator
Lindsey Graham
United States Senator
John Cornyn
United States Senator
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