Sequestration Impact

Based on our informal survey of a number of Government contractors, there has been no specific contracting officer guidance yet on what to expect or plan for concerning the sequestration. Everyone is just cautiously waiting. Most companies expect sequestration to have some impact on existing and future workload but at this point, its business as usual.

On Monday, the Department of Energy (DOE) sent out a letter to its contractors (blaming Congress for the sequestration) advising them of some of the potential impacts they could feel as a result of the sequestration. This letter reads, in part,

At this time, the Department of Energy is asking every step to mitigate the effects of these cuts. However, the Department may nevertheless need to take certain actions with regard to particular contracts and assistance agreements in order to comply with the required budget cuts.

For procurement contracts, the Department of Energy may decide not to exercise an option or may need to negotiate lower prices or other terms via a bilateral modification to meet the constraints imposed by sequestration. The Department may also determine it necessary to stop or suspend work, reduce the scope of work, or partially or completely terminate your contract for convenience. Additionally, planned contract actions for new work may be re-scoped, delayed, or canceled depending on the nature of the work and the degree to which it directly supports the agency's mission goals.

For financial assistance agreements, the Department may decide not to issue a continuation award - including not awarding incremental funds on multi-year awards - and may require negotiation of a reduction in the scope of your award.

To the extent that your contract or financial assistance agreement is affected due to these budget cuts, you will be contracted by the appropriate Contracting Officer with additional details.

Thank you for your continued partnership with the Department of Energy, and for your cooperation as we work together to manage these unfortunate circumstances.

We don't know how DOE and contractors are going to work together to manage the sequestration circumstances. It seems to us that all of the decisions will be DOE's.