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In general, programs are reduced 5.

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The 5. SequestrationThe President was required by the Budget Control Act of , as amended, to issue a sequestration order on March 1, , for automatic spending cuts to Federal Government programs for the remainder of the fiscal year. Search for:. Toggle navigation U.

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Student Loans Grants Laws Data. However, we assume that Congress will increase amounts for war funding, since they are not subject to caps, by the amounts necessary to offset the pending sequestration. This is not possible for other amounts, which are subject to caps or other constraints. The two percentages would be identical if the basic non-defense sequestration had been allocated proportionally across all non-exempt programs, and if the additional cuts needed to offset the effect of the 2 percent limit on the sequestration of some health programs had likewise been allocated proportionally across all other non-exempt programs.

But the Budget Control Act does not work that way.

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To begin with, the 2 percent limit on the cut to discretionary community and migrant health centers and Indian health is offset only by increasing the cut to other non-defense discretionary NDD programs. In contrast, the Act specifies that the 2 percent limit on the cut to Medicare is offset by deeper cuts to both non-exempt mandatory programs and non-exempt NDD programs.

These rules result in somewhat different sequestration percentages applying to those two categories of non-exempt non-defense programs. Defense sequestration. The defense cuts will occur through across-the-board, proportional reductions in the funding provided for defense accounts in the appropriations bills. War costs within the National Defense function are subject to sequestration, as are defense unobligated balances carried over from prior years. Although war costs, like other emergency costs, are effectively outside the discretionary caps that the BCA created, the sequestration resulting from the failure of the Supercommittee is a separate process, and war and other emergency costs are subject to sequestration.

Budget “Sequestration” and Selected Program Exemptions and Special Rules

In , the one year in which the cuts will affect defense funding that Congress will already have appropriated, the President can exempt some or all military personnel funding from the sequestration. To the extent he chooses that option, the cuts in other defense funding would increase. The percentage cuts in If the President chooses to exempt some military personnel, the percentage cut on the other defense accounts would rise, to 9.

The process for years after is quite different. Unlike in , there will be no automatic cut of all affected defense programs by the same percentage ; instead, the Appropriations Committees will decide how to live within the newly reduced defense funding caps. If the contractor can establish through a request for equitable adjustment or contract claim that the Government bears responsibility for some or all of the perceived cost growth, the Government might think twice before terminating a program.

At a minimum, a valid claim can reduce the likelihood that the Government will terminate the contract for default rather than for convenience. Performance assessments. For the same reasons, contractors should aggressively review and seek to correct performance assessments that unduly assess blame for contractual issues on the contractor.

(PDF) Trends in Discretionary Spending | Andrew Austin -

Adverse assessments not only affect future business, they can weaken arguments for maintaining current budget levels on existing programs. Contractors should understand the circumstances under which they may challenge performance assessments under the Contract Disputes Act.

Hagel appears to be confused by sequestration, Budget Control Act

Fixed-price contracts. As has occurred in the past, one of the ways that the government will seek to reduce costs is by the increased use of fixed-price contracts, which in the government's view shift the risk of cost growth to the contractor. Even before the Budget Control Act of , DoD made the increased use of fixed-price contracts a policy mandate.

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In November , Under Secretary of Defense Ashton Carter issued a memorandum to DoD acquisition professionals which, among other things, directed the increased use of fixed-price incentive contracts, decreased reliance on cost plus award fee contracts and reductions in the use of time and materials contracts. Carter also directed the use of firm fixed-price contracts "to the maximum extent reasonable when ongoing competition is utilized in multiple award contract scenarios. Shifting Government emphasis. Although overall spending may ultimately decrease, there are a number of areas where Government spending is likely to increase.

For example, the proposed DoD FY budget indicates increased emphasis on cyber defense, intelligence, surveillance, reconnaissance and space. Likewise, given the potential cancellation of multiple major programs, DoD's focus may shift to more proven, rapidly deployable, commercial technology.

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Contractors should remain attuned to areas of their industry where government needs are likely to increase. Program metrics. One of the most undervalued litigation tools in federal contracting is the program metric, whether this is understood to mean estimates at completion and related metrics or whether it refers to "earned value management" systems. Program metrics are often an early warning system for problem contracts.

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  • Why does this matter? Especially in times of shrinking budgets, it is extremely difficult for politicians to justify additional spending on contracts that are in loss positions. Program metrics are litigation tools because they also often provide information about possible government-caused changes. Termination and deductive change.