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Contractors brace for shutdown’s impact

By Kathleen Miller
Bloomberg News
Budget Battle Military Bases
MARK REIS - AP
Maj. Ryan Burke scans the nearly empty shelves in the meat section at the Fort Carson Commissary in Colorado Springs, Colo. The commissary was busier than normal with news that it will close until further notice because of the government shutdown. The defense industry, the single-biggest recipient of government contracts, is expected to be among the hardest hit by the shutdown.

WASHINGTON Since the government shutdown started, one-fourth of MicroTechnologies’ workforce of 400 in suburban Vienna, Va., has stayed home. The headquarters is like a “ghost town,” Chief Executive Officer Tony Jimenez said.

“I’ve seen more people cry in the last couple of days than the last few years,” Jimenez said in a phone interview after six federal agencies he wouldn’t identify told the company to stop work on contracts. “You don’t take people’s jobs and play Russian roulette with them.”

The partial shutdown that began Tuesday is beginning to have a ripple effect on federal contractors, which employ millions of people and attract more than $500 billion in annual awards. Costs will rise each day government offices remain closed.

The defense industry, the single-biggest recipient of contracts, will likely be the hardest hit.

United Technologies Corp.’s Sikorsky Aircraft business slowed production of Black Hawk helicopters after Pentagon inspectors were furloughed because of the shutdown, Gregory Hayes, the company’s chief financial officer, said Oct. 1 at a meeting with analysts and investors in Monterrey, Mexico. The inspectors are required to review choppers as they’re being manufactured, Hayes said.

About 800,000 federal employees have been furloughed.

United Technologies is poised to furlough almost 2,000 Sikorsky Aircraft employees in Connecticut, Florida and Alabama on Monday, according to a company statement. If the shutdown continues through next week, the furloughs would extend to its Pratt & Whitney and UTC Aerospace Systems division, bringing the total number of employees on hold up to 4,000. That number could exceed 5,000 if the shutdown stretches into next month.

The UTC Aerospace Systems division is headquartered in Charlotte, where it employs about 250 people.

Contractors should be able to handle a short-term shutdown, said Larry Allen, president of Allen Federal Business Partners, a consulting firm in suburban McLean, Va. If the government stays closed for several weeks, vendors may consider layoffs, he said.

“If we get to that point, the whole country will be hurting, not just government contractors,” Allen said in a phone interview.

There are an estimated 7 million full-time equivalent jobs tied to U.S. government contracts, Paul Light, a public policy professor at New York University, said in a phone interview.

NSC Technologies Inc., a closely held staffing company based in Portsmouth, Va., is having a hard time getting some of its employees access to Navy shipyards because most of the federal offices that supply passes are closed, said Tanya Rieger, vice president of workforce development.

About 250 NSC employees in southeastern Virginia, where much of the Navy’s ship repair and construction work takes place, have badges valid for a year or 28-day temporary passes, Rieger said in a phone interview.

“If the government doesn’t open back up, those passes will expire, and there is no way for these workers to get back to the shipyards,” she said.

USEC Inc., a suburban Bethesda, Md.-based supplier of nuclear fuel to electric utilities, may need to consider furloughs among the 959-person workforce for a uranium-enrichment project if the budget impasse continues past mid-October, Paul Jacobson, a spokesman, said in an interview. No decisions have been made.

The two-year, $350 million American Centrifuge project is on schedule and on budget, and it needs $48 million in federal funding in the year that began Oct. 1 to be completed by the end of 2013, Jacobson said.

Jimenez, of MicroTechnologies said his closely held company, which contracts with the Department of Homeland Security and Department of Veterans Affairs among other agencies, will be 10 years old next March.

Some of his staff took vacation, and others were on unpaid leave, Jimenez said, adding that he has never experienced such difficult times.

“The bottom line is you really are adversely affecting people’s ability to make a living with this shutdown,” he said. “Some of my employees may be home right now thinking, ‘Why do I want to work in a space where every time there’s an issue the House or the Senate doesn’t like, our jobs become a bartering chip?’”

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