Contracting Issues – Article Example

Sequestration in the defense industry is thought to bring about a monumental change in the Virginia where most of its industries obtain contracts with the military from supplying the military’s nutritional needs to building armors for defense. An increase in the government spending on defense contracts was observed in 2001 until it started to decline in 2010 where a majority of the state’s companies engage in procurement contracts with the government’s defense industry.
In January this year, the military will implement an automatic budget cut, which is projected to almost $500 billion worth for over a decade. Therefore, the defense industry predicts that it would greatly affect the state’s economic state as it would lead to millions of jobs lost in the entire country. Specifically the defense industry in Virginia alone may lose about 207,571 jobs, which could at the same time lose nearly $10.7 billion worth of money in labor income. Economists foresee that although Virginia falls second to California in the number of jobs that will be lost due to this defense cut, areas such as Northern Virginia and Hampton roads would remain to be those that will suffer harder due to a vast number of people who will be laid off.
Shutting down of military bases is not a part of the sequestration. On the other hand, cutting down the budget for defense does not necessarily mean that companies who remain to maintain a contract with the government may not be affected. Such economic trend would indirectly affect every part of the entire defense industry that due to a situation regarded as a trickle-down effect. Suppliers of high performance materials for the military’s body armor and other products will also be ones that will be affected indirectly. The government has already been observed to deliberately reduce its spending on the raw materials that are necessary for building body armors and other military products, thus the companies no longer rely on the defense industry for their advancement. The construction industry has also sensed cutbacks from the defense industry. Although there are no new construction contracts that will soon arise, the industry is hopeful that maintenance-related work would still keep them going in the long run.
In response to this downturn in the defense contracts affecting the industries in the state of Virginia, companies have started to build a new set of customers they would soon cater in lieu to the decline in budget cut in the defense spending.
Reference:
Blackwell, John Reid. (2012). Defense cuts Carry Big Cost in Virginia. Stars and Stripes.
Retrieved from http://www.stripes.com/news/us/defense-cuts-carry-big-cost-in-virginia-1.188012.