The initial reductions in force and furloughs will likely focus on general and administrative functions that support programs directly impacted by sequestration. The Government leaves our customers no choice other than to take this approach. Yes, there will be job losses and yes there will be loss of legacy corporate knowledge and intangible value that may never return to our customer base. This is highly unfortunate and yet another outcome of the politics of sequestration and declining Federal budgets. Reduction in force of Accounting, Compliance, Internal Audit, Procurement, Pricing and other administrative functions with legacy corporate knowledge cannot and will not be replaced with the same corporate value or knowledge and ability to maintain compliance.
Simultaneously, our customers are expected to rigorously comply with DCAA and DCMA heightened regulations and ongoing audits at a pace that is unprecedented. This is counterintuitive to audit committees, boards and executive management now being forced to reduce staff needed for ongoing compliance expectations. When weighing the alternatives, it is likely these cuts must take place in order for these entities to remain viable and competitive. No one wants to do this, but our customers’ hands are being forced by the reality of this situation.
We have and will continue to witness invaluable personnel reduced within our Government Contracting customer base (over 400 customers) that provide corporate administrative and compliance functions to new, existing and past awarded contracts. These critical functions will remain under attack as Sequestration and political gridlock lingers. Until a change occurs in the administration and the political environment, we believe these trends will continue.
We predict an increase in outsourcing of many of these critical legacy functions. What else can you do in this environment? The loss of legacy, intangible-valued internal resources will likely be replaced by “on call” consultants to circumvent the loss of expertise on an as needed basis. Long-term, valued employees will be relegated to becoming on call consultants or temps. Here we go again….just when we thought the recession was ending.
Consulting firms, like ours, will have to adapt with more competitive, longer term sustaining services for contractors that provide a “best value” and lower cost alternative to in-house staff. Those firms willing to adapt and provide these services must be willing to hire more temporary and, exiting contractor employees, (and former DCAA/DCMA industry experts) and combine them with their best senior staff in order to sustain critical functions and resources to customers. The industry must maintain these efforts and at a lower, more efficient value in order to maintain competitiveness and compliance. Until this cycle ends and the sector rebounds, we will continue to see more outsourcing and the loss of legacy, valued, corporate intelligence.
Redstone GCI is committed to this approach and responsiveness to our customers as we all work together to survive this period of uncertainty. We prefer not to be here but will do all we can to support our customers as they deal with this uncertain times.