Initial Analysis of the Impact of Sequestration on DoD Contracting

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Initial Analysis of the Impact of Sequestration on DoD Contracting
By: Jesse Ellman
@csis_isp

There has been significant anecdotal evidence that sequestration has had a profound effect on contracting by the Department of Defense (DoD). To date, however, there has been virtually no hard data. This lack of reliable information on the impact of sequestration can now be remedied with the availability of FY2013 DoD contracting data through the publicly available
Federal Procurement Data System (FPDS). Leveraging nearly a decade of experience in using FPDS data to analyze DoD contracting trends, the CSIS National Security Program on Industry and Resources (NSPIR) has started work on the FY2013 update of our series “U.S. Department of Defense Contract Spending and the Supporting Industrial Defense.”

Between 2012 and 2013, overall DoD contract obligations declined (in constant 2013 dollars) by 16 percent, from $368 billion in 2012 to $308 billion in 2013. This represents the largest one-year decline in DoD contract obligations in the 2000–2013 period. The decline under sequestration was over twice as large as the decline between 2011 and 2012 (-6 percent), and four times the rate of decline for the 2009–2012 budget drawdown period (-4.1 percent 3-year compound annual growth rate).

Within contracts, most of the major DoD components (such as the Army, the Air Force, and the Defense Logistics Agency) saw declines of between 18 percent and 23 percent between 2012 and 2013, but Navy contract obligations declined by only 2 percent. Similarly, contract obligations for products (as defined by government Product or Service Codes) declined at a rate comparable to that of overall DoD contract obligations, while contract obligations for services declined more slowly (-14 percent) and contract obligations for research and development (R&D) declined more rapidly (-21 percent).

The NSPIR study team expects to release a brief analysis of these trends in the coming weeks, in preparation for the release of the full report later this spring. The full report will analyze trends in contract characteristics like level of competition and use of fixed-price contract types, as well as the impact on the industrial base. The report will also dig deeper into some of the more notable trends, such as the Navy’s minimal decline in contract obligations and the steep decline in R&D.

Jesse Ellman is a research associate with the Defense-Industrial Initiatives Group (DIIG) at CSIS. Other posts by .

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