With $85 billion in automatic federal spending cuts that took effect on March 1 under the sequestration, contractors engaged in legal work for the feds face an uncertain future.
The reductions, which are split evenly between defense and non defense spending, won’t affect every contract. But Elizabeth Ferrell, a McKenna Long & Aldridge partner who leads her firm’s terminations and contract restructures group, said the brunt of the cuts will hit service-related contracts, which make up much of the $3.3 billion the U.S. govern­ment spent on legal work from 2008 to 2012. "It is easy to turn them off and then turn them on," Ferrell said of the service-related contracts, comparing them to contracts for goods.
Nearly all of the money the feds spent on legal work during the past five years is non defense spending. At $2.1 billion, the U.S. Department of Justice doled out the most funds for legal work.
The DOJ declined to comment on how the cuts would impact its contractors, including Ashburn, Va.-based Forfeiture Support Associates LLC and Arlington, Va.-based CACI International Inc. The forfeiture company, which helps the Justice Department handle seized assets, and CACI, which performs litigation support services, received almost half of DOJ’s funds. U.S. Attorney General Eric Holder Jr. wrote in a February 1 letter to Senator Barbara Mikulski (D-Md.), chairwoman of the Senate Appropriations Committee, that the sequestration would slash more than $1.6 billion from DOJ’s current funding level.
Peter Eyre, a partner in Crowell & Moring’s government contracts group, said he is advising clients to carefully review contracts and talk with agency officials about the sequestration’s impact. "What’s hard about it is the impacts will vary," he said.