Americans, contractors feel sequester woes
Polls and reports find cuts have taken their toll
By Simon Brody
Tuesday, May 28th, 2013
According to a poll conducted by ABC/Washington Post, the number of Americans who say sequestration has harmed them is on the rise. A recent Boston Post article addressed hardships faced by contractors who are coming to terms with a changed acquisitions market.

In March, right after the $85 billion in across-the-board budget cuts went into effect, only 25 percent of Americans said sequestration had affected them. This past week polling found that number had jumped to 37 percent, with half of them saying the impact was "major."

Americans who have been hit by the sequester are pessimistic about the economy. Only 36 percent of them believe the economy is recovering and 40 percent are optimistic about the economy's prospects in 2013. Among the majority of Americans who have avoided the sequester's harm, two-thirds said the economy is picking back up and 60 percent are optimistic about the economy in the coming year.

The poll of 1,001 adults was conducted from May 16 to May 19. It has a margin of error of plus or minus 3.5 percentage points.

In addition to the general polling information, the Boston Post recently published an article discussing how contractors have been impacted by the cuts and how they are dealing with sequestration.

"Large and small, local defense contractors -- faced with canceled military contracts and fiscal uncertainty owing to government sequestration cuts -- are aggressively pursuing new commercial markets and overseas customers to save jobs and boost sagging revenues.

"The people we compete with won't be here in five years if they do not adapt and change and go after new markets," said Tom Colatosti, president and CEO of Oasis Systems of Lexington, which provides technology and consulting services to the Department of Defense. "The DoD market is shrinking, and what usually happens is, when it's shrinking, everybody doesn't just get smaller -- the weaker players and players who can't adapt just get crushed."

Oasis Systems' own plan for living to fight another day entails adapting its tech savvy to serve Fortune 500 companies, hospitals, schools and banks nationwide, and making investments in areas such as cybertechnology, Colatosti said, adding that his company shed nearly 75 employees from its workforce over the past year.

"We always had a sense of being diversified within the DoD," Colatosti said. "But now since all of DoD is impacted, what was before something we wanted to do now has profound urgency."

Other local defense firms in search of new business include:

-- Textron Systems won a $113 million contract to build armored vehicles for the Afghan National Army, and is pushing for more foreign deals.
-- iRobot has $7.2 million in new contracts in Brazil and is exploring other South American and Asian markets.
-- Raytheon Corp. is on the verge of a $2.1 billion air defense system deal with Oman.
With sequestration in effect for the past three months, larger defense contractors are now looking to expand contract relationships with foreign governments, according to Chris Anderson, president of the Defense Technology Initiative.

"It's become probably a higher proportion of their business plan lately, so there's more time and energy being devoted to developing more of these types of contract relationships," Anderson said, adding that the defense sector comprises 5 percent of the Massachusetts workforce.

Textron Systems, which has 450 employees based in Wilmington, said it started thinking internationally prior to the Budget Control Act of 2011. The Rhode Island-based defense contractor was awarded a $113 million U.S. Army contract in March to build 135 additional armored vehicles for the Afghan National Army.

"Our focus internationally is not new to our company," said spokesman Stephen Greene. "We've just stepped up our efforts."

Waltham-based defense contractor Raytheon Corp., which is cutting 200 jobs as part of a company-wide reorganization, said international business represents 26 percent of the company's total sales in the first quarter of 2013. Raytheon is close to landing a $2.1 billion air defense system deal with the Sultanate of Oman.

"As in any business environment, we plan for all contingencies with a focus on agility and an unwavering commitment to our customers," company CEO William H. Swanson said in a statement.

Bedford-based iRobot, which landed $7.2 million in new contracts to provide about 30 robots for several high-profile, upcoming events in Brazil, will "spend some energy" exploring robotics deals in Chile, Argentina and Mexico, Southeast Asia and the Middle East, according to Chief Operating Officer Jeff Beck.

The company, which cut 17 percent of its workforce last year, also won Food and Drug Administration approval in January for its RP- VITA Remote Presence Robot for use in hospitals.

"The overall climate change in defense spending led us to restructure and think more about international markets," Beck said. "When sequestration kicked in, it clearly heightened the sense of urgency to diversify our business."

Meanwhile, General Dynamics C4 Systems -- which said sequestration will take $128 million out of the company's on-the-move Army communications equipment "Soldier's Network" program this year -- is standing firm and fighting to save the jobs of its 1,400 employees in Taunton and Needham who depend on the DoD, said President Chris Marzilli.

"Sequestration is really a slow bleed, and we're just trying to stem the blood loss," Marzilli said. "We've got to fight to make sure the money stays in this program instead of giving up and chasing markets.""

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