Steep automatic cuts in defense spending due to kick in next January would have the added effect of forcing the Defense Department to break contracts for weapons systems and other equipment and services, reports Reuters. That would result in billions of dollars in extra costs due to contract termination fees and penalties as the Pentagon implements the spending cuts. Those added costs “will easily be in the billions range,” said Sean O’Keefe, EADS North America’s chief executive, according to Reuters’ June 27 report (via the Chicago Tribune). He said US defense officials were starting to assess them. These costs would be a burdensome byproduct of the Budget Control Act’s already imposing sequestration clause. Unless Congress acts to prevent it, sequestration would strip some $500 billion from the defense budget through Fiscal 2021 on top of the $487 billion that the BCA has already taken from defense accounts over that span. Sequestration cuts would have a devastating impact on national security, US defense officials have said. The Pentagon leadership met with top defense industry executives this week to discuss the budget cuts. Defense companies are already gearing up to warn hundreds of thousands of employees of the looming layoffs under sequestration.
Nov. 29, 2020