Sequester Cuts Already Hurting Small Businesses and Contractors


Although the across-the-board federal spending cuts known as the Sequester don’t take effect until Friday, small businesses across the nation are already reporting that they’re hurting.

According to the SBA, the Pentagon awarded 20 percent of its prime contracts and 35 of the agency’s subcontracts to small firms. If the proposed cuts to the Pentagon’s budget are implemented, more than 2 million jobs could be lost, with nearly half of those coming from small businesses, according to a study by Dr. Stephen S. Fuller of George Mason University.

“Many small businesses are subcontractors, suppliers and vendors to larger scale businesses that are the prime federal contractors,” he said. “These subcontractors, suppliers and vendors have little recourse when their contracts with their primes are scaled back or terminated; in fact, the suppliers and vendors may not even know that their business is linked to a federal contract that could be canceled due to something called ‘sequestration.'”

The cuts will also hit certain states harder than others. Fuller points to Virginia, Maryland, and Washington D.C., as “ground zero” for the most painful of the budget cuts.

“California will take the biggest hit, because they’re 10.5% of the total federal budget subject to sequestration, but Virginia is 9.7%, and it’s a much smaller state, so it’s that much more important,” Fuller says. “The trio of Maryland, Virginia and DC has 21% of the federal payroll and procurement dollars subject to sequestration, but just 4.7% of the nation’s population — it’s a disproportionate level of exposure.”

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