State businesses wary of Pentagon budget cuts

 

Washington -- Although the Pentagon awarded a record $12.5 billion in contracts to Connecticut defense companies in 2011, a series of cuts to the defense budget are beginning to worry smaller companies who depend on making money from the military.

"It's hitting our bottom line," said Kim Nelson, president of Cabrera Services in East Hartford.

Her company cleans up after the Pentagon, eliminating radiation and hazardous substances from Defense Department sites, one of more than 2,200 companies in Connecticut do business with the military.

But the Pentagon's budget, which had been shrinking, got clobbered again when sequestration went into effect March 1. Those across-the-board budget cuts eliminated $46 billion from the defense budget.

A subsequent budget agreement gave the Pentagon welcomed flexibility in making cuts. But still, dollars are trending down.

Nelson said she's made the decision to keep all of her 100 employees on the payroll as long as she can.

"But I don't know how long I can carry everyone," she said.

Her company had more than $222 million worth of Pentagon contracts in 2011, and although Nelson worries those federal dollars will shrink, the worst thing, she said, is the uncertainty.  Strangely, the defense department has recently issued a flood of requests for proposals, invitations for companies to bid for contracts.

"It appeared the federal government was just holding its breath then decided to do something," Nelson said.

She said the Defense Department may be preparing for better times and the possible end to the sequester. "It's not clear if this is just posturing," Nelson said.

Ron Buccilli, president of CW Resources, Inc., in New Britain, does all of his business with the Pentagon and the state government.

He prepares "meals on wheels" for the state and provides a wide range of services to the Defense Department, including custodial work, grounds keeping and procurement of provisions. "We've avoided (layoffs), but [I] think they're inevitable," Buccilli said.

The full impact of the sequester won't be felt for a while. But the defense budget had been shrinking for years as the war in Iraq and Afghanistan wound down.

So the Pentagon asked its contractors to be more efficient, to reduce their costs by 10 percent to 40 percent.

"It's hard to do that with some contracts," Buccilli said. Especially if you don't want to lay off workers.

"I think we're in this for quite a while," Buccilli said of the federal austerity.

While Connecticut's defense industry braces for tough times this year, Rep. Joe Courtney, D-2nd District, said things might not be as bad as expected.

Courtney said there was a lot of "high anxiety" before the sequester went into effect, but there's less so now that the Pentagon has more flexibility over its budget.

He said that one of Connecticut's largest defense contractors, Electric Boat, was set to feel the pinch later this year when Navy contracts to repair submarines were postponed because of the sequester. But the Navy reversed its decision to hold off on repairs to the USS Miami, a Groton-based attack submarine that was damaged in a fire last year while undergoing an overhaul at the Portsmouth Naval Shipyard in Maine.

More good news for Groton's Naval shipyard is that the Navy has decided to budget enough money for Electric Boat to build two nuclear submarines this year, Courtney, who sits on the House Armed Services Committee, said.

"The remaining question is the next block of submarines," he said.

Electric Boat hopes the Navy has enough money to continue to build two submarines each year for the next five years.

Joseph Swider, chief operating officer of A.K.O. Torque, Inc., in Windsor, said he has yet to feel any impact of military budget cuts, though he worries about the future.

His company earns $1 million to $2 million a year from the Pentagon from contracts for its calibration systems and hopes the fact he's in a "niche" industry will protect him. "Everyone is suffering from uncertainty right now," Swider said.

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