UTC says government shutdown will mean furloughs for thousands of workers
Washington — Despite receiving billions of dollars in last-minute contracts before the federal government shut down this week, UTC, parent company of Pratt & Whitney and Sikorsky Aircraft, tonight announced it would be “forced to furlough thousands of workers” because of the shutdown.
Just hours before the shutdown, East Hartford-based Pratt received a $2.5 billion contract from the Pentagon to continue to make spare parts for fighter jets and other aircraft.
First affected, however, would be Sikorsky Aircraft. If the shutdown does not end by next Monday, nearly 2,000 Sikorsky workers are expected to be placed on furlough.
If the shutdown continues through next week, Sikorsky will put an additional 1,000 employees on temporary layoff. Employees who would be affected work at facilities in Stratford; West Palm Beach, Fla.; and Troy, Ala.
A shutdown that extends into next week would result in more people furloughed at Pratt & Whitney too.
In a statement, United Technologies said the temporary layoffs the company plans are a result of the shutdown’s furlough of federal auditors who audit and approve operations at Pratt & Whitney, Sikorsky and most other large defense contractors.
“Without the required … inspectors, who were deemed non-essential federal employees, certain defense manufacturing work must be halted, which will result in employee furloughs,” the United Technologies statement said.
United Technologies said the number of furloughed workers at Pratt & Whitney, Sikorsky and UTC Aerospace Systems could exceed 5,000 if the government shutdown continues into next month.
The shutdown is unchartered territory for Connecticut’s $13 billion defense industry. The Pentagon was excluded from the last federal government shutdown, which occurred 17 years ago and lasted three weeks. That’s because Congress had already approved a defense spending bill, even as it stumbled on the rest of the federal budget.
This time, the Pentagon is not exempt from shutdown but tried to blunt its impact on defense contractors by issuing dozens of contracts in the days and hours before the federal government closed.
Pratt & Whitney’s new $2.5 billion contract will be paid out of the Pentagon’s revolving working capital fund, which has some leftover money.
“We are pleased that this arrangement has been implemented, as it fosters greater efficiency in executing contracts, and will reduce time and labor for both the government and Pratt & Whitney,” the company said in a statement.
Company spokesman Matthew Bates said the contract would extend until 2018. He also said the company has already received an initial payment in the amount of $8.7 million.
Loren Thompson, a military expert with the nonprofit Lexington Institute, an Arlington, Va., think tank, said looming shutdown or no, the Pentagon usually issues a flood of new contracts at the end of a fiscal year, Sept. 30.
“When it comes to defense contracting, the year has a slow start and ends with bang,” Thompson said.
Despites its notice of impending furloughs, Sikorsky was also among those awarded a last-minute contract, worth $84 million, to continue to service the military’s UH-60 Black Hawk helicopters.
But most of the state’s defense contractors weren’t as lucky. They will have to wait for the shutdown to end before they can bid for new contracts.
The federal Anti-Deficiency Act generally does not allow the government to enter into contracts without active appropriations. That means the Pentagon had to stop issuing contracts on Oct. 1 when the 2014 fiscal year began without a budget, the result of an impasse in Congress.
Even those working with funds Congress approved in 2013 or earlier may have problems as civilian staff, such as the inspectors who are vital to United Technologies’ operations and other Pentagon staff, are furloughed.
Frank Kendall, undersecretary of Defense for acquisitions, said contractors working on contracts awarded in fiscal 2013 or before will “generally” be paid.
“There may, however, be delays or disruptions in payments because of the effects of shutdown on government employees who process payments,” Kendall wrote in a memo.
For now, General Dynamics’ Electric Boat, in Groton, will continue operating as usual, company spokesman Robert Hamilton said earlier Wednesday.
“We’ve got funded contracts, and we don’t anticipate a short shutdown will affect us,” Hamilton said.
One thing that will help Electric Boat is that the company was awarded $176 million in two contracts about a week ago. The money is available because it uses funds appropriated in the 2013 federal fiscal year.
One EB contract, worth about $26 million, is to perform maintenance work on the USS Providence. The other, worth about $152 million, would continue engineering work and upgrades on other Virginia Class submarines.
“We’re going to continue to monitor the situation,” Hamilton said.
Sen. Richard Blumenthal, D-Conn., who held an event Monday at Habco Inc., a Glastonbury defense contractor that says the federal budget crisis has left future operations uncertain, said the length of the shutdown will dictate the extent of its impact on Connecticut’s defense industry.
“If it’s a few days, it may be minimal,” Blumenthal said. “But if it’s two or three weeks or several months, it may have real consequences.”
Even contractors that have money to continue operations face uncertainty and difficulty planning for the future, Blumenthal said.
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