U.S. Contract Terminations Coming

Government contractor Oshkosh Corp.'s M-ATV vehicle. Photograph by Oshkosh Corp. via Bloomberg

Contractors may see more canceled deals with the U.S. government as the federal budget shrinks, according to Robert Burton, a former top procurement official under President George W. Bush.

“Terminations for convenience” on federal awards will “absolutely” trend upwards, said Burton, a former acting administrator of the Office of Federal Procurement Policy and now partner at Venable LLP in Washington. He said he is already seeing contracts “on hold” in the face of budget cuts in his capacity as an attorney.

Burton said the upward tick in cancellations wasn’t dependent on sequestration, the automatic budget cuts that will be triggered if President Barack Obama and Congress don’t agree to delay or alter them.

“What they’re really planning for are huge budget cuts” that are “going to happen next year” regardless of whether sequestration is avoided, Burton said.

The federal government terminated 13,579 contracts in the fiscal year ended Sept. 30, more than double the 5,692 it ended in fiscal 2006, according to procurement data compiled by Bloomberg. The value of canceled deals was $2.15 billion last year, compared with $416 million five years earlier.

These terminations, which included a $144 million deal with Oshkosh Corp. for battlefield ambulances last year, reflect the discontinuation of war funding that fueled a boom in contract spending in the past decade.

Juliann Francis and Nick Taborek contributed to this report from Bloomberg Government. 


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