Contractors Skip Shopping Spree

Kratos Defense & Security Solutions Inc. is in no post-Christmas rush to find deals.

With Washington’s budget impasse threatening $500 billion in additional defense cuts over a decade, San Diego-based Kratos and other military contractors are hunkering down and stockpiling cash.

Kratos has put acquisitions on hold, trimmed research spending and halted equipment upgrades as it waits for a resolution to the so-called fiscal cliff.

“Guys like us are going to hold a good portion of their cards until there’s some budget clarity,” said Eric DeMarco, the company’s CEO.

Contractors are feeling the pinch of leaner times. The threat of automatic cuts, combined with $487 billion in previously planned military reductions, has added to the uncertainty.

“The fiscal cliff in my mind has already been here,” said Robert Burton, a partner at the law firm Venable LLP in Washington. “It arrived some time ago.”

Companies in recent months have seen federal contracts canceled, delayed and scaled back because government agencies don’t know what their funding levels will be, he said.

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