Each administration arrives in Washington with high hopes of making meaningful change to the way the Federal Government spends money. President Trump got off to a fast start by freezing hiring in Federal agencies. Like so many actions in Washington, the old has become the new. In the past, a Federal hiring freeze has translated into new work for government service contractors. As a practical matter, the work of the government must be done and if Federal employees are not available to do the work, the Federal government hires contractors to do the work. Contractors in the services sectors like planning, project management, training, quality assurance, IT support, logistics and base management are likely to experience increased demand. Data suggests that reducing the Federal workforce in favor of a contractor based work force is, in fact, a cost effective move because the long terms cost of Federal employee benefits drives up the cost of using Federal workers to do work which a contractor could perform.
With a change of administrations, the impact on the systems design and manufacturing sector is often less immediate than the impact on the services sector. President Trump has indicated that his administration will examine with the critical eye big ticket items like Air Force One and the newest fighter jets. Making changes to high dollar, multiyear projects are often not cost effective because the cost of implementing the change often exceeds the cost savings. For example, a redesign of the Air Force One would likely require stopping the current work which triggers costs like demobilization and unabsorbed overhead as well as contractor recoverable contract administration costs. Once the work is redefined, the contractor will incur compensable costs remobilizing and reconfiguring the work in place to accept the redesigned work. Successful changes to system projects are normally realized when the system is abandoned so the government just pays to shut down the effort. Manufacturing to support major government systems is often spread over many states so it is difficult to build the political consensus to scrap major systems.
From the time to time the government has explored consolidating the Department of Defense service. Combining the Army, Air Force, Navy and Marines into the National Defense Force would eliminate redundancies like 4 groups of fighter jets and 4 groups of flag or general offices. With a united fighting force, the government would realize the cost efficiencies of a combined organizational and operational element; not unlike the benefits derived from a commercial merger. President Trump has demonstrated a willingness to break the mold. He may be the right President to implement the "National Defense Force" model. If implemented, all government contractors would benefit over the short term due to the requirement to support the transformation. If done right, once the transformation was complete, the dollars spent on Federal contractors would decrease for the same reasons the cost of running the armed forces would decrease.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
