Stacy Bair’s Lovell-based Bairco Construction maintains roads at more than 300 missile storage facilities in the West. The Department of Defense is her biggest customer, with four contracts totaling more than $3 million. Bair isn’t the nation’s only small business owner concerned about the federal government’s inability to strike a budget compromise.
If the government goes off the “fiscal cliff” Jan. 1, many small business owners could lose their most reliable client: Uncle Sam.
Congress imposed austere budget cuts, known as sequestration, when it failed to pass a deficit reduction plan in July 2011. The cuts will trigger at the start of the new year if a deal isn’t reached over the holidays. The cuts will slash $1.2 trillion from the budget and are split between defense and nondefense spending.
Education and infrastructure programs would sustain significant fiscal blows. According to Department of Defense estimates, more than 25,000 teachers and aides would lose their jobs, 700,000 mothers and children would lose nutrition assistance and 1,500 grants would be cut from the National Science Foundation, among other cuts. Defense spending would decrease by 10.3 percent, threatening more than 108,000 civilian employees and reducing the Pentagon’s budget from nearly $550 billion to $491 billion.
Troops aren’t the only recipients of defense spending. In 2011, the Department of Defense contracted with 56,798 small businesses nationally, including 117 small businesses (and 29 other-than-small businesses) in Wyoming, according to federal procurement data.
Without these contracts, small businesses would have received $57.4 billion less in 2011, Department of Defense spokeswoman Cheryl Irwin said.
The sequestration threat is shining light on the symbiotic relationship between big government and small businesses like Bair’s. If the government cuts its ties with small contractors, fewer people will buy cars, build or purchase existing homes or visit local restaurants.
Whether the companies make aircraft covers, pave roads for missile silos or perform nonprofit work for the mentally disabled, the potential cuts have everyone on edge. The exact effect of sequestration on Wyoming businesses is unknown, but many small-business owners and employees are keeping their fingers crossed, hoping Congress does something.
The government will always have needs, Bair said, and some of those needs are the services Bairco provides.
“Inadvertently, our primary focus has been with the federal government,” she said. “I am trying not to worry too much about it for my own sanity.”
Sen. Mike Enzi, R-Wyo., said the biggest fear stemming from sequestration is the viability of F.E. Warren Air Force Base in Cheyenne.
“We’ve been working very closely with the military so that everyone understands the relationship between the community and the base,” he said in an interview with the Star-Tribune.
Jennifer Merrill’s Cheyenne-based Merrill Inc. has been contracting projects with the government for five years. Like Bair, she’s performed paving projects at missile silos. Her company recently repaired a bridge at F.E. Warren. The government had more than $2.9 million in contracts with Merrill in 2012. She recently signed a deal for 2013, but she fears the possible 10.3 percent budget cut would affect her company in the future.
“I think all contractors are concerned with the level that the government is going to continue funding long-term projects,” she said.
Due to the penny-pinching in Washington, the bidding process is changing. The government criteria for choosing contractors used to be based on a mixture of price value and qualifications. Now it’s going to shift to the lowest price possible, Bair said.
“We’re going to have to shift our forces to different procurement vehicles,” she said.
Bair’s company won government contracts when she wasn’t the lowest bid. She said Bairco Construction will be fine as long as she can “sharpen our pencils” to reduce costs.
The Jackson-based Confederate Group installs security systems, access barriers and video surveillance for government projects. Wesley Burnett, the company’s manager, said all of Confederate Group’s jobs are government contracts. He said he hasn’t been informed of any immediate cuts.
Kennon Products of Sheridan makes covers for aircraft, protective casings for oil and gas pipelines and patient protection equipment for hospitals. The company has performed more than $1.3 million worth of work for the federal government this year.
“Replacing $1.3 million would impact any business,” said Ronald Ramsey, president and owner of Kennon Products.
“If we go into sequestration … we’ll be facing less government orders and it will really create some difficult situations for small business contractors to maintain their staff,” Ramsey said.
Some nonprofits are facing the same concerns.
Magic City Enterprises in Cheyenne receives more than $61,000 per month from the Department of Defense. It runs a commissary at F.E. Warren and performs janitorial work at a Government Services Administration building in downtown Cheyenne. The nonprofit employs nearly 20 disabled and mentally challenged people.
Magic City works on a year-to-year basis with the government and recently finished its 2013 contract. It’s worked with the Department of Defense since 1982. The 90-day-out clause and the talk of closing bases throughout the country keep John Abas, community employment manager for the nonprofit, on his toes. If the base closes, the commissary closes, he said. And the effect would be “devastating” because a lot of people with disabilities would be without jobs.
“You never know with an Air Force base,” he said. “We’re always worried something may happen to it. But we just keep on going.”
If a sequester takes place, Americans can expect poverty to rise, economic growth to fall, infrastructure to crumble and “fire and brimstone,” said Michael Linden, director of tax and budget policy at the Center for American Progress, a progressive Washington think tank.
“It’s unrealistic,” he said of the possibility lawmakers will allow the sequester to kick in. “Don’t expect it to happen.”
When asked if Congress was going to pass a federal deficit plan by the end of the year, Rep. Cynthia Lummis, R-Wyo., said she didn’t plan on coming back to Wyoming until Dec. 23.
“We may have to go back between Christmas and the new year,” she said.
She was less optimistic than Linden, and said it will come down to the wire for Congress to act.