US Defence Department efforts to plan for 'fiscal cliff' may come too late

With the US presidential election finally over, newly re-elected President Barack Obama is turning his attention to the USD1.2 trillion in automatic spending cuts that will take effect on 2 January 2013 unless Congress acts.

Although the cuts, or 'sequestration' have been in place since 1 August 2011, when Congress passed the Budget Control Act of 2011, the US Department of Defense (DoD) has only recently begun in earnest to examine and plan for the potential impact on its Fiscal Year 2013 (FY13) budget.

"It's a day late and a dollar short," said Thomas Petruska, president of Contracts Unlimited Inc, a consulting firm specialising in helping small- to medium-sized businesses secure contracting opportunities with the government. "The arithmetic is definitely working against them."

Obama is scheduled to address the fiscal crisis in a speech - his first since winning the election - from the White House on 9 November. If lawmakers remain deadlocked over deficit reduction plans and do not enact legislation to delay sequestration, automatic budget cuts of USD109 billion, evenly split between defence and non-defence programmes, will go into effect annually up to 2021.