The push and pull of spending for Aberdeen contractors

Aberdeen Proving Ground has a lot more money to spend on contracts than it once did but not as much as in the very recent past.

Such is the push-pull effect of new funding from the military's national base realignment and closure effort, coupled with tighter federal budgets and less wartime spending.

The Army post in Harford County obligated $15.5 billion in the fiscal year that ended in September. That's up $12 billion from 2005, the year the BRAC changes were announced, but down nearly $2 billion from 2011. The proving ground buys goods and services — such as software and radio-frequency sensors — needed to carry out its mission.

Contracting tallies are harder to come by for Fort Meade, the other local recipient of BRAC largesse, but businesses working with that installation tell a similar story. The Fort Meade Alliance, a nonprofit group that advocates for the Anne Arundel County base, says funding is up compared with 2005 and has been level or declining slightly in the past few years.

Loren B. Thompson, a defense analyst, thinks this experience is suggestive of how the two bases will fare under mounting national pressures on military spending.

"Aberdeen and Fort Meade will not feel the budget pinch as badly as most places," predicted Thompson, chief operating officer of the Lexington Institute, a think tank in Arlington, Va. "A place like Fort Meade is really crucial to keeping the peace because of its intelligence function. In the case of Aberdeen, the military is putting much more stress on communications and networks" — a post-BRAC focus for the base — "than it is on things like tanks."

BRAC gave Aberdeen the Army Communications-Electronics Command and similar high-tech operations that had been headquartered at Fort Monmouth, N.J. Fort Meade gained several new tenants, including the large Defense Information Systems Agency, and has also benefited from non-BRAC growth in signals intelligence and cybersecurity.

Barney Michel, president of the Army Alliance in Aberdeen, a coalition that advocates for the installation, said the base has seen "tremendous growth in contracts" since the BRAC moves.

But the 2011 decision to impose across-the-board cuts on both defense and nondefense agencies starting in January — unless a compromise could be reached on deficit reduction — has affected Aberdeen contractors for months, he said.

Congress recessed for the Christmas holiday without having reached agreement on an alternative to the automatic cuts, known as sequestration. The long uncertainty has weighed on federal agencies and contractors alike.

"Over the past six months, we've seen a significant slowdown in the amount of contracts let through Aberdeen Proving Ground and the dollar value associated with the contracts," said Michel, who works at defense contractor Joint Research and Development's Belcamp office. "That's affecting businesses across the spectrum, small and large, as contracts are not renewed or renewed at lower levels or delayed as everybody awaits an outcome on potential sequestration."

Kenyata Wesley, chief associate director for small-business programs at the Communications-Electronics Command, said Aberdeen contractors are seeing changes that go beyond BRAC and the state of the federal budget.

Aberdeen is shifting from contracts that pay businesses based on the time and materials involved — a type of deal that could stick an agency with much higher costs than expected — to "cost plus fixed fee," with triggers in place to control spending, Wesley said.

Time-and-materials contracts are supposed to be issued only when it is very unclear how much time or money would be needed. When the wars in Iraq and Afghanistan were at their peak, agencies felt pressure to get equipment into the field as quickly as possible.

But the days of sacrificing price for efficiency are ending, Wesley said. Aberdeen is about halfway through the transition away from loose price contracts to what should be a more certain environment, he said.

"The taxpayer will see a postwar savings," he said.

Bryon J. Young, executive director of the Army Contracting Command at Aberdeen, said by email that this change is already pressing costs downward — one of the reasons for the installation's falling contracting budget. He expects to see a continued "slight downward trend" in contracting dollars for the current fiscal year, which began Oct. 1.

But a bit down from big is still big. Contractors gathered at Aberdeen this month for an industry conference heard about multimillion-dollar deals to be awarded in 2013 and 2014, including a few multiyear contracts worth nearly $1 billion each.

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