News of the Day
Defense cuts are looming once again as the US government seeks to balance its budget. The fairly predictable reaction from politicians is to protest the cuts, which will hurt individual states during an election year. What the general public might not know — but the supply chain does — is that cuts will harm a segment of the electronics industry known as minority-owned/disadvantaged businesses.
Sourcing agreements require a certain portion of the government’s spending to be directed toward these businesses, which include those owned by women, ethnic minorities, and veterans. I’ve come across a number of companies that qualify in the electronics distribution/manufacturer’s rep space. In distribution, it is fairly easy to set up a business if you can invest capital in inventory. Over the years, I’ve covered one- or two-person businesses operating out of homes, garages, and basements. Many of them are reputable businesses that take supplying the US government seriously.
An organization called the Coalition for the Common Defense compiled some state-by-state estimates for losses if the budget cuts go through. In New York alone (PDF), 379 businesses owned by women “provided goods and services for America’s national defense,” and those businesses could lose more than $50 million of revenue.
The term for this particular type of budget cut is sequestration, which basically means cuts will happen across the board. In September, Secretary of Defense Leon Panetta compared mandatory defense cuts to “shooting ourselves in the head.”
The coalition described the impact on the Empire State this way.
New York defense prime contractors earned over $7.59 billion in 2011 protecting America, but now they may face 18% revenue cuts under Sequestration — starting in 2013.
New York defense contractor revenue losses could be greater than $1.37 billion — each year.
I’d like to hear from minority-owned/disadvantaged businesses in the electronics industry. Is this the usual posturing over defense cuts, or is it a very real threat?
This article can be read here: http://www.ebnonline.com/author.asp?section_id=1893&doc_id=245422&itc=ebnonline_gnews