Defense Companies Warn Thousands Of Layoffs Imminent Due To Shutdown(forbes.com)
forbes.com
Defense Companies Warn Thousands Of Layoffs Imminent Due To Shutdown
http://www.forbes.com/sites/lorenthompson/2013/10/04/defense-companies-warn-thousands-of-layoffs-imminent-due-to-shutdown/
44 comments
Here's the thing... It is not in a military contractor's best interests to properly document and mothball any knowledge or capability so well that it can be handed over to the government, stuck in a warehouse for decades, and be dusted off by someone completely different without difficulty. Doing so is tedious, expensive, and makes the contractor instantly replaceable. Failing to do so is cheap, fast, easy and improves their odds of getting future business!
The flipside is that it's impractical to pay companies to maintain the capacity to build everything they've ever built for all time. Imagine what it would cost IBM to keep people trained in building new versions of every product they've ever invented! If it costs billions to adequately document and mothball the construction process for every wheel you've ever made, but it only costs millions to reinvent the occasional wheel, what do you do?
The flipside is that it's impractical to pay companies to maintain the capacity to build everything they've ever built for all time. Imagine what it would cost IBM to keep people trained in building new versions of every product they've ever invented! If it costs billions to adequately document and mothball the construction process for every wheel you've ever made, but it only costs millions to reinvent the occasional wheel, what do you do?
The flipside is that it's impractical to pay companies to maintain the capacity to build everything they've ever built for all time.
The defense contractors handle that problem by putting those people on other projects. Sometimes it is productive work, sometimes it is just any project with a budget surplus. Their intent is to maintain institutional memory even if the project itself has been mothballed.
That's what I saw happen to people numerous times while working as a consultant to a couple of DoD contractors. I billed a crazy-high rate and they even shuffled me off onto a peripheral program in order to keep me around as a sort of security blanket for the original program that was (slowly) spinning down.
The defense contractors handle that problem by putting those people on other projects. Sometimes it is productive work, sometimes it is just any project with a budget surplus. Their intent is to maintain institutional memory even if the project itself has been mothballed.
That's what I saw happen to people numerous times while working as a consultant to a couple of DoD contractors. I billed a crazy-high rate and they even shuffled me off onto a peripheral program in order to keep me around as a sort of security blanket for the original program that was (slowly) spinning down.
>> Imagine what it would cost IBM to keep people trained in building new versions of every product they've ever invented!
There's a reason the mainframe forward-compat date is 1964, it's so they don't have to!
There's a reason the mainframe forward-compat date is 1964, it's so they don't have to!
> The US government ended up spending a decade and over eighty million dollars just to research and rediscover the manufacturing process for this one particular component.
Well, we didn't exactly "rediscover" the process for manufacturing FOGBANK. That's because we never actually knew the process -- we just thought we did.
The previous production process just happened to include a contaminant that turned out to be a critical ingredient. This is what we had to discover.
As for the money -- how much would it have cost to keep the existing facility running for the past few decades? If this is more than $80 million (including inflation), then it was better to stop manufacturing it.
Well, we didn't exactly "rediscover" the process for manufacturing FOGBANK. That's because we never actually knew the process -- we just thought we did.
The previous production process just happened to include a contaminant that turned out to be a critical ingredient. This is what we had to discover.
As for the money -- how much would it have cost to keep the existing facility running for the past few decades? If this is more than $80 million (including inflation), then it was better to stop manufacturing it.
If a normal business were as fiscally irresponsible as the US Government, all of its employees would have long since been out of a job. I find it bizarre that people apply a different financial standard and expectation to a nation's finances as they would to their own or a business'.
The massive deficit spending, financed by the Fed, that keeps all of these jobs going, is mostly in fact funded out of the pocket of Americans without their knowledge. If we were forced to balance the budget tomorrow, a million people would lose their jobs. Given the guaranteed increase in the cost of debt over the next decade, that tells you exactly what is going to happen to all of these jobs given our national debt will climb past $20 trillion (just 5% on $15 trillion wipes out social security or the US military).
This shutdown will end very soon, despite the hoopla. Not one of the major financial problems that America has will be resolved however. An even bigger disaster will merely roll closer.
The most surprising thing about what's going on, is the fact that so many people dependent on government largesse have for so long been spared the consequences of the out of control financial problems in DC.
The massive deficit spending, financed by the Fed, that keeps all of these jobs going, is mostly in fact funded out of the pocket of Americans without their knowledge. If we were forced to balance the budget tomorrow, a million people would lose their jobs. Given the guaranteed increase in the cost of debt over the next decade, that tells you exactly what is going to happen to all of these jobs given our national debt will climb past $20 trillion (just 5% on $15 trillion wipes out social security or the US military).
This shutdown will end very soon, despite the hoopla. Not one of the major financial problems that America has will be resolved however. An even bigger disaster will merely roll closer.
The most surprising thing about what's going on, is the fact that so many people dependent on government largesse have for so long been spared the consequences of the out of control financial problems in DC.
Anyone still remember how those banks got bailed out by the government? Wouldn't it be nice to have the gov save your company every time you do something stupid :-)
It would also be nice if my company could print it's own money, and I could pick up a gun and jack the company next door and steal all their resources or extort them without any legal repercussions. It would also be great if my employees had to pay me back a tax everytime I gave them a paycheck so I could get some more guns.
I too would enjoy the franchise wars and have every restaurant called Taco Bell.
People who think that governments are "fiscally irresponsible" should look more into what kind of stuff happens when a country does not have a strong government or when even a relatively small portion of the population doesn't subscribe to the system. Screw majorities... if 10% are disgruntled enough, nothing works even remotely as well as in the US.
Basically the republicans are such a minority. They are fighting for something they claim to be their ideals, and are willing to drag the whole nation down with them (so far). The big problem is that the majority calls their BS, and not without any merit...
Basically the republicans are such a minority. They are fighting for something they claim to be their ideals, and are willing to drag the whole nation down with them (so far). The big problem is that the majority calls their BS, and not without any merit...
So basically we're not making as many weapons, in which case you won't hear me complaining.
We're going to make the same number of weapons, we're just going to do it less efficiently, with more human disruption. Disclaimer: also would prefer a much smaller US military.
Not trying to refute your point, nor even argue that we need a bunch of nuclear weapons; but nukes have a shelf life. They have to be maintained / reconditioned periodically.
Or we could eliminate this as an issue and decommission them.
Hey! That sounds like something that some kind of hippie peacenik might say, or Ronald Reagan. Besides, it makes too much sense.
The first thing all these people do the day they are laid off is file for unemployment (justifiably).
So this passes all the costs onto the states.
I am wondering why state governments aren't foaming at the mouth yet about this.
So this passes all the costs onto the states.
I am wondering why state governments aren't foaming at the mouth yet about this.
The first thing all these people do the day they are laid off is file for unemployment (justifiably).
So this passes all the costs onto the states.
Unemployment insurance is primarily paid for by payroll taxes that go into a dedicated fund. That probably doesn't apply when the federal government decrees an extension to unemployment benefits, but the first 180 days or so come from that dedicated fund.
My understanding is that the payroll tax varies based on the historical rate of lay-offs. So a company that regularly lays people off (say a hollywood production company that lays people off at the end of every movie project) will have a higher payroll tax than a company with much better employment continuity. I could be wrong, that's just what I've been told and I have not dug into the details, although I did marry a woman who works in movie production.
So this passes all the costs onto the states.
Unemployment insurance is primarily paid for by payroll taxes that go into a dedicated fund. That probably doesn't apply when the federal government decrees an extension to unemployment benefits, but the first 180 days or so come from that dedicated fund.
My understanding is that the payroll tax varies based on the historical rate of lay-offs. So a company that regularly lays people off (say a hollywood production company that lays people off at the end of every movie project) will have a higher payroll tax than a company with much better employment continuity. I could be wrong, that's just what I've been told and I have not dug into the details, although I did marry a woman who works in movie production.
I'm not an American, so this question may be rather uninformed: why doesn't this "furloughing" lead to a rash of "fsck you, pay me"? I know labor protection isn't that strong, but contracts still mean something and plenty of these workers are sufficiently unionized that they can't just be fired.
In cases where unions are involved, the terms of the furloughs are usually negotiated with the unions beforehand. I don't know about contractors specifically, but for civil servants, their unions were definitely involved in the furlough negotiations during sequestration. In this case I don't know how much they'd get to say since the entire federal government has shut down and the issues go all the way to the highest parts of the government.
Also keep in mind furloughs are not layoffs - just unpaid leave.
Also keep in mind furloughs are not layoffs - just unpaid leave.
>Also keep in mind furloughs are not layoffs - just unpaid leave.
they pay back the salary for the furloughed days once shutdown ends - at least that happened to gov employees after previous shutdowns
they pay back the salary for the furloughed days once shutdown ends - at least that happened to gov employees after previous shutdowns
Correct. They only do this for government employees not contractors. Contractors don't get paid.
I went through the shutdown back in the 90s as a contractor working at the Whitehouse and we all got sent home without pay. If you had saved up vacation you could use that, otherwise you didn't get paid and there was no back pay for the furlough period. We basically got laid off for that time period, whereas the government employees got a paid vacation.
I went through the shutdown back in the 90s as a contractor working at the Whitehouse and we all got sent home without pay. If you had saved up vacation you could use that, otherwise you didn't get paid and there was no back pay for the furlough period. We basically got laid off for that time period, whereas the government employees got a paid vacation.
>they pay back the salary for the furloughed days once shutdown ends
And here I thought that the sliver lining of the shutdown was that the government would spend less taxpayer money this year!
So much for that hope.
And here I thought that the sliver lining of the shutdown was that the government would spend less taxpayer money this year!
So much for that hope.
I'd be surprised if chaotic, unorganized spending cuts would actually save money in the long run.
It will, the contractors won't get paid for the shutdown period. Only government employees will get back pay.
Why do you think they're unionized? Very, very few of these workers are in a union.
Welfare through military spending.
Lay them all off already, give our privacy back.
The majority of these employees (the vast majority) have nothing to do with the NSA or related activities. Even tangentially. Those being furloughed seem to be in the industrial/manufacturing sectors. These are people making the aircraft, ground vehicles or components for them. Future furloughs will hit those whose contracts were to get funding this fiscal year (appropriations can span multiple years, so it's possible a contract is funded despite this, but many may not be funded until after this current budget is passed). And companies will likely use this as an excuse to save some money by furloughing more employees than just the ones on affected projects. And in turn I wouldn't be surprised if they try to change the terms of their existing contracts to stretch out deadlines, even contracts that shouldn't have been effected. Hooray! More money down the drain.
Ah, so they don't facilitate the spying of U.S. citizens, they're just facilitating the rain of death from U.S. drones overseas.
Carry on then.
Carry on then.
Ah, yes, hyperbole, the key to useful discourse.
What part of what I said is hyperbole? If you work for a defense contractor that is what you do for a living. Make shit to kill people over seas.
Yes, I'm sure that's what every single employee does, including the software engineers, HR people, managers, receptionists, and janitors.
Yes.
The software engineers rather directly.
The others are there to support the software and other engineers.
The software engineers rather directly.
The others are there to support the software and other engineers.
I'm tempted to resort to hyperbole of my own, but suffice to say that if you work for a defense contractor, the fact that your job doesn't directly contribute to people being exploded does not absolve you.
Absolve you of what? Supporting your countries armed forces? What a terrible sin.
Supporting the armed forces when we face a realistic and imminent threat, from an enemy we can actually name, is a fine thing. We are not in that situation by any stretch.
What I get confused about and fail to understand, is why people get excited about hearing that others are being furloughed. What's so good about people not being able to support their family, or possibly default on debt and even worse allow city and state budgets to shrink? We all lose together.
Because Jo(e) Average Worker gets squeezed by these guys more every year to pay their generous salaries and retirement packages. Well turnabout is fair play.
Isnt that whole shutdown about spending ? well this is where money could be saved, by aborting all these expensive and useless weapon deals, instead of cutting food stamps for the poor. US society dont need new tanks, drones or missiles. Let's cut defense spending.
No. The shutdown is about a minority faction of the GOP trying to repeal the Affordable Care Act which is already funded. It has nothing to do with spending.
The shutdown is a political maneuver by a small faction that would otherwise lack power.
The basic gist is that if contractors that supply all of one component or product dry up, those former employees don't just stay unemployed, they go to work in other industries. But, if in 5, 10, or 20 years, you decide you actually need that component or product again, you can't just flip a switch and re-activate manufacturing. The knowledge is gone, all the workers you had who were trained in the process have gone into new fields, and rebuilding your military production infrastructure is very painful. For a good example of this in recent years, FOGBANK.
FOGBANK was a mysterious classified material critical to creating nuclear warheads. Following the turn-down of the cold war and missile reduction plans, the manufacturing plant was mothballed. And the process for creating it was so secretive that no one remembered quite how to make it. Decades later, when aging missiles needed replacements, the process for manufacturing was lost and scientists couldn't reproduce the process based on the information left behind. The US government ended up spending a decade and over eighty million dollars just to research and rediscover the manufacturing process for this one particular component.
http://en.wikipedia.org/wiki/FOGBANK
Obviously FOGBANK is an extreme case, but it's a fair point worth considering. Drastic cuts to military contractors may leave large holes in military supply, especially of sensitive and classified materials.
NPR Planey Money episode: http://www.npr.org/blogs/money/2013/08/23/214928040/episode-...