The Office of Management and Budget (OMB) yesterday provided additional guidance to agencies on implementing sequestration, scheduled to go into effect at midnight March 1 unless averted by congressional action. 

Danny Werfel, OMB Controller, told agencies that if legislation to avoid sequestration is not enacted before the deadline, across-the-board reductions will go into effect totaling $85 billion over the next seven months.  Werfel said OMB estimates “that the effective percentage reductions are approximately 9 percent for nondefense programs and 13 percent for defense programs.”

This new guidance builds on the sequestration guidelines OMB issued in January.  In the January memo, agencies were told to step up their plans on how they would operate with a lower level of resources.  Those plans, OMB directed, should include:  reducing civilian workforce costs (through hiring freezes, terminating temporary employees, and furloughs, if necessary); achieving cost savings in grants and contracts; and taking advantage of funding flexibilities, such as reprogramming and transfer authority.  In all cases, OMB directed agencies to reduce operational risks and minimize the impact on core missions when preparing plans for sequestration. 

In this latest memo, OMB told agencies to ensure that they could “determine the specific actions that will be taken” to operate under sequestration. 

Agencies should identify major contracts or grants planned for cancelation, delay, or rescoping. 

Regarding furloughs, agencies should identify the number of employees that will be furloughed, the length of the furloughs, when notices will be sent, and how the furloughs will be administered.  Agencies should also “ensure that they are fully aware of and in compliance with any and all collective bargaining agreements,” when implementing furloughs.

The guidance directs agencies to communicate with their partners and stakeholders (states, local governments, tribal governments, contractors, and grant recipients) on the impact of sequestration.  Werfel advised these communications should be “as specific as possible.”

Concerning new contracts and options, OMB told agencies they should “only enter into new contracts or exercise options when they support high-priority initiatives or where failure to do so would expose the government to significantly greater costs in the future.” However, in talking such actions, agencies must evaluate costs and benefits and minimize the effect on small business.

Agencies are directed to have in place the risk management strategies and internal controls necessary to “provide heightened scrutiny of certain types of activities funded from sequestered accounts.”  These activities include:  new hiring; discretionary money awards to employees (which should only occur if legally required), and new training, conferences, and travel.  Agency leaders will “ensure that these activities are conducted only to the extent they are the most cost-effective way to maintain critical agency mission operations.”