Sequestration: The Prequel

On July 31, 2012, the Defense Procurement and Acquisition Policy (DPAP) office issued a "class deviation" to implement the provisions of section 808 of the 2011 National Defense Authorization Act which prohibit DOD from spending more on contracts for services in 2012 and 2013 than it spent in 2010. The "deviation" requires that CO's set negotiation objectives that do not exceed the labor rates and overhead rates that were in effect during 2010 for the same services, but because the "deviation" also requires that award of any contract that was priced based on rates in excess of those negotiation objectives must be approved by the secretary of the relevant military department or the head of the contracting activity, many DOD CO's are treating the "deviation" as a cap on allowable labor and overhead rates, regardless of any justification that may exist for rate increases.