McCain threatens to block defense contractor pay

WASHINGTON -- Sen. John McCain said yesterday he would move to block Pentagon payments to defense contractors facing layoff-related expenses from automatic budget cuts set to begin in January.

McCain, of Arizona, the top Republican on the Senate Armed Services Committee, faulted guidance from the Office of Management and Budget last week that said the government would cover legal and compensation costs of contractors facing spending cuts and held liable for not giving enough notice of layoffs.

He accused President Barack Obama of "telling contractors to ignore the law" so that layoff notices wouldn't be delivered before the Nov. 6 election. "Companies have a choice whether to rely on OMB's politically-motivated guidance or to comply with the law," McCain said in an emailed statement. "But I can assure them that I will do everything in my power to ensure that taxpayer dollars are not used to compensate contractors who do not comply with the law."

The automatic spending cuts, known as sequestration, would take effect Jan. 2, if lawmakers and Obama fail to agree on a long-term plan to reduce federal deficits. Military spending would be reduced by as much as $500 billion over the next decade, including as much as $54.7 billion in fiscal 2013. Defense contractors, led by Lockheed Martin Corp., have said they might be compelled to warn thousands of workers their jobs might disappear.

McCain said he is asking the Pentagon to notify Congress of all costs associated with such layoffs at least 30 days in advance of reimbursing contractors for those costs. It's not clear how McCain would block any transfers if the Senate remains in Democratic hands after next month's election.-- Bloomberg News