Contractors will bear the brunt of $37 billion in mandatory budget cuts that the Department of Defense has to absorb in the coming months, top Pentagon officials said June 11.

“The majority will come out of contractors,” DOD Comptroller Robert F. Hale testified before the Senate Appropriations Committee’s defense panel. “We’re going to see a drop in contractors. I don’t know yet how much because the year isn’t over, but I think it will be a sharp drop.”

The spending decreases are part of the broader federal budget cuts known as “sequestration.” The $37 billion reduction applies to fiscal year 2013, which ends Sept. 30.

“Contractors are part of any institution,” Defense Secretary Chuck Hagel told the Senate panel. “We need them — certain skills, certain expertise. But there’s no question that we’re going to have to make some rather significant adjustments, which we are.”

Hale estimated that about 700,000 contractors work for DOD. While DOD contractors have come under renewed criticism because they cost significantly more than civilian workers, Hale defended their use, saying they often provide skills that the department does not have or needs only temporarily.

“Audit readiness – an excellent point,” Hale said. “I’m hiring a lot of contractors because they know how to do audits; we don’t yet. In other circumstances, if you going to have the job over a long period of time, you’re probably better off, it’s probably cheaper, to have a civilian government employee do it.”

DOD civilian employees will feel some pain from the sequester cuts, mainly in the form of furloughs and hiring freezes, Hale said.

Other areas being affected include training and maintenance.

“For example, the Army has stopped rotations at its key combat training centers for all but deploying units,” Hagel testified. “More than a dozen combat-coded Air Force squadrons either, already have, or will soon stop flying, and the Navy has curtailed many deployments.”

If Congress allows sequestration to continue into fiscal year 2014, DOD is expected to face another $52 billion in cuts.

“The Defense Department will continue to find new ways to operate more affordably, efficiently and effectively,” Hagel said. “However, as I’ve stated, continued cuts on the scale and the timeline of sequestration will require significant reductions in military capabilities and the scope of our activities around the world.”

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Marc Selinger is a journalist based in the Washington, D.C., area. He can be reached at Follow him on Twitter at @marcselinger.