By Lori Ann LaRocco, CNBC Sr. Talent Producer
NEW YORK ( CNBC) -- Cutbacks in defense spending have been hanging over the sector for about a year now. Wall Street waits to see when the axe will fall. But that doesn't mean investors should be sitting around waiting for it to happen. There is always opportunity hidden in times of uncertainty. You just need to know where to look. Secure Strategy Group co-founder and former DHS Assistant Secretary Robert Liscouski and Secure Strategy Group co-founder Scott Greiper both took the time to answer my questions on where the smart money is going in the defense sector. Secure Strategy Group is a strategic advisory firm which invests in the security and defense sector.
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LL: With the budget cuts, there will be more jockeying for the government contracts. How much pricing pressure do you anticipate this will have on margins? Will they go higher? Or have they troughed? RPL: No question this has an impact on pricing -- there has been downward pressure on labor rates for government contractors and this will increase given the prospective pay freeze in USG. Furthermore -- there is more teaming going on because the government is taking a very aggressive approach to putting out multiple award IDIQ (Indefinite delivery/indefinite quantity) contracts and further forcing competition for the work as the task orders come out. SG: We believe that the DoD will move towards greater implementation of fixed price contracts to reduce risk. This will negatively impact margins. -- Written by Lori Ann LaRocco of CNBC