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Federal Government Contract outlook next 30 days

Posted by Mike Anderson on Fri, Oct 25, 2013 @ 02:02 PM

The government shutdown was ended on October 16th by implementation of a continuing resolution to fund the government until January 15, 2014 (H.R. 2775).  Everyone breathed a sigh of relief and all federal workers returned to the workplace.  That is all well and good but does this mean business as usual?  How will this affect the small businesses across the country that are known as government contractors?  The question that most small businesses are asking is how it affects them and if it will cause a disruption in either business as they have known it or will it disrupt their cash flow?

First of all, the government was shut down for over 2 weeks (16 days to be exact).  You certainly can't expect any system to be down for this long and then start back up without missing a beat.  I like fish in rivers in my spare time so I try to relate this to something more obvious.  If a small stream has a blockage (maybe a beaver put some sticks in the steam) then certainly the flow below the obstruction is reduced.  If you suddenly remove the obstruction, the downstream effects are turbulent, littered with debris and in general in a state of turmoil for a period of time before returning to normal (in other words, a flood).  I think the same analogy will hold true as the government starts back up.  There will be a backlog of work that was put on hold for 16 days.  Now that the federal workers have returned, they are faced with their normal full time jobs plus the additional work due to the backup that occurred during these 16 days.  This will obviously slow down most transactions.  This will most probably affect everything from the issuance for new RFP's all the way through payment of funds for work done. 

The second issue with the continuing resolution is that the government will be cautious about spending.  The funds are approved by the continuing resolution, that is true, but the total amount of money is not yet approved and changes could occur.  Simply put, the budget is not approved.  There are other variables at play here.  Without an approved budget, there could be changes in levels of funding for certain departments.  The continued presence of the sequestration implementation could also cause reductions in the approved budget.  It is not clear what that impact is yet.  As a result, most departments will be very reluctant to spend more than what is absolutely necessary.  In other words, internal operations will probably come first, essential services and then other programs.  I saw this week an internal memo from the Department of the Navy.  This memo outlined guidance for the department over the next 3 months.  The main points of the memo can be summarized as follows:

  • Proceed conservatively
  • No FY2014 new starts
  • No multi-year procurements
  • No contracts for increase in procurement over FY2013 levels
  • No military construction, family housing or other activities requiring specific authorized legislation until passage of said legislation
  • All travel, training & related expenses to be scrutinized - mission critical priority & minimum personnel
  • Government sponsored conferences postponed to after 1/15/14
  • Non-government sponsored conference attendance scrutinized
  • Hire civilian personnel scrutinized - cautious
  • Maintain judicious control of obligations & expenditures

While the Department of Navy is not shutting down the doors, they are trying to be very careful about funding.  This could find its way to some programs that small business is involved in.  If you think that the government is taking a long time to start a contract or grant, there could be a reason behind it like they department is being overly cautious until the full budget is approved and the sequestration issue is resolved.  Will this happen on January 15th?  That is not clear.  The FY2011 budget didn't get approved until April and the FY2013 budget didn't get approved until late March.  That's not a good trend.  I think the government contract market will be soft for a while. 

Topics: government contracting, Sequestration, Shutdown