Well this looks like some good news coming out of Washington for a change. Congress has put together a budget proposal that will help keep the government running for the next 2 years and soften the blow of sequestration. This, of course, assumes that both houses can come to agreement and the President doesn't veto the bill. I think none of those things will happen and we will get a budget bill to pass.
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I attended a briefing this week by the Director of Small Business with the Air Force Space Command. It was very enlightening to see the status of small business contracting within this section of the Air Force. Yes, the budget cuts and sequestration has reduced the amount of money being spent in this sector. But the good news is that the small business goals are being met in a lot of areas despite the reduction in dollars (on a percentage basis). The Air Force is using some creative tactics to insure that small business has an opportunity and that the small business goals can be met. I think that the Air Force realizes that small business is the best hope for job growth as well as the best chance for new innovations.
There are plenty of people offering suggestions about what the government's sequestration is doing to the industry of government contracting. Defense contractors are the largest segment of this population and probably the most impacted. There have been projections that the Department of Defense would have to lay off over 6,000 of it's civilian workforce in 2014 just due to sequestration cuts. It was also forecast that research and procurement could be cut by up to 16% and maintenance could be cut by as much as 12%.
As the Federal Budget changes and is whittled down, there will obviously be some programs that will be cut and or eliminated. It has been widely publicized that non-essential travel has been greatly reduced within the government to help reduce costs. Even the Blue Angels flight team was grounded for a period of time during 2013 (They will be back in the air for the upcoming fiscal year). I thought it might be worthwhile to look at some of the programs that we have heard of that could either be casualties or might be good candidates to survive.
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?
OK the government shutdown is over and everything is back to normal, right? Well not quite. It will take some time for the furloughed government employees to catch up to their workload, not to mention that with the holidays, normal FY Q1 activities make the government slower than normal this time of year anyway. Now add to that the backlog of work due to the government shutdown and the workload is overwhelming to most government employees. This will mean that things take longer to accomplish here in the short-run until everyone can catch up. Add to that the effects of sequestration, which everyone feels will be harder to implement this year than it was last year, and the effect is a real slowdown in processing work. This means a slowdown in issuing new contracts and a slowdown in processing payments. This is not to mention a slowdown in processing new RFP's or evaluating new RFP's. Every activity is likely to take longer. This could have the largest effect on small business and small business financing. It will definitely slow down cash flow for small business as well as impact their revenues and profits in the short run. We have talked about this before and small business should evaluate how to deal with these issues.
There was a lot written about sequestration earlier this year, including a lot of panic that sequestration would all but shut down the government and our economy would crash. Well it seems that the economy did not crash and the government did not shut down. The news lately has died down relative to sequestration being a doomsday scenario. I think most of what we see today is "blaming" the loss of a program or government activity on the sequestration actions here and there but not the mass hysteria of earlier in the year. So what really happened with sequestration and what will the effects really be? I have recently read a couple of good articles that seem to have a handle on what is actually transpiring with respect to sequestration. In short, the impact is slow to see the actual results of the actions. We have seen some impact but the impact may grow over time, especially if sequestration continues into FY2014 and further.