Changes in Defense Spending on the Horizon
On June 4, Defense Secretary Robert Gates set a deadline for Defense Department agencies to submit proposals by July 31st on how they would streamline operations to save over $100 Billion. The focus is on becoming more streamlined, to eliminate unnecessary overhead and trim excessive programs. The overall Defense Department budget is not going down but Secretary Gates wants to put more emphasis on the war efforts in Afghanistan & Iraq. He also wants to see the federal spending done more efficiently and more productively. There will be a scrutiny of programs that we have not seen over the last 10 to 15 years and without a doubt some programs will be canceled. The types of contracts to be let will change as well. Already we are seeing indications that the DoD is looking for more Firm Fixed Price (FFP) type contracts and less of the Cost Reimbursable type contracts. The FFP contract vehicle will put more pressure on the subcontractor to make sure they are profitable. In this type of a contract the government will only pay a specified amount and any over-runs will be the problem of the contractor. Now, certainly, there are some types of activities where a FFP type contract just won't work but you can bet that every Contracting Officer in the DoD will be considering how they can spend their money more wisely. The questions is, are you as a subcontractor, ready for this new challenge in the Department of Defense?