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Sequestration's toll on industry is difficult to measure. Federal News Radio's special report, The Private Side of Sequestration, gauges the impact and ongoing effect of the Budget Control Act on the contractors that sell more than $500 billion worth of goods and services to agencies each year. We take an in-depth look at large, small and medium-sized companies, and investigate how government contracting is different today compared with previous fiscal years; which sectors are being hit the hardest; how business development is changing under sequestration; and how companies are planning for the future.
Federal 4th quarter spending spree offers contractors hope for return to normalcy
Monday - 7/29/2013, 6:17am EDT
The first three quarters of fiscal 2013 were rough for government contractors. Agencies delayed contract solicitations, delayed awards, and asked for vendors to cut costs.
But many contractors say the last two months of the fiscal year may just make up for the sluggish rate of acquisition.
Analysis of federal spending from Govini, a government market research firm, found the number of requests for proposals are up by 28 percent in 2013 as compared to 2012.
Geoff Celhar, the vice president for research and analytics for Govini, said each successive quarter in 2013 has seen an increase in RFPs, which means eventually agencies will make an award.
And that's why many vendors have high hopes for an acquisition rebound in August and September.
"There is this giant rumor out there that many of the government customers have over corrected for sequestration, so there will be a lot of money they have to get on contracts in this last quarter of their fiscal year. We are seeing some pick up in activity, but we expect to see more of that," said Paul Fernandes, the president of STG, a mid-tiered IT services company. "Task order contracts are becoming a very popular way for customers to move money quickly and award contracts very quickly."
Getting out of the malaise
In part 2 of Federal News Radio's special report, Private Side of Sequestration, we examine why vendors may be rethinking August vacations in order to handle what many expect to be one of the busiest end-of-the-federal fiscal year buying sprees in recent memory.
Typically, the fourth quarter of the federal fiscal year is a race for agencies to spend the rest of their money before it expires. But as many agencies and vendors have seen, 2013 is no typical year. With employee furloughs, budget cuts under sequestration and an overall malaise around spending, solicitations and awards have slowed considerably.
But that's also why federal contractors are betting for some normalcy to return to agency spending as agencies realize how much money they have left after accounting for these cuts and decreases.
STG and other companies aren't quite canceling staff vacations, but they are preparing for a heavy workload.
"Across the board, we are gearing up to write more proposals," Fernandes said. "We just interviewed a couple of people and a couple of companies that help support the proposal writing effort. We brought them in and are looking to partner because we are expecting increased proposal activity over the next several months. We know you can only get so much out of your existing staff; whether you cancel their vacations or not, they still only can be productive for so much time."
Chris Romani, the president of Integrity Management Consulting, a small business providing acquisition and management consulting services, said he isn't canceling vacations either but does expect a busier end of the summer.
"We believe it's going to be a feeding frenzy and a busy fourth quarter," he said. "We looked at the funding profiles of our target agencies, which is part of our strategic plan, and we see that they have a lot of mission needs and a lot of unobligated funds. So, we believe it's going to be a busy fourth quarter. It basically started for us a couple of months ago and it has just not let up."
Romani said the number of RFPs and request for quotes under multiple award contracts means Integrity will have to do trade-off analyses on which solicitations to pursue.
"We are having to look at such things as fit to our strategic plan, percentage of win and things like that," he said. "I guess it's a good position to be in. We have to make trade-off analyses on how much you can push through the pipe."
Romani said agencies are moving away from GSA schedules and other multiple award contracts toward small business set-aside contracts. This change makes RFPs more competitive.
A different type of buying
But the spending spree is not business as usual, as there is less overall money. Agencies are looking at whether they can move money to reduce furloughs.
Harold Youra, president of Alliance Solutions, a consultant who helps product vendors with business development and strategic planning, said his clients expect an uptick in spending this summer.
"Last year if you had $100 of spend, and they spent $90, they would still spend $100. This year we are seeing if it's $100 of spend, it was down to $80 they need to buy products or services for. What we are seeing: yes, there will be some money leftover for the end of the year, but I don't think it's going to be like years past where they bought anything. I think there is a priority list the government has set up, and as they are going through the sweeps for the end of the year, I think they are really prioritizing where they are going to spend money. It's not going to be 'let's buy something to buy something.'"