The Federal Market Isn’t Disappearing

Cash falling out of Uncle Sam hat

Last month’s inauguration ceremonies seemed at last to put a terminal punctuation mark on possibly the longest election “season” I can remember. But now at state-of-the-union time, the government must somehow deal with its festering fiscal situation.

Unlike their corporate counterparts, at least federal managers don’t for the most part have to worry about their agencies going out of business or being subject to mergers and acquisitions. They do, unfortunately, have to worry about RIFs and furloughs, though. Just Friday OMB painted a lurid picture of what will happen March 1 unless Congress acts.

OMB Controller Danny Werfel pointed out that because of the compressed timetable – the government is approaching halfway through the fiscal year – agencies in effect will have to compress a year’s of cuts into the remaining months. That will feel like 9 percent cuts in civilian agencies and 13 percent for Defense.

That very well might require furloughs. But they won’t be like widespread layoffs. DOD has said its civilian workforce would work four-day weeks, and receive only 80 percent of their pay, for the rest of the fiscal year.

None of the current goings on say a word about the long term drivers of fiscal calamity, namely entitlement spending and interest on the federal debt. Don’t take my word for it, read the latest 10-year forecast from the Congressional Budget Office. CBO sees deficits coming down in the next few years. But then: “Deficits are projected to increase later in the coming decade, however, because of the pressures of an aging population, rising healthcare costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt.”

Closer to current reality, no one can say precisely how the budgets for IT will actually turn out. An earlier story in Federal Times with the happy title, “CIOs whack IT budgets,” painted a picture of constraint. It focused on Housing and Urban Development for eliminating duplicative systems, and others delayed at the SEC. But it didn’t give a comprehensive picture across the government. And anyway, aren’t agencies supposed to be consolidating duplicative systems, regardless of fiscal conditions?

But I think the FedTimes story did catch the zeitgeist. Certainly in DOD many programs are also being delayed, including long term things like new Army ground vehicles. Then there is the January 14 memo from the Office of Management and Budget, instructing agencies to step up their planning for sequestration, which predicated follow-on planning initiatives at the Air Force and Army. Because the White House has indicated a preference for keeping military personnel accounts exempt from sequestration – which it can do – that puts proportionately more pressure on the fully discretionary accounts such as IT.

So, yes, tough times and uncertain ones. But not despairing ones. Keep in mind that much of the public sequestration talk has an element of politics as the sides play a little brinksmanship. But even so, agencies need to make sure their obligations don’t outstrip their ability to eventually pay. Even if there is no sequester, an extension of the continuing resolution now in effect could catch agencies short.

Resiliency still exists in the federal IT and services markets, though. Two big contracts recently went from incumbents to new entities. The National Nuclear Security Administration (NNSA) selected a team of vendors called Consolidated Nuclear Security, LLC for a long term contract to run two large, critical facilities with nuclear weapons and uranium processing. Consolidated consists of Bechtel, Lockheed, ATK Launch Systems and SOC LLC, with Booz Allen Hamilton having a consulting role. It replaces a troubled contract with Bechtel and Babcock & Wilcox.

Bloomberg reported that in 2013, NASA will have eight contracting opportunities, each worth at least $100 million – three new, the rest recompetes.

These contracts show that the market remains fluid, with opportunities out there. Cyber is another growth area. Just this week the Commerce Department issued a request for information on obtaining security monitoring as a service. The important thing for contractors, like government managers, is to tune out the noise and listen to opportunities.

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About the author

Tom Temin has written 486 posts for Fedinsider.com

Thomas R. Temin - Editor in chief of FedInsider and brings 30 years of publishing experience in media and information technology. Tom is also co-host of The Federal Drive with Tom Temin and Amy Morris, a weekday morning news and talk program on WFED AM 1500 in Washington D.C.

2 Responses to "The Federal Market Isn’t Disappearing"

  1. jladick says:

    Check out this BlogPost – GSA Sales Numbers for 2012 or read the GovLoop version which was tweeted by the GSA.

  2. jladick says:

    Great article. This is not the end of the world, and everyone needs to recognize that most of the panic is being caused by media and congress. Thanks for the reality check on the Federal Market. I posted the article on twitter, and expect some pretty lively LinkedIn discussions to come from it as well.

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