There’s one thing budget experts can predict with confidence: This budget cycle — and the next — will be unlike any agencies and contractors have seen in the past.
President Donald Trump is expected to submit his fiscal 2018 budget to Congress in mid-March. The continuing resolution that lawmakers passed last year expires Apr. 28. Congress must still agree on a funding solution for the remainder of fiscal 2017. Meanwhile, Trump has indicated his desire to repeal and replace the Affordable Care Act and implement a major overhaul to the tax code.
These circumstances, and the personalities behind these crucial budgetary decisions, could set up an unprecedented budgetary climate for agencies and contractors.
“Things that we thought were slam dunks are not,” Stan Collender, budget expert and executive vice president of Qorvis MSLGROUP, said during a Feb. 24 Professional Services Council discussion.
This puts newly confirmed Office of Management and Budget Director Mick Mulvaney, a former member of the House Freedom Caucus who has expressed his opposition against raising the defense spending caps, in a tricky position.
“He’ll either be the most influential member of Trump’s cabinet or the first one out the door,” Collender said.
The President has expressed his desire to boost military spending and raise defense spending caps, but Democrats have consistently said they won’t budge without an increase to the domestic spending caps.
“The administration is facing the situation where they want to spend more on military programs but probably won’t be able to do it through the caps,” Collender said.
The Overseas Contingency Operations (OCO) fund could once again be an option for the administration. But Mulvaney has called the OCO account a “slush fund” in the past and was one of four co-sponsors of an amendment to the 2017 Defense authorization bill that would have reined in its use for non-wartime spending.
One scenario is that Congress could appropriate agency funding past the spending caps, which in theory would trigger sequestration, Collender said.
But the President could ask OMB not to issue sequestration guidance, he added.
“The sequester isn’t automatic,” said David Berteau, CEO of the Professional Services Council. “OMB has to actually issue guidance to sequester, a direction to sequester. Without that order, there is no sequestration.”
Government shutdowns and cliffhangers over the debt ceiling, which will likely be suspended by March 15, may be a possibility.
“They cannot be dismissed outright just because one party is in control of the White House and both houses of Congress,” Collender said of either option.
Both Berteau and Collender said they could ultimately see four years of continuing resolutions or omnibus packages, which Republicans may use to pass other policy priorities.
“If you put it in one big bill it’s tough for members to vote against, because there will be something in there that they either can’t do without or have to be in there,” Collender said.
Time is another factor, since it’s unlikely committees will have enough time to resolve full appropriations packages with the congressional schedule, which has most lawmakers on recess for two weeks in April.
“It’s not hard to see a scenario where you get to April 28 and you say, ‘Oh, we just need another week here,’ so we get a one-week CR,” Berteau said. “And then you get to the next week, and you get another one-week CR. If you look at government contracting behavior, they’re already spending as if it’s a CR, and what that means is, don’t spend all your money yet because you’re not sure what you’re going to get in the subsequent CR.”
But in a changing environment Collender said the contracting community should tweak its operating principle and the strategy companies use to market them to the public.
“You have to get a reputation as not just somebody who herds money from the government but provides value to the government, that the contracts you get, the work you’re doing, actually improves … the bottom-line,” he said.