What full-year appropriations halfway through the year means to contracting

Even if Congress agrees on a budget deal by March 11, that means 2022 money will arrive nearly halfway through the fiscal year.

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Congress bought itself a short month to get together on final appropriations for 2022. Even if they do agree that there’s a deal on March 11, that means 2022 money will arrive nearly halfway through the fiscal year. And even then accounts won’t be ready on the 11th. For contractor and procurement implications, the  Federal Drive with Tom Temin  turned to federal sales and marketing consultant, Larry Allen.

Interview transcript:

Tom Temin: And I don’t know why people are so breathless about the so-called framework. All that meant was another three weeks of continuing resolution, and then maybe they have a deal.

Larry Allen: But Tom, a framework was necessary to have what I call the fixes in, and when you have leadership from the House and Senate Appropriations Committees, negotiating hard for a couple of weeks over getting a framework, the idea now is that all the people who work with them have been instructed, we want a deal. So we’re going to get a deal. We’re gonna get an appropriations bill, an omnibus bill. Anytime you roll all 12 of them together, people, I think, rightly call it an ominous appropriations bill. But we’re going to get one. In the meantime, contractors and government agencies are kind of stuck in second year with having a continuing resolution for another month. So by the time we get a final appropriation, which is you alluded to, probably will come around the march 11, I would hope that would be the deadline day. It’ll be April 15 or so. Hey, there’s something to look forward to on Tax Day, you get your appropriations before each individual office has its money. And that’s really when the fiscal year begins.

Tom Temin: Right, that would be well past the halfway point. And so for contractors, what can they reasonably expect the government to be able to do with that half a fiscal year, even though they might have full year appropriations?

Larry Allen: Well, I think Tom, we can expect to see projects be funded right out of the box, a lot of preliminary work being done right now, everything that can be done without money, and not on all projects. But look, a lot of experienced veterans and federal agencies have told me they’ve got a pretty good idea of what their core funding is going to be. They know what projects they’re going to be able to fund. So for that set of projects, that set of activities, they can proceed up to the point where they need appropriation to actually drop the RFP or RFQ. Contractors can see it and expect to see I think, very frenetic activity, there will also always be some surprises. Congress may fund some things more than agencies expected. They may not fund things at all that agencies thought we’re going to get funds, you know, those are going to be last-minute surprises one way or the other. But the big thing I think that contractors can expect to see is that there really is no way, Tom, that agencies are going to be able to get all the money committed in five and a half months, no matter how quickly people move over, no matter how much advanced work they’ve done, there’s going to be money left on the table. So if you’re a contractor, even more so than in other years, you want to work closely with your customers, to make sure your project gets funded, that you’ve made it as easy as possible for your agency customer to do business with you that way. You get your project through, they get to get their project done, and everybody wins.

Tom Temin: Right. And then money that is unobligated by the end of the year then is in theory gone. And it would have to be reappropriated. And of course, we won’t have appropriations on October 1 of 2022 for the ’23 fiscal year, realistically speaking.

Larry Allen: That’s right. It’s gonna be an election year. And traditionally, in an election year, Congress kicks the bucket down the road until after the November elections. In this case, they’re midterm elections. So I wouldn’t expect to see anything for FY ’23 until December at the earliest. And you’re right, Tom, any money that’s unobligated and that’s the key is obligated to an actual project. If so, then it doesn’t go away when the belt holds on October 1. Otherwise, any obligated money for this year does go away. And agencies can look to Congress for giving them a very, very short runway to get their projects funded and get critical things done.

Tom Temin: We’re speaking with Larry Allen, president of Allen Federal Business Partners, and a little bit something close to home here. A Court of Federal Claims judge changed some guidance or reversed some guidance with respect to some GAO guidance with respect to contractors who may have lost a deal because prime personnel left during the solicitation and the government was counting on those people as part of their source selection. And now it seems like there’s a little bit more freedom for contractors to lose people and still keep their deals.

Larry Allen: Potentially, Tom, what we’re really talking about here, key personnel for a contractor on professional services contracts. Many of them require companies to put in resumes of actual people, critical personnel who will be dedicated to the project, should the company win. And what happens is, the solicitation goes out, say in February, the award isn’t made until April, maybe there’s a protest, and the project doesn’t really get going until June. Well, between February and June, people might leave the company, they might retire, they might get dedicated to another project. All the GAO rulings to date on that scenario, have taken the contractor to task saying, you bid something and then essentially baited and switched. And the agency has every right to reconduct a procurement if that happened. And now along comes the Federal Claims Court judge saying, wait a minute, wait a minute, let’s apply more a common sense solution to this scenario, companies really can’t be expected and critical people can’t really be expected to freeze in place, while a government agency goes through the process of awarding a contract, and doing all the things it needs to do to issue an authority to operate on that contract. And therefore contractors shouldn’t be done if they lose somebody through retirement or they took another job. They want contractors to have that flexibility there. They’re not giving you as the contractor carte blanche to put together a slate of key personnel just to swap them all out. They’re not saying that. But they are saying, look, we need to understand that time changes things, we need to be aware of that and accommodate it. A couple of the contract lawyers I’ve spoken to on this case, Tom, think that now we have a conflict between at least one claims court judge and GAO. We’re going to end up with a case in federal court that will establish a precedent, one way or the other on this on how you treat your personnel. But for the time being, I think contractors can feel that they’ve at least got some level of flexibility that GAO had not given them before.

Tom Temin: Right. And so for a superior court, a higher court to establish that precedent that would then flow back to GAO, which ultimately makes its decisions based on its best understanding of statute.

Larry Allen: Well, right. In fact, the claims court judge in his decision, said that GAO’s practice seems to be “untethered” from law or regulation. Doesn’t mean that it’s wrong, it just means that GAO kind of created its own precedent. So if you’d get a legal case in a superior court, a district court that sets a precedent that would be something that I think other venues would then look to, to decide future cases. That’s probably really what we’re hoping for now, because there are now some clouds here, depending on venue, and people would like some consistency, but at least they’re clouds that are favorable, I think, to contractors, because, up until now, GAO has been pretty clear that agencies can done companies who promise one slate of people but then for reasons outside of their control, can’t deliver on that by the time the project gets underway.

Tom Temin: Larry Allen is president of Allen Federal Business Partners. Thanks so much.

Larry Allen: Tom, thank you and I wish your listeners happy selling.

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