Lack of a government shutdown is not the same as a timely start to the fiscal year

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The federal contracting community will feel relieved if Congress proceeds with a continuing resolution, and avoids a lapse in appropriations. Fondly known as a government shutdown. But starting the fiscal year on a CR is hardly ideal. Federal sales and marketing consultant Larry Allen explained why when he spoke with Federal Drive with Tom Temin. He’s the president of Allen Federal Business Partners.

Interview transcript:

Tom Temin: Larry, it does seem strange that we would welcome a CR because it’s a better alternative than a shutdown. But none of those things come close to starting the fiscal year with the full year appropriations understood and nailed down. So maybe discuss the lack of ideality in starting with a CR.

Larry Allen: It’s actually a really good way to look at it. So often, we focus on the continuing resolution at the beginning now of each fiscal year, for either a period of weeks or months. And it keeps the government open, which is great. It’s better than a shutdown. But it doesn’t make the government fully operational. And the reality that we’re seeing at the end of FY 21, is that government never really catches up from the late start. So it’s not just that it’s not ideal to start the year without a full appropriations — projects are delayed, people just keep kind of muddling along with what they were doing before — it’s that we never really fully get over the late start. We’re rushing up to the end of every year trying to get as many new projects funded and out the doors we can. Tom, that inevitably leads to mistakes. It leads to less than ideal acquisition outcomes. So when you’re looking at a CR at the beginning of the year, and you’re like, Well, it’s only six weeks? Well, no, it’s not only six weeks at the beginning, it has an equal effect at the end of the year because people can’t catch up, they can’t get everything they need to get done in a timely manner. This is really a less than ideal way to try to fund government.

Tom Temin: And what does this do with respect to contractor’s schedules and their results financially and otherwise?

Larry Allen: Two types of contractor reactions here, Tom, one is larger, experienced contractors kind of know that there’s going to be a CR for a certain amount of time at the beginning of each fiscal year, and to the best of their ability, they bake it in to their business processes. And while it’s not ideal for them, they’re going to be ready when the appropriations do come and they’ve got the relationships. For smaller businesses though — those that are particularly dependent on cash flow, maybe they’re newer market entries that are really counting on some funding coming across the table before the end of the ’21 calendar year — a continuing resolution could really play some substantial hardships on those businesses. You’re not getting the new projects out the door, you’re not getting the funding that you need, it’s very likely that you have investors who are starting to ask questions about why that’s happening. It’s highly ironic that this happens at a time when most of the rhetoric is very pro small business and government acquisition. And yet, one of the many effects of government by CR is that small businesses, particularly might find themselves in a cash crunch.

Tom Temin: And also you’ve got, last week already, the OMB sending out the shutdown warnings to federal agencies — the preparation notice — and that’s routine. But that must nevertheless put some kind of a chilling effect on agencies willingness to move, even with acquisitions toward the end of the year, when they’re tied up with shutdown preparation.

Larry Allen: That’s exactly right. Continuity of operations planning, Tom, is something that all federal agencies have to do in a certain time of the year if there are not going to be appropriations — if there’s another reason for a potential shutdown, you have to plan as if there will be one. Most agencies have established plans, but there are procedures that you have to go through. Think of it as stage one, stage two, stage three, that type of thing. What that means, though, is that the people who would ordinarily be doing the buying at the end of the fiscal year or overseeing the buying for the last week of the fiscal year, they’re not doing that function. Instead, they’re taking time back to work on internal processes and procedures for that, what if scenario. What if we were closed down and where we have to operate under no funding at the beginning of the fiscal year? That’s got to be very frustrating, and it further compounds the inability to get good government business done at the end of the year. So really, Congress starts us off late with a CR that pushes everything out, and then it no CR is imminent, Congress has a requirement for agencies to plan for shutting down, taking away that time for doing the acquisitions that they didn’t get a chance to do at the beginning.

Tom Temin: We’re speaking with Larry Allen, president of Allen Federal Business Partners. And I want to change topics here for a minute, because something you’ve written about recently is the idea of maintaining your corporate reputation. And there are so many vectors of threat to reputation. It’s almost like cybersecurity. You could end up on some idiotic TikTok thing, or some social media campaign could probably wrongly, mostly wrongly malign you, and yet that could have an effect on contracting officers on your ability to do business.

Larry Allen: It really can. First of all, I think most smart companies try to do the things that they can do to protect their image, to protect how people view them. And that’s really important. You want to have that level of trust. Having a good reputation helps build relationships. And we know, Tom, that the federal market is very relationship driven. But companies can’t control everything. In a TikTok world, in a world where everybody has a camera, everybody can record things, companies really not only have to have a good reputation and take steps to protect it, they have to have a timely reaction plan for when a inevitably bad thing happens. And as you said, it doesn’t even have to be a legitimate bad thing. It could be something that, somebody who has an axe to grind with the company gets access to a platform, and suddenly they’ve got 50,000 followers all saying negative things. What’s your response strategy going to be? And you need to think about that before it happens, so that you’re ready to put out the fire before it spreads. Whether you’re a company or an individual contractor employee, Tom, reputations matter. And it’s really important to understand that even a good reputation established over time could unravel quickly if you’re not prepared to respond to negative comments that people may make about you whether or not they’re valid.

Tom Temin: And of course, there are probably 10 million consultants running around claiming to be crisis communications and emergency planning consultants. They’re kind of like interior decorators that are good at placing chairs, but there’s no real science there. But the other issue, I think, is for management, rather than to have to hire reputation restoring consultants, is to make sure that people all the way down the line are doing the right thing and know what they’re expected to do. Because it could be, it’s like those videos you see of airline baggage handlers tossing bags halfway across the tarmac so they land with a big thud somewhere, that can damage the airline’s reputation, and it’s happening on the tarmac, not in the executive suite. And I think for those that manufacture things for the government, that’s a real issue. Someone filmed someone gluing something wrong on the bottom of an airplane, or inside an electronic assembly, you’ve got a problem.

Larry Allen: Anytime that you have an employee who cuts corners, Tom, whether it’s somebody who’s in a production line, or whether they’re in a position where they’re like, Well, we know we’re supposed to have a product made to the standard, but that’s going to take too long, we might not get it done in time, so we’re gonna take a shortcut here. Anytime you have an employee that puts the end product your company makes at risk — puts it out in front of a customer and advertises it as something less than the quality that the customer thought it was going to get — you’re putting that company in jeopardy, those actions are putting the company in jeopardy. Tom, that’s one of the reasons why when I work with lawyers on False Claims Act cases, we take a look at the employees who are involved, whether or not any specific ones were involved in wrongdoing. And if they were, we talk to those people, get the information we need from them, and then we make recommendations to senior management to have those individuals terminated from employment. Because the company needs to protect its reputation moving forward, they may still have to pay a fine for whatever False Claims Act violation the company had, but showing president responsibility prevents the next worst thing from happening, which could be suspension or debarment from government business. So the message has to get out to employees.

Jared Serbu: Larry Allen is president of Allen Federal Business Partners speaking there with Federal News Network’s Tom Temin.

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