The debt ceiling debate has absorbed many in Washington over the past few weeks, as well as those whose business prospects are directly tied to federal spending. Now that a deal is done, how are they feeling about it? To find out, Federal Drive with Tom Temin spoke with federal contracting expert Larry Allen.
Larry Allen I think the good news is now that we have a debt ceiling agreement, that the rest of the fiscal year for fiscal year 23 should be pretty strong. Congress has appropriated a lot of money, perhaps a record number for acquisitions for this year. We’ll have to wait and see what happens when the year ends. But overall, it should be a strong last quarter plus for government contractors. Agencies now have a clear path from here to the end of the year. There shouldn’t be any more hiccups. Things may have slowed down a little bit while people dealt with what they thought might be a shutdown due to the debt ceiling. But now that that’s over, I think we’ll have the traditionally strong fourth quarter that we’ve had, particularly strong consistent with the last two years.
Eric White Which agencies are going to see less dollars, though? I mean, obviously, the GOP members got some of what they wanted, which means cuts to federal agencies. What are you hearing from your clients on that front?
Larry Allen So I think the big thing we’re going to see on that is civilian agencies going to be, in some cases, they will have less money to spend. Not so much the Department of Defense, at least not right now. But if you’re looking at places that have unobligated COVID money, whether it’s [Centers for Medicare & Medicaid Services (CMS)] or Department of Education, that maybe was giving grants to state and local governments that have not obligated that money yet. Those are areas where we’re going to see money clawed back. So if you’ve got money that’s been sitting in an account unused for a couple of years, maybe it was COVID money, maybe it was infrastructure money. That money, if it’s not obligated, it’s very vulnerable. That’s the type of thing you could expect to see taken away. But in terms of defense expenditures and anything related to national security, that’s going to remain there, remain strong things that are associated with cybersecurity. Having said that, though, there’s a difference between cybersecurity and other IT wish list items. The further away you get from criticality, the more likely it is that you might see funds diminished for allegedly non-critical, non-major IT projects.
Eric White And part of the deal also, they didn’t want to call it this, but it seems as if we’re returning to across the board cuts, a.k.a. sequestration. Are you worried about any of that language going back into spending deals?
Larry Allen Well, now we do have the S-word back in the federal vernacular for sequestration. And basically what the budget agreement says, is if Congress fails to pass all 12 appropriations bills for fiscal year 24 on time, on time being before midnight, Sept. 30, then there would be an automatic 1% across the board sequestration that would kick in, and nobody would want to see that. That would also affect the Department of Defense. I will say there is a lot of time between now and then for Congress to either pass the bills, which is unlikely, given their previous track record of not getting appropriations bills done on time. But more likely, there’s more of an opportunity to maybe backtrack on the sequestration automatic cut. We’ve already heard some members in the Senate talk about carving out the Department of Defense from those automatic sequestrations. So there’s a lot of time left before that type of cut would actually take place. But it certainly is a specter and it’s a marker, I think, as much as anything to try to get appropriations done in a timely manner. And really that would just benefit everybody. It benefits federal agencies, it benefits taxpayers because it puts in some surety to the budget process. And of course, it it benefits contractors as well.
Eric White Yeah. And most of them obviously look quarter to quarter. But is there worry about five years down the road having to do this whole thing again?
Larry Allen Oh, I think you definitely have to be concerned about coming up with another debt ceiling increase when we get to that point, sometime after the next presidential election. Right now is the amount of time we think we’ve got ourselves, we’ll see if that comes to fruition. But I definitely think, in terms of overall acquisition dollars, we’ve been riding a high for the last several years in the government market. Contractors and their government counterparts would do well to understand that we are not going to continually see year over year increases in discretionary spending. Whether it’s attributable to a debt ceiling increase in appropriation, a sequestration, what have you. I’ve been in this market for a long time. I’ve seen government acquisition dollars go up, but I’ve also seen them go down. We’re kind of do right now for a downturn. So in the out years, really starting as soon as fiscal year 24, I would urge some caution in expecting things to continue as they have. There may be some belt tightening and some increased competitiveness.
Eric White Got it. As far as the frequently asked questions the contractors have for their agency customers. One of the major ones, obviously, is the General Services Administration. You all recently did an analysis on what those FAQ interact sites are, how well they’re being kept up. What did you all find?
Larry Allen The basic idea behind the GSA interact sites I think is a good one, and that is to serve as a centralized way for different groups of contractors to stay in communication with specific programs at GSA. You have an interact site for almost every federal acquisition service contract method, whether it’s the schedules program, whether it’s a Alliant, whether it’s one of Polaris or Oasis. And yet, what I found is if you’re not on the schedules program interact site, then your site isn’t being updated very often. The GSA schedules interact site is updated about every 10 to 14 days, whereas Polaris has not been updated in well over a month, six or seven weeks. It’s been a little bit over a month now for Oasis Plus. Both of these are procurements that are ongoing right now. Oasis Plus is just about to come out with the final RFP. And yet both of those programs, Polaris and Oasis Plus, were dealt either directly or indirectly setbacks in the court of federal claims about six or seven weeks ago. GSA needs to communicate effectively, clearly and quickly what they’re going to do with those two programs and when that’s going to happen. They might not have all of the answers now, but you’ve got an Interact program to communicate with industry on what you can say, and there ought to be some capability to update it. Even a program like Alliant Three or GSA has already said, don’t expect an RFP out until fiscal year 24. I think an update for that program is worthwhile, because it’s going to have some of the pricing issues and some of the mentor protégé issues that Oasis Plus and Polaris have. So all three of those sites, I think, need to be updated for GSA to clearly communicate, even if it’s just a message that says, hey, we know that these are issues, we’re working through them. Here’s an anticipated timeline for when we’re going to be back with answers.