Agency spending surges at the end of the year persist despite pandemic

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Like the Old Faithful geyser, the end-of-year federal spending spree is showering contractors, even while the pandemic persisting and producing spending of its own. The figures are coming in. So can your company make its numbers? Federal Drive with Tom Temin asked federal sales and marketing consultant Larry Allen.

Interview transcript:

Tom Temin: Larry, you’ve been looking at the figures and it looks like yeah, the pandemic spending is up. But nevertheless, food old faithful geyser is coming into play now for regular old spending?

Larry Allen: It is Tom, and right in time for September, the month where the government makes its biggest spend all year long. And it promising to be a very good September for government contractors pretty much across the board. Certainly there have been a lot of funding that has been diverted to pandemic relief. You would expect that, that was needed earlier in the year. That also sidelined action to do things like IT modernization or even some more meat and potatoes type of stuff that agencies typically do during the end of the fiscal year. Well now they have the time to do that there’s not going to abandon COVID related buying, there’s still a need for that, that’s still going to happen. But at the same time, whether you’re an information technology, professional services, or even more traditional government contract market segments, like office supplies or hardware, these are areas that there’s still significant amount of opportunity left in the last month of the fiscal year.

Tom Temin: So that’s pretty much the traditional model. And so, from a contractor standpoint, I guess the issue is making sure that there is a contracting officer who’s authorized and available to take orders and even to maybe direct your federal customer to a contracting officer that you know has capacity.

Larry Allen: This is the time of year time as a contractor that you can really help to go government help you. And you touched on it in that intro, and that is making sure that you the contractor can tell the contracting officer how they can buy from you, easily. Your customer wants your solution. That’s great. They go to the contracting officer. Now the contracting officer has to do her or his thing in order to comply with the FAR and actually make the acquisition. Well, there are a lot of acquisitions on the table to be made over the next 30 days or so. So you the contractor have to say, well look, you can get to me easily to micro purchase buy if it’s under $10,000. Simplified acquisitions, small business set aside, GSA schedule or another IDIQ. Whatever it is that makes it easy for that person to get to you. And don’t assume that they are specialists in the area that you know best, you may have to show them how in order to get the business done.

Tom Temin: Yeah, so people really than should use their federal credit cards, you can buy a lot for under $10,000 when it comes to say IT equipment, most individual pieces are under $10,000.

Larry Allen: We’ve certainly seen the federal IT community make use of micro purchases this year, Tom, as well as simplified acquisition methods, whether it’s the schedule. GSA has a program, GSA Advantage Select, that is one where people can buy pre configured laptops without even getting further competition. So if they get a nice quote from a contractor they like they can make the buy. One of the things I find that’s neat about that program in particular is that all the prime contractors are small businesses. So not only can you get what you need quickly if your agency finds itself needing small business credit at the end of the year, you can get that too.

Tom Temin: That gets us to the topic of small business numbers have come in, and things seem to be marching along there.

Larry Allen: Tom, I think the recent small business numbers show two different stories in the federal marketplace, the most obvious and the good news story is look for the seventh year in a row, government beat its small business use goal objective. So 23% is the total number of prime contracts that are supposed to be set aside, those dollars are supposed to be set aside for small businesses. In FY 19, the government did 26 and a half percent, so it beat that goal by three and a half percent. It also met I think all or close to all of the sub goals. So women owned business, minority, disadvantage, service disabled, veteran owned small business, all of those numbers were met. I think the one that came close was HUBZone. The historically under utilized business zone designation, where everybody is trying to stabilize that part of the market. But from a macro level, look those numbers are really good. And so too are the small business subcontracting numbers, not just the prime numbers, but the subcontracting numbers, those are strong as well. But in the small business subcontracting numbers, we begin to see some cracks that tell another side of the story. And that is that the government Tom has come along and it can’t resist the urge to place new requirements on contractors of any size. This year, just alone, if you’re in the IT industry, you’re looking at two — you’re looking at Cybersecurity Maturity Model Certification requirements, CMMC. You’re looking at section 889, Part B, the restricted use of IT and telecom. Both of those can be incredibly expensive for any business to come into compliance with, small businesses in particular. And so no surprise there that if you look at some of the other numbers that SBA didn’t issue but other people do, you actually see small businesses leaving the market. I think one of the reasons why is that there are these new requirements that are expensive, people can’t meet them, they decide they’re going to go do something else. So when we look at small business numbers, we tend to look at small business as something that fits inside a neat little box. And it’s not. So for the larger small businesses, the ones that have experienced, they’re doing well, for some of the smaller small businesses, maybe the newer ones and the innovators, they’re still struggling.

Tom Temin: Right, and they could be new to the federal market, or they could be trying to expand their reach into the federal market and uh-oh they have a ZTE router somewhere. So there’s an expense to get that replaced. And the expense and effort of reporting and certifying that it’s replacedm because that’s part of CMMC also.

Larry Allen: Right. It’s the reporting requirement, its certification requirement. It’s the fact that if CMMC covers you, you have to have a third party credit your system and your organization. That takes time that takes money to become accredited. And on top of that, if you’re offering cloud solutions, you already had to get FedRAMP approved. There’s a lot to it. And while some of these are justifiable, needs that the federal government should have, they have a right to know that they’re getting secure IT, they have a right to know that they’re not getting counterfeit parts, and that they’re doing business with responsible companies. All that without question, but we need to understand the cumulative effect to have the expense of all these roles placed on our small business community because we have declared that doing business with small firms in the government market is a good thing — and yet those policies seem to favor some groups of small businesses over others.

Tom Temin: Federal sales and marketing consultant Larry Allen. Thanks so much.

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

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