The biggest success factor for federal contractors might be dealing with uncertainty

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With the infrastructure bills up in the air, and the government operating on a continuing resolution for routine spending, you might say the only thing that’s certain is uncertainty. For advice on how contractors can factor in that uncertainty and keep going, Federal Drive with Tom Temin turned to the senior director of federal market analysis at Deltek, Deniece Peterson.

Interview transcript:

Tom Temin: Deniece, always good to have you on.

Deniece Peterson: Thanks for having me.

Tom Temin: So uncertainty, I guess, is something that occurs every year, but we have the CR now until December, but all of these other possible spending programs swirling up in the air while they fight about it. So what do you show are some good practices for contractors to stay alive here?

Deniece Peterson: I think the core of it and what I’ve seen over the years talking to contractors is around scenario planning, right. Because with uncertainty, some areas you can kind of predict what may happen, and some you can’t, and we have a perfect storm of budget uncertainty and a pandemic and a new administration, it’s hard to predict, right. But companies that invest the time in scenario planning, so what is the impact to our business look? The CR is what we usually see, which is we usually have something in place for Q2, right. But what if it goes beyond Q2, which has happened, you know, many times over the past. And what does that look like in terms of our opportunity pipeline, and reassessing the health of the opportunity pipeline? Are those the same opportunities? If there is a delay or, God forbid, another shutdown, how does that change the makeup of that pipeline? Also looking at resources, right, because one of the big decisions a lot of companies have to make, especially those on the smaller side, is when you have a plan for a contract you’re pursuing, or you’re implementing on, and then CRs shutdown things happen, there’s a decision point where, okay, I have a limited number of resources here, whether it’s money or people and thinking about do I move people to other contracts, do I keep them there and kind of see what happens? So kind of thinking about all those different scenarios that can play out whether it’s timeframe funding levels, because there’s extra with the infrastructure bill, potentially the reconciliation bill, and then resources, and really looking at it as its own project is basically what I’ve seen.

Tom Temin: Sure. And that resource question is really the key one, I think, because in some sense, if it doesn’t look like businesses going to be coming through, it might be no fun, but it’s fairly easy to shrink the company to the size of the business you have. But I imagine maybe a bigger challenge is, suppose things start flowing, or you do get that new contract, and you have to ramp up in this environment. That ain’t easy either.

Deniece Peterson: That’s part of that resource picture on this, hashtag great exodus, that’s going on across country, really having to take a look at that, because that’s another factor that I think is adding to that perfect storm, right. So looking at, okay, if we are in a position where we can write out the usual stuff, the CRs and things like that, and we do see opportunities coming from new funding, are we in a position to take advantage of that, whether it’s resources to pursue it, or people that can actually do the work, because now we’re competing against everybody, at a level kind of compensation wise that maybe we weren’t ready for.

Tom Temin: Sure, because the workforce is in some disarray. I mean, the usual patterns of employment and unemployment are just seemingly at odds with what the economy is actually doing. And therefore, I think federal contractors, would you say, have as much trouble finding the talent they need as the nearby restaurant?

Deniece Peterson: Yes.

Tom Temin: We’re speaking with Deniece Peterson, she is senior director of federal market analysis at Deltek. And what kinds of relationships, conversations, activities with your federal customers should you be having through all of this? Should you be talking regularly, even though there may not be a whole lot to talk about?

Deniece Peterson: Well, for sure, that’s always recommended, because it can be difficult to really get a picture of what’s going on inside of an agency through these kinds of scenarios. And I would imagine that if the CR, we get final appropriations after the single CR, it’s probably not as dire because we’re used to that for the past 20 something years at least. But moving beyond that, then agencies have to make some decisions and contractors kind of need to get an insight into what those are around, because once you get past Q1 and get into Q2, now we’re looking at impacts to agency missions, we know new starts are off the table. Each company has a different kind of threshold for how long they can kind of twist in the wind, right. So getting those conversations going as early as possible. Agencies are used to CRs but if another shutdown is on the table, agencies obviously have plans for that. But just talking about, well are there any changes to your plan that you had in place for the last shutdown, unfortunately, because they’ll shutdowns are happening more frequently the past five years than the past 20 years before that.

Tom Temin: So stay agile and keep the whiteboard eraser nearby and lots of fresh markers. And another aspect of this is managing your subcontractors because that can have a big impact on your ability to compete and to get projects done. So what about dealing with them, and again, keeping them interested, but even if you don’t necessarily have a lot of money flowing toward them.

Deniece Peterson: So that’s it, keep them as engaged as possible in terms of sharing with them the pipeline and what we see coming and what we see the potential is in the pipeline as well as future opportunities that could come from new legislation. And just staying engaged with them, not only to kind of keep them interested in kind of the teaming part, but if you’re already partners with them, one of the biggest impacts of the shutdown is the cut of the revenue flow from the prime to the subs. So if there are delays at the prime level, they’re not going to pay the subs, right, necessarily, until they feel like they’re in a position to do that. And so subs, a lot of them of course are small businesses that they can only float for so long. So just kind of it’s almost like a confidence building exercise of we got you, we’re still in this, we’re still pushing ahead where we can, we’re being diligent about staying aware of where we are and keeping you engaged.

Tom Temin: And if you are a subcontractor, you might have to tell your people well maybe you should go after that waiter job in the meantime.

Deniece Peterson: Yeah, sometimes you do and say we’ll welcome you back. But you know, people have to eat right, so.

Tom Temin: Don’t spill the pasta. Deniece Peterson is senior director of federal market analysis at Deltek. As always, thanks so much for joining me.

Deniece Peterson: Thank you for having me.

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