Contracting

Why contractors need to focus on the brass tacks.

The next nine months will prove crucial ones for federal contractors. Lots of acquisition regulations cooking, expansion of Buy American and more White House em...

Tom Temin@tteminWFED

February 28, 2023 4:26 pm

8 min read

The next nine months will prove crucial ones for federal contractors. Lots of acquisition regulations cooking, expansion of Buy American and more White House emphasis on small disadvantaged business. For where it’s all headed, the Federal Drive with Tom Temin turned to federal sales and marketing consultant Larry Allen.

Interview transcript:

Tom Temin
And your advice now is for people to concentrate on the basics, basically closing business and sticking to the knitting. Tell us what’s driving that idea.

Larry Allen
Tom, what’s driving that idea is that there’s been a lot of emphasis over the last few years about the fourth quarter in the federal market. And while the fourth quarter is certainly important, there is business gets done now, Tom, and I think sometimes that gets ignored. We’ve seen a lot of contracts let earlier this year, even already. And by now, all agencies should have their dollar figures for the remainder of the fiscal year. In fact, I’m telling companies, if they talk to a client, who says that they haven’t gotten their number yet, from [Office of Management and Budget (OMB)]. I think that’s probably more of an excuse then a reason, because everybody should have their budgets by now. And you should be going out and trying to close business today, as well as preparing for the fourth quarter.

We want to hear from federal technology leaders about how you are addressing current cyber demands and how your agency is making the most of its resources to improve its cyber posture. | Take our quick survey

Tom Temin
Right. It’s fair to say the government agency you’re dealing with doesn’t want to save the money, because otherwise, you know what happens then. So why would an agency say, well, we don’t have our budgets yet? Because it does take Treasury a couple of weeks, after the appropriations bills are passed to get the funds loaded. There’s some mechanics there. But we’re a month past that now.

Larry Allen
And that’s why I’m telling companies that everybody should have their number. I usually think it takes four to six weeks before each individual Office gets its money after Congress passes and appropriations bill, given the timing this year Tom, probably an extra week to 10 days, because we had Christmas and New Year’s in that timeframe. But certainly, people should have their money. We still definitely find federal agencies that will tell specific contractors, we really don’t have the funds for that yet. And what they’re really saying is we’re not going to be spending money on that right now. That should be a signal to contractors that, may be time to move on, find another prospect, a better opportunity that they can focus on closing business in the near term. You don’t want to go back and hook your wagon to a lot of excuses. You need to go out and find actual business.

Tom Temin
And by the way, in looking at what agencies are planning in the IT area, the Exhibit 53’s have gone away, haven’t they?

Larry Allen
Right. This was something that for years and years, federal contractors had studied religiously to suss through IT opportunities. Now, with the ubiquity of IT changing budget rules, it’s not necessarily as discreet as it once was, Tom. But if you’re an IT contractor, particularly an experienced company, you can know where to hunt to find those opportunities, even if they’re not exactly where they used to be. But that I think, really speaks to the evolution of the use of technology in pretty much every aspect of government. It’s no longer just its own thing.

Tom Temin
All right. And then there is the Buy America expansion that the president mentioned in the recent State of the Union speech, and it has to do with iron and steel, or construction type materials. But you’re saying don’t believe for a minute, that’s all it’s going to be confined to?

Larry Allen
Well, I think what we’re really talking about here, Tom, is there’s going to be a lot of confusion, a lot of confusion in the federal arena about where and how different Buy America rules are to be applied. And there are a couple of different rules. There’s the Buy American Act that has provisions for both, construction and non-construction goods. There’s the Buy America Act, which is a little bit more narrowly defined to specific types of money. And then there’s the Trade Agreements Act, which the president really didn’t mention in his State of the Union. And that caught the attention of lots of people who follow government acquisition, not just myself, but some of my colleagues, because it’s so frequent that the two of acts, Trade Agreements Act and Buy American Act are linked together that I think there’s a lot of confusion, certainly in the political class, Tom, and that can lead to policies that are confusing to people in government. And what I’m telling contractors is, hey, contractors industry, this is your time to be able to get educated on what the differences are between the Buy American Act and the Trade Agreements Act, when each act applies, and what it says so that you can help your customer get through this and get to a better acquisition. And you can also, as a company, save yourself from having to sign up for an extra rule that you might not have to follow in a specific circumstance.

Tom Temin
We’re speaking with Larry Allen, president of Allen Federal Business Partners. And as they say in showbiz, wait, there’s more. Beyond Buy America, there is this new Small Disadvantaged Business executive order, and that could make it tougher for every other kind of small business.

Larry Allen
I really think it could. I’m not sure that’s the intention. But we’ve seen policies over the years, whether they’re related to acquisition or something else that do have unintended consequences. We know that when the Biden administration came into power, one of the first things they did was say, we’re going to significantly increase the amount of prime contract dollars that go to small disadvantaged businesses. While the executive order, that you alluded to, is more recent action by President Biden, that essentially told OMB to come up with a plan to meet that goal a year earlier. So you’re going to increase by 50%, the amount of contract dollars that go to small disadvantaged businesses. Originally, it was going to be over, I think, five years or now it’s going to be over four years. And in the meantime, I think if you’re not a small disadvantaged business, but some other type of small business in the government market, you ought to be wondering what this means for your business. And the simple fact is that, the government has not increased its overall 23% small business contracting goal. And while some government agencies exceed that goal, they typically don’t exceed it by more than one or two percentage points, sometimes less than that. So the amount of business that goes to small businesses, might grow slightly, but it’s not growing exponentially. So if you have one particular part of the small business world that is eating more of, essentially the same sized pie, that tells you that there’s going to be less pie for the rest of the small businesses to eat. And I think that can be a real challenge. So if you’re a woman owned small business, a service disabled veteran owned, or a HUBZone business, just to name three. I think that this is a development that you need to be watching very carefully, in terms of, how it could impact contracts that you thought were coming to you.

Read more: Contracting

Tom Temin
Right. And this all happens as the government, especially the Defense Department, is looking at the shrinkage in the number of small businesses doing business with the department.

Larry Allen
That’s right. Thousands of small businesses, Tom, have left the government market. And most of those have left doing business with the Department of Defense. While we see new market entries that come in, what we really see is that small businesses that are able to commit the resources that are, ironically, large, small businesses that can abide by the government’s rules and regulations, or that maybe are so small, that they have those brand new technologies that are in development, or they’re specialized programs that accommodate those types of companies. But if you’re a general small business, selling commercial items to the government, and you don’t have an extra socioeconomic designation beyond being a small business, I think this could be a very tough time for you. It’s not just me, I’m hearing from companies that I know who had that type of situation. And they feel like they’re being squeezed out from both ends, from the larger businesses, who are, of course, obviously very capable of doing lots of things in the market, but also these other businesses that may have a more favored, at least in the current marketplace as the economic designation. And that poses a real challenge. And for them, they’re like, well, I’m either gonna stay in this market or I’m gonna have to leave entirely if I want my business to thrive.