Contractors make plans for a messy start to the next fiscal year

The main question now is whether Congress will enact a continuing resolution come October 1st or whether we’ll have a government shutdown. Either way, things will get messy come September 30th. Here with some shutdown preparation tips for contractors,  Federal Drive with Tom Temin spoke to  federal sales and marketing consultant Larry Allen.

Interview Transcript: 

Tom Temin It seems like we keep coming back to this topic, but Congress keeps coming back to the same tropes over the budget over and over again. And so it looks pretty likely maybe a short shutdown.

Larry Allen I do think we’re at a better than 50-50 chance for a shutdown at the beginning of the year. I would be the first person in line to be happy if I’m wrong. But the way it’s shaping up right now, you have to really follow particularly what House leaders and House rank and file members are saying. If you follow that, then it really does look like we’re on track for a possible shutdown. And Tom, this one could be more than a day or two. So if you’re a government contractor, I think it’s really important to understand what the long term impact could be on your business. Things like not being able to get paid are probably at the top of the list, as well as not getting any new business coming in, not being able to have business meetings. Tom, it even goes deeper than that, though. If you’re planning on going to government conferences and doing some networking, if you’re doing that while the government is still shut down, you’re not going to be seeing a lot, red any government employees at these events. So depending on the length of a shutdown, it really could be disruptive to things like relationship building, future business development, let alone getting paid on work that you’ve already performed.

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Tom Temin I think people sometimes overlook, and it’s been a couple of years, I guess three or four years. I don’t know when whenever we had the last long shutdown, which seemed like an eternity, it was like close to a month, is that government employees, you know, legally and then they’ve adopted this culturally. They can’t do anything even on their own dime, so to speak. They’re not allowed to do anything official, even if they want to volunteer and meet with vendors or go to a conference because it’s illegal for them to actually do that.

Larry Allen That’s exactly right. And you think about some of the high profile conferences we have coming up in October, ones where you get a lot of government speakers who are not only talking about what their plans are and what their potential business opportunities are, but they’re also there to network and interact with industry because they know they don’t have all the answers themselves. If that doesn’t happen, that just leads to one of the more inefficient ways to run a government. Not to mention that while things are shut down, part of the government still has to run Tom, and while government employees may get paid for back time when the government eventually reopens, the same is not true for contract.

Tom Temin Yeah. So any particular advice on contractor preparation? Is there anything they can do except sort of hunker down and cover their eyes?

Larry Allen Well, I know that this is a time of year when companies are trying to get as much business in the door as possible. And I still think that should be priority one. I might strike while the iron is hot. At the same time, I would not wait past September 15th to try to have those discussions about what comes next with my federal customer. They’re going to increasingly be in their own internal meetings, their own continuity of operations, planning discussions, and it may be very difficult to get them on the line or via email to have a discussion about what that means for you. So very quickly, you know, by the middle of September, they may not have all the answers. But, you know, you mentioned earlier, we have danced this dance before. It may have been a couple of years, but we still kind of vaguely remember the tune in our heads. So it’s important to have those conversations when you can have them.

Tom Temin We’re speaking with Larry Allen, president of Allen Federal Business Partners. And the other issue I wanted to discuss with you is presuming normal processes of government and the awarding of multiple award contracts. There’s a lot of MACs in the cooking, and some of them have to do with small business. Some are non small business. Knowing what you actually are is not all that simple nowadays, is it?

Larry Allen Tom It really is not. And the Small Business Administration has issued a series of changes really over the course of the past year, but particularly in the last six months. And as a government contractor, you should not really be able to rely you shouldn’t expect to rely on whether government contracting officers thinks you’re small or not. This is a time when all small government contractors who have a question about their size status really need to take ownership of that situation because you can be small on one day and on one procurement vehicle and not small at all on another. And there are a series of complex gates that you have to run, Tom, depending on the type of contract vehicles. If you’re on a GSA or VA multiple award schedule contract, there’s one set of rules. If you’re on a MAC that was set aside for small business. There’s another set of rules. There’s still another set Tom for a MAC that was awarded to businesses of all sizes. So if you’re a small business, there are three different answers potentially to the question of whether or not your company is small based just on the contract vehicle. If this isn’t something that you’ve read up on lately, you really ought to do that, because if you don’t and you miss certify or improperly certify yourself as small. Tom, your company could be on the hook for renewed acquisition charges if the government has to go out and do another competition. Definitely on the hook for legal fees and you could potentially be facing more severe penalties like suspension or debarment. So it just really isn’t worth it to throw your hands up and say, I can’t get it. It really is worth your time to do a little investigation and make sure that you know your size in any given situation.

Tom Temin Yeah, that’s one of those good reminders that, yes, there’s a partnership between government and industry, but if industry steps outside of what they’re supposed to be doing, especially in something complex like this, you could end up in a false claims situation. You claimed something you were/are and falsely in one situation that might have been valid in another situation. I guess it all points to the growing importance of the compliance officer.

Larry Allen You really do have to listen to your compliance officer. As I’ve said here before, compliance is pennies on the dollar. Not every company likes to hear that, but it’s really true. And you can, as a small business, end up with a False Claims Act case. And those can be very expensive. If you’re sitting in front of the Department of Justice alleging false claims and you’re looking at, you know, seven, potentially eight figures worth of direct costs, not to mention the indirect cost to your company. And it’s just not worth it. So make sure, you know, on this contract, I’m one thing on this contract, I may be another and tell your federal customer because they want to do business with you probably almost regardless of your size, if you’re good, if you have an established relationship. So it pays to be honest.

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Tom Temin And all of this is in the context of a trend that should be favorable to contractors, and that is just the growing amount of federal spending that includes contracting that we’re seeing over the last couple of years and looks like will happen when there finally is a budget for 24.

Larry Allen That’s right, Tom. One of the things that people tend to look at a lot when we’re looking at government business is how much the Department of Defense spends. But if you look at figures that were recently released by Bloomberg Government, civilian agency spending grew by 53% between FY18 and FY22. That’s a pretty sizable jump. And while there are different things that led to that, it’s a good news story for most government contractors because it’s not just all being concentrated in one area. We’re talking about increased spending in professional services, in I.T., in veterans benefits and medical care. And as you point out, that’s likely to continue into FY24. So this is a nice market to do business in. We saw a substantial amount of spending in FY22, and FY23 should finish equally as strong. So if you want to be able to participate in a market that is rich with opportunities, you definitely want to make sure you’ve got your compliance house in order.

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