It will be this new congressional leadership’s first test to try and avoid a government shutdown. As usual, the ones who will be doing most of the watching will be federal contractors. There is a new initiative from the White House though, that will give them plenty to keep busy while the waiting game ensues. To get a pulse check on the contracting industry, Federal Drive with Tom Temin Executive Producer Eric White talked with David Berteau, President and CEO of the Professional Services Council.
Eric White Of course. Of course. So here we go again. With a possible government shutdown looming over the horizon. What is it that you are telling folks to keep an eye on as the back and forth continues?
David Berteau Well, the House, of course, has introduced a continuing resolution draft bill. And it’s rather unusual because it has what they call a laddered approach. Right. Some agencies will face a shutdown again in January and others will have a C.R. that extends all the way to February. It’s unusual, largely untested. There was a little experiment with this back in the George H.W. Bush administration. But it is true that got the bill on the floor. And other than that, it’s a fairly clean bill. What we have to watch for, of course, is do they have the votes to pass this in the House? Do they have the votes to pass this in the Senate? And will the president sign it? So those are the three elements we can dig into each one of them.
Eric White By all means. Yeah. Let’s go digging right now. What what are the chances you think that will happen?
David Berteau So as this plays out on Tuesday, the House is back in session and we’ll be able to know by the end of the day, I think, whether the votes are there to pass this bill. There are a number of House Republicans who have said they will not vote for a C.R. of any way, shape or form. More than likely, it means that Speaker Johnson will need some Democratic votes. And so we’re going to watch to see whether those votes materialize. The other thing we’re going to watch for the last time this happened back on September 30th, you know, Speaker McCarthy got a relatively clean C.R. passed and it needed Democratic votes and it cost him the speakership. No indication that that same dynamic is inevitable this time, but it’s certainly something that we need to watch for. Then we need to watch and see what happens on the Senate side where they would love to have a different bill. They’ve got two options, really. They can pass the bill that the House passes, assuming the House passes it. In which case they send it on the president or they can modify and send it back to the House. Don’t know which they’re going to do. We should be able to see that by Wednesday or maybe Thursday. Keep in mind, Friday, midnight is the deadline. Then, of course, the question of the White House, the White House press secretary has indicated a potential for veto. Eric, it’s useful to remember, although it’s been a long time since it happened, we can get into a shutdown by Congress not passing a C.R., which does happen. Or we can get into a shutdown with the president vetoing the bill that the House passes. It hasn’t happened in a while, but the long shutdown that we had back in 1995 was, in fact, precipitated by a White House presidential veto, not Congress failing to act. So we’re going to have to see what the White House both says and ultimately what it does.
Eric White I was going to say, you know, even if it is a continuing resolution, there’s still a lot of uncertainty in said CRs, usually because things change and sometimes the agencies aren’t aware of what exactly they have the funding for. Can you elaborate a little bit on that?
David Berteau Well, as we talk to the agencies and our member companies, I mean, one of the things that we suggest to our member companies that they have robust discussions with their programs in advance of a possible shutdown, and they also do some internal planning. One of the most important things for companies to plan for is what will they do independent of what the government does? The ability to pay people, the ability to access funds. In case you’re not going to get your invoices paid, make sure all your invoices are paid and on time. Make sure you’ve communicated with your programs and you know who to contact in the event of a shutdown, because a lot of people get sent home and you’re not allowed to communicate with them. So you need to know who’s going to be there for you to talk to. Agencies are restricted by the White House in many cases, in most cases in preparation for a shutdown in terms of how much they can say and when. And for many programs, the program officers, the contract managers and administrators will not know if they’re being furloughed under a shutdown or if they’ll be required to work without pay. They won’t know that until the morning after the shutdown starts. That makes it hard for both programs and contractors to plan ahead of time. Keep in mind also, contractors are the ones who take the first hit, right? So civilian employees won’t get their first paycheck, but in the case of contractors, they won’t get invoices paid on the first day of the shutdown because most of the time that is an immediate effect. So the effect hits contractors sooner. It’s also true that the effects aren’t reimbursed. So if a stop work order is issued and workers are laid off, they’re not going to get back pay. Unlike the federal government employees who automatically will get back pay once it comes into play. So all of those are factors that come into play as we begin to think about what happens if there is a shutdown.
Eric White We’re speaking with David Berteau. He is the president and CEO of the Professional Services Council. So as maybe a way to help contractors keep their mind off of a possible shutdown. The White House announced the Better Contracting Initiative late last week. I imagine you have some thoughts on that.
David Berteau We do accord that we’re very much in favor of better contracting. The question is, what does this initiative have in it and what’s it likely to do? And it’s interesting, the administration laid out four prongs in its fact sheet that they issued publicly. I think, you know, there’s some elements of positivity in each of those prongs. The first prong, for instance, talks about making sure that there’s a common database. And we think it makes great sense for agencies to share data. In fact, probably the most important thing is to make sure we standardize data definitions first, because sharing data that doesn’t have common data definitions could actually end up being confusing and misleading. Cost data for contractors. Common cost data that may be fairly easy for common products, you know, paper printers, even necessarily commercial software and that sort of thing. But it’s really hard for services because the question of what’s common is very, very hard to define, especially if, as the White House indicates in announcing this initiative, they focus on outcomes rather than input. So there’s a lot of unanswered questions about protecting companies from the government, misusing or misapplying their cost data or even misunderstanding what’s in it. Those questions need to be resolved as you go forward on that first prong.
Eric White Gotcha. Okay. And so what we’re involved in the other prongs of the initiative.
David Berteau Well, again, it’s easy to agree on the overarching principle. The second prong says agencies shouldn’t be paying more than they need to. That’s absolutely true. But there are a lot of reasons why one agency might not be procuring the same services as another. And those differences, I think, will require more thought and analysis. And then the fact sheet acknowledges before we can compare those prices and make sure that the government doesn’t pay more than it should for what it needs. And then the third prong, why, again, talk about agree right up front getting contracts right the first time. Well, who would argue for getting contracts wrong the first time? So this reminds me, of course, of a dynamic where the government oftentimes is driving the solicitation. But then as the work is performed, the actual capabilities required of the individuals performing that work requires more senior personnel, more experienced personnel, better trained personnel and higher rates. So you get a gap between what it takes for a company to win a contract and what it takes to perform it. That’s the government’s fault, right? If you write a solicitation that’s different than what the work will be performed under, then you’re going to not get it right the first time. So obviously, we applaud that implementation of this prong. Though it’s not going to be easy for a lot of services contracts. And then the last prong is really about how the government buys and whether or not contractors are going to create essentially a monopoly on the on the front end. It’s really important to recognize that a mentality that looks at too much consolidation because of many buyers and only a few sellers is an appropriate application of antitrust, etc., for the broader commercial economy. But in the government’s case, what you really have is very many sellers and only one buyer, and that’s a fundamentally different dynamic. And as this prong is implemented, we would like to remind the government that if they only buy enough for a few sellers, that’s not really the fault of the companies. That’s really if the government is not buying enough to keep a lot of companies in business, they’re going to have to live with the consequences of not having enough competition. So those are the way we think about those four prongs. Look forward to working with the administration as they begin to move out on these two.
Eric White Yeah, finishing up here, I wanted to gauge your opinion on whether or not there will be continued improvements building upon those prongs in this initiative.
David Berteau The overarching approach of the Better Contracting Initiative seems to be aimed at better outcomes and that we certainly applaud. It is, however, structured in such a way that a lot of the elements will focus on inputs rather than outcomes. So bridging that gap will be the first and probably most important piece. The last thing I would note though is, you know, it’s November and there’s an election a year from now. My experience, Eric, is that in an administration in the fourth year of a four year term, there’s actually a lot you can get done if you focus on what you’ve already laid the groundwork for and you build out on that and implement those going forward. So again, the intent of these is something that we agree with. The implementation will be the challenge and we look forward to working with the administration on those as all of our PSC members will benefit from an appropriate implementation of these prongs.