Fourth-quarter spending surge: How big will it get?
The federal fourth-quarter spending surge is accelerating into its final weeks, and it looks to be just as busy as usual, if not more so.
A large proportion of federal spending typically occurs in the last three months of the fiscal year that ends Sept. 30.
The trend could be strengthened this year, with Deltek reporting that as much as 50% of total contract dollars remained unspent as of early August.
On the other hand, some believe the sequestration threat on the horizon could dampen the annual spending rush.
The most recent report available is from John Slye, advisory research analyst for Deltek. Slye identified three factors that may impact the strength of the buying surge this year, two positively and one negatively.
First, the recent historic trend is for a larger fourth-quarter surge, as Congress has tended to delay more each year when approving federal budgets. The government made 36% of its contract obligations from July 1 to Sept. 30 in 2008, rising to 42% in the same period in 2011.
Ongoing political polarization in Congress appears to be contributing to the appropriations delays, also contributing to increasing fourth-quarter spending, Slye wrote.
However, with sequestration looming, some industry members are reporting delayed or cancelled procurements, schedule changes and reduced orders, which may mute the impact of the fourth-quarter pattern, Slye added.
Ray Bjorklund, vice president and chief knowledge officer for Deltek, also predicted that the current fourth-quarter rush could be larger than last year’s.
In fiscal 2011, the buying peak was less dramatic. At the start of the fourth quarter, the federal procurement system had spent approximately 70% of its contracting dollars.
This year, agencies had a larger supply of unspent funds.
“Deltek’s analysis shows that nearly half of contract dollars remain unspent,” Bjorklund wrote in a blog post on Aug. 6. “The spending still to come could potentially total $260 billilon.
“Government contractors should be prepared to take advantage of this rush. The rapid pace of fourth-quarter procurement will mean quick turnaround times. This year’s unusually heavy pent-up demand may mean companies that don’t prepare will watch (last-minute) opportunities pass them by,” Bjorklund added.
He also said a burst of buying often occurs in July, followed by a slower but still accelerated pace of buys, then a final flurry of activity in the final two weeks of the quarter.
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