Column: Difficult times ahead for federal contractors?

     As we wrap up fiscal 2017 and look into fiscal 2018, there are a number of clouds on the horizon.

      Earlier this year a number of small business owners anticipated positive changes from the new administration. Attendance was up at a number of contractor matchmakers and workshops. New infrastructure spending and lowered tax rates were on the agenda. With a one-party majority in Congress, fear of a shutdown appeared to decline.

      However, as we look ahead over the coming months, I am concerned about recent developments, or lack thereof.

Decision-maker appointments

      Many of the key appointed officials whose jobs are to establish budgets and priorities have not been nominated or confirmed.

      Holdovers and career employees who are “promoted” to acting positions generally are not willing to risk approving actions that may be reversed or abandoned later when appointees are nominated and confirmed.

      Without those decision-maker people in place, decisions will not be made and initiatives will not move ahead and be funded. This can also impact projects already underway that are ready to move to the next phase.

Multiple-award and IDIQ contracts

      More and more requirements are being lumped together under multiple-award contracts and indefinite delivery/indefinite quantity (IDIQ) contracts. Responding to these contracts requires either a broad set of capabilities by a single company, or a well-conceived team effort under leadership of a prime contractor.

      Substantial portions of the government’s information technology needs are procured via task orders issued under multiple-award IDIQ contracts. Similarly, the Army Corps of Engineers uses geography-based Multiple-Award Task Order Contracts, known as MATOCs, to procure construction and repair services throughout the country.

      It is not unusual for such contracts to be only partially funded at the time of award. An agency buying office with a need determines the funding source and citation at the time it issues a task order for that requirement.

      Consequently, you may spend a significant amount of time and effort earning an award on such a contract, or chasing a task order, and subsequently find that there is no funding for your type of work. Do your due diligence on recompetes and new IDIQs to be sure that there will be opportunities that will utilize your products or services.

Congressional funding actions

      The president and the Executive Branch are responsible for submitting a budget request for the funds they estimate are needed to run the government. And Congress is responsible for appropriating funds based on its estimates and priorities. If Congress cannot agree on the appropriations bills by the beginning of the fiscal year (Oct. 1), two possibilities exist:

1. Both houses of Congress pass a Continuing Resolution and the president signs it. This would provide funding at the same rate as in the last fiscal year, for a time-limited period. This period may be a month or many months. Agencies are only able to continue steady-state spending on day-to-day operational costs, but unable to undertake new projects and new initiatives that were not previously underway or that require significant increases in funding for the next phase. You may be caught waiting for funding on projects you are working on already.
2. The House and Senate cannot agree, or the president does not sign the bills. In this dire case, there is no funding for federal operations and the government must shut down. Unfortunately this has happened in the past, and it results in defaults, substantial unexpected costs (to contractors as well as agencies) and being locked out of government workplaces. You must be prepared to find alternative work for your employees suddenly on the bench, or financing for the inventory that suddenly is not turning over. Your cost accounting system must be top-notch to enable you to file claims against Uncle Sam to recoup your losses. BE PREPARED!

Debt limits

      It sounds like an esoteric argument to most citizens – one of those crazy “government-speak” situations. Unfortunately, failing to raise the debt limit puts the US government in a situation of defaulting on trillions of dollars of Treasury bills, bonds and notes, as well as those of Federal-dependent agencies like Fannie Mae and Freddie Mac. This not only means that U.S. investors suffer, but also is likely to shake up the world economy, as many countries depend on U.S. Treasury securities being solid as a rock.

      Contractors are pretty low on the scale of who would be paid if the government collapses. Treasury securities holders are first in line. The closer we get to the debt limits, the more government contractors are at risk. And a small increase in the debt limit just means that the same situation will face us again soon. Pay attention to Congressional increase of this limit – it is essential.

What’s the impact on you?

      If your business provides necessary, day-to-day supplies or services, you should be in good shape, as government must go on and employees must have the tools they need for day-to-day functioning. But those companies that provide innovative products and services to government, or who are focused on completing project work (such as construction or new computerized systems programming and design) may find that these projects are being delayed, defunded, reprogrammed or canceled.

Tom Johnson is the publisher of Set-Aside Alert. He may be reached at tjohnson@setasidealert.com.

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Column: Difficult times ahead for federal contractors?

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