Government Contracts Monitor

Furloughs Over but Procurement Woes Remain

August 26, 2013

Congress’s $85 billion in budget cuts are certainly affecting government contractors. Not surprisingly, many of the contractors feeling the greatest impact are those associated with military spending. The Department of Defense (DOD) was specifically targeted to absorb approximately half of the cuts from the sequester that began March 1, 2013.

Contractors are trying to diversify and enter or increase their presence in other markets, but this is proving to be difficult. For example, state and local government demand has also been weakening as state and local budgets shrink, making these markets less attractive.

The top five sectors most reliant on DOD contracts are (i) military facilities support; (ii) ship and boat building; (iii) aerospace product and parts manufacturing; (iv) research and development services; and (v) navigational, measuring, and control instruments manufacturing. Since the sequester began in March, employment has fallen at an annual rate of about 2.5 percent in these five sectors, as compared to other sectors where, combined, employment has grown at an annualized rate of about 1.6 percent. Interestingly, prior to the sequester, government contractors experienced about the same employment rates as other industries.

Another startling statistic is the reduction in the number of federal employees: their ranks have shrunk by 45,000 since the sequester began and, of those employees remaining, the number who have been pushed into working part-time has increased by 45%. This means fewer people to make award decisions. This spells trouble for FY 2014.

The greatest percentage of federal contracts is awarded in the last fiscal quarter, which ends September 30th. Not only are procurement offices short of staff, the staff that exists is less experienced. Thankfully, the planned furloughs that would have created further chaos over the coming weeks have now been cancelled. But the end of furloughs does not signal the end of the procurement problems. What remains are slower procurements or procurement processes that skip steps historically found to be helpful such as discussions, clarifications and BAFOs; difficulties obtaining debriefings and, when they are provided, shortened and less effective debriefings; and, as reported here many times before, more protests regarding awards that do make it out the door – placing further stress on overburdened and often inexperienced contracting officers.

FY 2014 will be a year filled with challenges, for government employees and government contractors alike. Competition will be fierce. The government is looking for more for less. Contractors must give agencies what they are asking for, at low cost and low risk. And contractors must be patient. Procurements will be painfully slow. This may be a good time to reflect on what your strategy will be going forward into FY 2104. Business as usual will not be a good business model.

Lindsay Simmons is the attorney responsible for the content of this article.

Attorneys

Lindsay Simmons