Current Political Impacts on Government Contracting

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Stan Soloway from Professional Services Council spoke at the at the Greater Washington Society of CPAs (GWSCPA) meeting on January 25. This session examined sequestration and current political impacts on the Government Contracting services industry.  Below are highlights from the event:

IT

  • All signs point to government spending will have a strong focus in the information technology industry. 
  • There is a 7: 1 ratio of government employees 50years+ compared to government employees in their 30s.
  • Private sector like Amazon and Sales Force has done a better job at recruiting young talent to support IT initiatives.
  • The gov’t is lacking behind because it cannot compete with benefit packages and salaries demands as well as its private counterparts.
  • For this reason, there is a lot of opportunity for gov’t contractors who have talent in the IT industry to support and mentor the gov’t IT initiatives

 SEQUESTRATION

  • Federal spending is a $300 billion dollar a year industry
  • Any minor cuts 2 to 10%, $6billion to $30 billion will impact the government contracting industry but will not severely cripple it.
  • Sequestration will not end government contracting.  The industry will contract but will survive.
  • There are discussions of a 22 day furlough of non-essential gov’t employees beginning in March.
  • It is calculated that this would only save approximately $9 – 10 billion.  This is not considered the best solution but feel it may be a way to get Congress to act.

 POLITICAL

  • Republicans and Democrats are not communicating to one another at this point.
  • A scary thought considering the sequestration deadline is less than 1 ½ months away
  • There are some new faces that have started in Congress.  We are uncertain of their fiscal views. How they will compromise with the opposing party and ultimately how they will vote.

CONTRACTS

  • There is a lot of money on the sidelines.
  • Contracting Officers are in a limbo as far as what money they will actually have when sequestration hits.
  • Contracting Officers are concerned about funding programs in the event money is cut from their budget. But that does not mean that allocated funds are off limits to sequestration cutes.
  • Sequestration will not impact money already funded to a contract.  i.e. if there is $1,000,000 budget and $100,000 has been funded to a contract.  Only $900,000 will be subject to sequestration.
  • There have been a lot more delays in awarding contracts as contracting officers are not sure what their budgets will be.
  • The contracts that are going out for bid are leaning more towards low cost technically acceptable.
  • This approach is more favorable to the public eye as the public will see the government trying to be fiscally responsible.
  • It also helps with the reduction of contract protests.  It is difficult to protest low cost.
  • However, this could be detrimental in the long run because the government will not be getting the more qualified personnel on its contracts.  Essentially the government will not be getting the best value for the dollars spent.
  • One way a contracting officer can circumvent this is to increase the technical side of the contract.  This could bring in more qualified personnel.

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