Agencies adjust contracting approach for coming fiscal clampdown

As contractors brace for the impact of budget cuts, agencies also must recalibrate their expectations.

Mary Davie, GSA

Agencies are re-evaluating their approach to contracting as the feared fiscal cliff draws near, says GSA's Mary Davie. (GSA photo)

Companies doing business with the federal government are feeling the effects of a confluence of economic and spending trends, and with no reversal expected in the foreseeable future, leaders will need to learn to adapt.

A lagging economy, the impending fiscal cliff and resultant uncertainty in Washington are having ripple effects on industry – and in turn, government officials must reevaluate their approach to contracting, according to a panel of acquisition insiders who spoke Dec. 14 at an AFFIRM event in Washington.

“We certainly are in a different economic time than we have been in many, many years, so that’s a reflection in terms of the contracts, the budget and the changes we’re making in terms of how we spend our money. It has to mirror that environment,” said Mary Davie, acting commissioner of the Federal Acquisition Service at the General Services Administration. “There are a lot of things happening that are forcing changes that probably all together are sort of this perfect storm of how we need to think about and address this.”

According to Lou Crenshaw, principal with Grant Thornton, companies interviewed for his organization’s annual government contractor industry study reported less revenue from government business, and drops in overall federal contract revenue – down 9 percent from last year in the civilian space and 16 percent in Defense Department business.

“This is the first time we’ve seen this. I’m sure there are budgetary influences here, uncertainty about what’s going to happen with sequestration and the fiscal cliff, maybe some of it insourcing to some extent,” Crenshaw said. “I think we’re seeing defense contractors diversifying their portfolios, moving more into the commercial sector. I think we’ve seen decreasing revenues coming in and certainly the margins seem be decreasing.”

That impact comes amid shrinking budgets as well as longstanding ambiguity in federal spending that has been perpetuated by continuing resolutions, the panelists noted. As a result, the government has no choice but to shift buying practices.

“I think what you’re seeing, at least at DOD, is our behavior is changing. If our behavior doesn’t change, then our warfighters should see it. And we are pledged that they don’t see anything; to them a fiscal cliff is just a story in an overseas newspaper,” said Vice Adm. Mark Skinner, principal military deputy to the assistant secretary of the Navy (research, development and acquisition). “We have to become more disciplined as a department. Our behavior has to change if we’re going to deliver the same amount of goods and services, or a measureable amount of goods and services, to our warfighters as we enter this fiscal environment.”

At DOD, that may mean making do with current goods and services where necessary, Skinner noted. Davie said that GSA is looking at ways to take advantage of different ways of contracting, including the use of shared services.

“We might talk about some of the things we’re doing in the network services area, where we’re really trying to figure out if there are ways to build common infrastructure across government so that each agency isn’t having to repeat a basic infrastructure for data and voice networks,” Davie said. “Those are the kinds of things we’re at least looking at right now…how to reduce the duplication in contracting or solutions. How share more and how to leverage those things.”

The panelists acknowledged that some may argue these are the types of changes the government needs to be making anyway – a swing of the pendulum that is not unheard of in the enduring cycles of the way agencies carry out their missions.

“When you step back, government is still spending hundreds of billions of dollars on government contracting. We just have to do it differently. Where GSA sits, working with the agencies, there is a lot of thought about how to do it differently,” Davie said.

According to the speakers, officials are looking to keep industry in the loop, asking for feedback and maintaining open lines of communication in order to make the changes in the best way possible.

“The fact that we’re changing should not surprise you. But we have to be very open about how we do it and let you know exactly what we’re doing,” Skinner said. “We want to enter into dialog. If there are thorny issues, let’s talk about them.”

And as Crenshaw noted, it is not all bad news – despite the budget cuts and uncertainty in spending, it is still a robust market.

“I still believe doing business with the federal government is a great place to be…not only are you doing a great service, but all things being equal they’re a great customer. It’s not like on the commercial side everything is just ducky and we don’t have these problems,” he said. “Even though it may be riskier, it’s not quite as certain of an economic environment out there as it used to be.”

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.