A Look at the Next Two Weeks…And Beyond

by Steve Charles, Co-founder and Executive Vice President

With the Washington Nationals now eliminated for sure from this season’s baseball playoffs, Washington the city and the market can focus fully on handicapping the possibility of a government shutdown next week.

Just in case, the White House issued a memo this month on agency operations during a “potential lapse in appropriations,” the proper word for shutdown. It’s two pages, followed by a 12-page attachment on details of contracting, grants administration, and payment processing during a lapse. In essence, for the government to spend anything, it would have to be for “excepted” activities, mainly essential and emergency requirements, lest an agency fall out of compliance with the Antideficiency Act.

But let’s presume Congress will find some way of avoiding a shutdown. For sales planning purposes, how else can you think? A shutdown wouldn’t likely last more than a few days anyhow. Less clear is how much spending authority your federal customers will actually have in terms of both dollars and the authority itself.

If you have a scholarly bent, the Government Accountability Office has long tomes (GAO Red Book) online covering appropriation law, dating back to the Civil War era. But for more immediate practical purposes, pay attention to the term of a continuing resolution. In theory they could do it a couple of days at a time. In practice, the term will revolve around the Obamacare defunding gambit and the debt ceiling deadline around October 17.

Regardless, agencies only have spending authority at the yearly rate, prorated for the months approved. So an agency with an annual budget of $1 million in an account would have authority to spend only $250,000 during a three-month CR.

But like your Swiss wind-up watch, this year has complications. Namely, sequestration, which at this writing is still in effect. Will the CR live within the 2014 Budget Caps of the Budget Control Act (Sequestration levels) or will it ignore them and apply the sequestration holdbacks later in the year?  Expect some agencies to remain cautious, others will try and spend what they can early and worry about holdbacks later.

When approaching government customers, remember any spending under a continuing resolution, aggressive or conservative, must be mappable back to an authorized program funded by appropriated dollars in the previous year. Agencies can’t initiate new programs under a CR, but they can engage better ways to do what is already under way. That’s the smartest way to position your offerings now.

Beyond the current budget vicissitudes, here are a few of the long-term trends we’ll be staying on top of in the next year:

• How  to sell products in a services-oriented environment. Infrastructure as a Service, utility-based computing, application sharing ⎯ these are all changing how the government looks at IT. Perhaps this by-the-month mode of buying is at some level driven by unpredictable spending authority.
• Extreme price sensitivity, seen in the growing use of lowest-cost, technically acceptable procurements, shared services, and in the growing practice of analyzing competing contract vehicle prices. Keep an eye open for the “prices paid database” promised by OFPP.
• Development of rules and practices to fill out the policies designed to ensure a safe electronics supply chain. Our big concern is whether the government is prepared to pay what it costs for tested, certified parts through bonafide channels.
• Expect  more pressure to participate in strategic sourcing programs. The government wants to pay less and we need to show them how we’re lowering our costs of sales.