Insights

Beyond Winners & Losers, the Reality of the Budget Debate: Billions Are Expiring Unobligated

As the deadline approaches for another continuing resolution (CR) and top-line funding levels in a potential deal among congressional leaders are discussed, most of the media coverage is that XYZ program funding is reduced/increased by so much money which is a win for this party and a loss for that party. The winners and losers coverage is “inside the beltway” chatter for the next election cycle, but one must not forget the programmatic impacts of those funding levels on the citizens, the federal employees, and contractors. A review of funding level increases against the main expenditures indicate that perhaps billions of dollars are left on the table.

While the funding levels are important and interesting, what is the workforce’s capacity to spend the money? The main expenditures for government are personnel, facilities, contracts, and grants. As such, when under a CR, most agencies are reluctant to obligate funding when the final funding level for the year is unknown. Depending on when funding levels are enacted, some civilian agencies in recent years have faced the dynamic of having half the year to spend more funding than they ever had. Publicly available data shows that some civilian agencies in recent years have obligated half of their total contract obligations in the fourth quarter of the fiscal year (July through September). With the government acquisition workforce, the capacity to run the procurement with the necessary market research, prepare the solicitation, conduct the evaluation, and obligate the funding for the contract is often the limiting factor. There are only so many hours in the day and so many contracting officers authorized to obligate contracts. The government acquisition workforce is to be commended for their efforts in recent years; however, contract obligations with other expenses do not appear to add up to total budgeted funding levels.

In addition to the funding level and the capacity to obligate the money, what is the agencies desire to spend the money? During the prior administration, Congress appropriated large civilian agency funding increases, but the number of federal employees did not grow while grants and contracts did not increase in proportion to the funding increases. What happened to all that money? Depending on the “color of money” or period of availability, unobligated balances return to the U.S. Treasury when the funds expire. Typically, the efficiency and effectiveness of this endeavor is getting the agency internal government stakeholders in alignment across the Chief Financial Officer (CFO), Chief Procurement Officer (CPO), programmatic offices etc. with other senior leaders such as the agency head or the Deputy Secretary. During fiscal years 2021 and 2022, civilian agency contract obligations increased only 4% despite civilian agency funding increases approaching 15%.

In summary, there are likely tens of billions of dollars a year expiring unobligated in federal civilian agencies. The tremendous market opportunity is persuading government clients to spend the money.

Recommendations for Industry:

  1. Talk with your clients and potential clients. Find out what is happening around them. Talk with your contracting officers, heads of contracting activity, industry liaisons, small business advocates, etc. What are they hearing from their CFO and their team? Is there a deadline that program offices need to send procurement or the CFO about their needs/requirements?
  2. Find additional contract ceiling on existing contract scope. Each CR prevents “new starts.” Find ways to describe additional benefits that are within an already established scope or program framework. Provide language that program managers and contracting officials can take directly to the CFO.
  3. If there is an increased likelihood of a government shutdown, who is the main contracting point of contact for industry when other contracting officers are unable to work? Have you submitted all the possible invoices for payment for work already completed ahead of the deadline so they can be processed before the deadline?
  4. If your company is big enough to have a government relations or congressional affairs team, have them alert the appropriate congressional committees that contract obligations are falling behind. Have committee staff ask agency leaders such as the CFO how they are doing on budget execution against their funding levels especially as it relates to contract spend.
  5. If your company does not have a government relations or congressional affairs team, reach out to an industry association such as the Professional Services Council (PSC) or the Coalition for Government Procurement (CGP) to raise your concerns that are likely observed by other companies.

Fiscal year 2023 is the first budget that the Biden administration gets to shape the entire budget lifecycle (develop, defend, and execute). Can the current administration pivot from their legislative achievements to focus on execution and implementation of their funding and policy priorities?

As funding levels change, contractors are an excellent source of talent to scale up and scale down as appropriate. Whether it is going to the moon, protecting the environment, or finding tomorrow’s cures, civilian agencies have needs and they have the funding. With full year 2023 funding enacted, go help agencies implement and execute their mission priorities.

Bradley Saull is a Vice President at Jefferson Business Consulting. He was the first Vice President at the Professional Services Council (PSC), an association of more than 400 government contractors.

More Insights

Commercial vs Federal: How are they different?

Pursuing business with the federal government is not like pursuing a commercial customer. Government contractors must navigate a complicated landscape of regulations and compliance requirements.  Most government purchases are subject...

Read More »

Share This: