As we come to the end of FY 2017, the government is rushing to allocate their unspent contract obligations within the next four and a half weeks. In FY 2016 roughly $38 billion was spent in the last week of September alone, and historically about 1/3 of obligations awarded are in the 4th quarter of the year. When looking to take advantage of this end-of-year spending surge, there are some things you want to keep in mind. The graph below shows you the remaining budget by percentage for each agency, while the second graph reports the same information by specific dollar amount (minus DoD).
FY 2017 Unspent Contract Obligations by Dollar (Millions)
Most important is to note how this end-of-year money is typically spent. Everyone wants to make use of the extra funds as opposed to returning money to the Treasury and ending up with a decreased budget for the following year. With time being limited, it is less complicated to fund work on existing contracts rather than execute a new procurement action – of any kind. We often have people ask us, how can I find some of this end-of-year gold. The answer is, as close to home as possible. These 4th quarter actions are made at the ground level within program offices. Getting someone you do not already know (or someone close to someone you know) to begin a procurement action with you (a stranger) at this time is not a good percentage strategy.
So, if you are looking to benefit from agencies with a surplus budget, you should first contact your current customers. See if they have any work that can be absorbed into the requirements of your existing contracts, provided there is available ceiling to absorb the funding action. If your client does not have funds, be sure to ask if they know someone who might be looking for help and would have work that fits within your contract scope. Another, but far less likely option at this point, is to steer the action to an existing vehicle contract or MAC (Multi-Award Contract), assuming of course that you are on the vehicle, and preferably in an appropriate socio-economic category where competition will be more limited. At this point, unless they can significantly limit the competition (smartly written SOW’s can help), even awarding a Task Order could be too time consuming. That said, we have seen that Seaport-E, Schedule 70 (IT), PSS 00Corp and Alliant are a few MAC’s that tend to offer significant opportunities towards the end of each year. In many of these cases, the customer may not have a company in mind, they are just looking for a vehicle that can get their dollars on the street in time for an award. Keep in mind, that on some of these vehicles, such as Schedule 70, they can do limited competitions where the Task Order is released to a pre-chosen set of potential bidders. This list can be as short as 3 companies.
Another option to consider is asking the customer if they are willing to process a simplified acquisition. These can take under 30 days to process and while the simplified acquisition threshold (SAT) is still $150,000,the SAT for commercial items was raised to $7.0 million in 2015.
DoD has $60 billion to spend in the upcoming month
As indicated in the bar graph, roughly 20% of each agency’s federal budget is currently unspent. DoD has $60 billion to spend in the upcoming month, and the State department appears to have the most unspent obligations as a percentage of their authorization, with 41%. At State, expected budget reductions for next year have resulted in many procurement actions being halted. The agency simply is not sure they will have money for these activities in the out-years. However, that does not change the fact that they have money to spend now, and might want to spend it on some shorter term, more immediate activities.
This evaluation is reinforced by data analysis highlighting 4th quarter spending habits over the last four fiscal years. The Department of State leads with 55.1% of obligations awarded in the last few months of each year. Keep in mind that not all agency spending patterns follow the same trends. It is important to know your customers habits, as well as their current situation, to make the best targeting decisions.
Remember, the 4th quarter of the FY can be a great time for small business and economically disadvantaged businesses as many agencies will rush to try and meet their small business targets now, having been tentative about allocating funds to set asides during the first 9 months of the year. But, this need will still not overcome the need to play close to home. So, check the funding ceiling in all your contracts, including task orders, and go see every customer you have. Do not hesitate to ask the question – got anything I can help you with as the year comes to a close? Explain why you are asking – do not expect them to know that you have contract ceiling they could use. And, if they do not have end-of-year funds to spend, be sure to ask if they know someone who does.