Deltek: Federal IT’s busy season could face budget pressure

As area schools begin and a major election cycle kicks into high gear, another yearly countdown begins: the final weeks of the federal fiscal year that ends Sept. 30.

As agencies wrap up their fiscal 2012 technology purchases, contractors are facing significant uncertainty about exactly how much will get spent.

Historical procurement data indicates that an increasing proportion of the total federal IT budget is spent in the final fiscal quarter. In the past 16 years, the government has increased the percentage of new prime contracts it starts in the fourth quarter to 38 percent, up from 29 percent.

That trend has only accelerated in recent years, as the recession, federal debt, budget delays and the more frequent use of stop-gap government funding measures has resulted in agency uncertainty about what they have to spend until late in the fiscal year.

In an annual federal IT forecast, Deltek estimates that the total federal IT market contractors could pursue in fiscal 2012 is $121 billion across executive, legislative and judicial branch agencies, including independent agencies and government-owned corporations such as the U.S. Postal Service.

The shift to increased fourth-quarter spending means federal departments and agencies could spend between $45 billion and $50 billion on IT in this quarter alone.

Still, the budgetary turmoil of the last few fiscal cycles make this year’s outcome less clear. Tension has risen in Congress and the industry over the impacts of impending budget sequestration come January 2013.

While several members of Congress are attempting to avoid sequestration, many in the contracting industry have warned that we are already seeing it affect acquisitions.

Some companies are experiencing delayed or cancelled procurements, schedule changes and reduced orders. These kinds of changes could take a toll on the traditional increased buying pattern of the fourth quarter, whether or not budget sequestration occurs.

This year’s federal busy season may be one of the most unusual Deltek has seen.

John Slye is an advisory research analyst in federal industry analysis at Herndon-based Deltek, which conducts research on the government contracting market and can be found at www.deltek.com.

 
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