The end of the year is a time to reflect, recall memorable moments and plan for the future. But for many in the federal contracting industry, 2012 may be a year they would just as soon forget.
Discretionary spending — the portion of the budget that goes to pay for federal employee salaries and contractor goods and services — saw back-to-back annual spending reductions for the first time in 15 years.
The two-year trend will likely continue in 2013, especially if the government goes over the fiscal cliff. Sequestration will significantly increase the slope of the downward trend line.
One impact of the uncertainty is program delays, as agencies bide their time to figure out what they can afford in the coming years.
More than two years after releasing a solicitation, the Department of Homeland Security only this month began to announce awards for portions of its $22 billion Enterprise Acquisition Gateway for Leading Edge Solutions acquisition, better known as EAGLE II.
Similarly, many bidders are still awaiting word of contract awards under the Air Force’s multibillion dollar Network-Centric Solutions-2 program, or NETCENTS-2. Solicitations were issued as far back as May 2010.
Another 2012 event having a continued profound impact on the contracting industry is the General Services Administration’s Las Vegas boondoggle, which further increased pressure on federal agencies to reduce travel and conference attendance.
The Defense Department and Army went so far as to put significant limits on spending, participation and travel to conferences and events. These opaque policies seem at odds with the Office of Management and Budget’s “mythbusting” memorandum from 2011, which encouraged agencies to improve their engagement and communication with industry.
In another example of the impact government policy changes have had on contractors, look no farther than the business unit spinoffs prompted by changes in how organizational conflicts of interest are managed.
The trend started a few years ago when Northrop Grumman spun off services business TASC, and Lockheed Martin made a similar move. This year, L-3 Communications spun off Engility into a public government services company and Science Applications International Corp. announced plans to split its services business from its “solutions” company.
Kevin Plexico is vice president of federal information solutions at Herndon-based Deltek, which conducts research on the government contracting market and can be found at www.deltek.com.