Although two months late in delivery, the president’s FY2014 Budget Request continues promotion of administrative priorities while proposing cuts and savings to trim the deficit.  Deltek's newly released report, FY 2014 Federal Budget Request:  Challenges and Opportunities, analyzes the spending priorities, policy plans and information technology trends and initiatives in the FY2014 budget request.  

The Obama Administration is requesting $3.8 trillion for FY2014. The budget focuses on jobs creation and economic growth to strengthen the American middle class.  Deltek’s report examines patterns in the $1.2 trillion discretionary budget, as well as the $82 billion information technology budget, including market trends, drivers, and contractor-addressable spending. 

Using a well-honed methodology for gleaning the contractor-addressable portion of federal spending, Deltek calculates projected expenditures for FY2014 for ten different federal product/services market segments.

The chart above shows the contractor-addressable portion of funding across federal agencies, as well as compound annual growth rate for each from FY2012 to FY2014.  Nearly all of GSA's budget authority is under "Spending Authority from Offsetting Collections, Discretionary" to provide GSA the authority to fund its operations using funds collected from sources other than appropriations, primarily service fees.

Should the budget pass as written, Deltek estimates the contractor-addressable portion of IT spending for FY2014 to be $106 billion, which includes traditional IT spending captured in the Exhibit 53, as well as IT spending not typically captured in Exhibit 53 reporting, such as in embedded weapons systems.

Additionally, Deltek predicts contractor-addressable federal spending on architecture, engineering, and construction services will reach $27.7 billion in FY2014.  Aerospace and defense spending will reach $149 billion.  And operations and maintenance spending will reach $80.6 billion.

The budget request and Deltek’s research reveals the following in regards to the different market segments:

• Information Technology: IT priorities are largely the same as the past 2 years, including shifting from an asset to a service mindset, infrastructure and data center consolidation, and continued transition to cloud computing.
• Architecture, Engineering & Construction:  Expect a continued shift in funding from major to minor construction, including deferred maintenance, especially in civilian agencies.
• Aerospace & Defense:  Despite budget constraints, DoD is focused on protecting investments that support the new defense strategy, and the war drawdown continues to impact spending on ground systems and mission support equipment.

As the federal government strives to reduce the deficit and decrease spending, finding contracting areas of opportunity becomes increasingly difficult.  The request provides insight into the administration’s priorities, however the eventual enacted budget is somewhat of a wildcard.  Don’t expect appropriations to conclude prior to Oct. 1, continuing resolutions are likely to prevail.

For more information on Deltek’s report FY 2014 Federal Budget Request: Challenges and Opportunities  see the GovWin IQ website at www.govwin.com.

 

Now the budget is in the hands of Congress, which has historically appropriated more for IT than what the President requests. With fiscal priorities clashing and sequestration impacts now being felt across the market, federal IT could weather the current fiscal storm in relatively good shape.

• Threat Information Sharing – The EO expands the sharing of both classified and unclassified cyber threat and attack information to companies by requiring federal agencies to produce and quickly share unclassified reports of threats to U.S. companies. The directive also expands the Defense Industrial Base (DIB) Enhanced Cybersecurity Services (DECS) program to stimulate near-real-time sharing of cyber threat information with participating critical infrastructure companies. 
   
• Cybersecurity Framework – The Order gives the National Institute of Standards and Technology (NIST) the lead role in developing a Cybersecurity Framework of practices to reduce cybersecurity risks to critical infrastructure. This construct is to be built in collaboration with industry, leveraging existing and proven international standards, practices, and procedures. Further, the Framework is to be technology neutral to allow for innovation and competition among cyber products and services. The Department of Homeland Security (DHS) will promote the implementation of this Framework by industry through various sector-specific agencies like the Department of Energy and others.
   
• Privacy Protections –The mandate requires federal agencies to incorporate privacy and civil liberties safeguards into their activities, based upon the Fair Information Practice Principles (FIPPS) and other applicable privacy and civil liberties standards. Agencies are also required to conduct regular assessments of the privacy and civil liberties impacts of their activities and make these findings available to the public. 
   
• Cybersecurity Regulation – The EO requires regulatory agencies to review existing cybersecurity regulations in light of the new Cybersecurity Framework to determine if current regulations are effective and sufficient, if any should be eliminated, or if new regulations are needed. Agencies will propose new, cost-effective regulations based upon the Framework to shore up existing regulations deemed ineffective or insufficient.

In the end, the new EO reignites the policy and legislative debate on federal cybersecurity as well as asserts broader federal influence over private critical infrastructure and networks.

On the eve of his State of the Union address, President Obama ushered in a major overhaul of U.S. homeland security policy with Presidential Policy Directive/PPD-21. Much of the news coverage this week referred to the directive as some sort of “cyber” policy. To that end, PPD-21 “identifies energy and communications systems as uniquely critical due to the enabling functions they provide across all critical infrastructure sectors.” However, while PPD-21 is not solely focused on information, or “cyber,” security [See Deltek's latest report on this market], awareness of “cyber threats, vulnerabilities, and consequences” is significantly higher in this directive than in HSPD-7.

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“The law is the law, whether you like it or not. It doesn’t matter if you like it. It’s the damn law.” 

Many governors and insurance department heads awoke this morning with Mississippi Insurance Commissioner Mike Chaney’s words ringing true after last night’s reelection of President Obama. States holding out for a change in federal leadership on health reform now have fast decisions to make. The numbers are staggering for Mississippi: one in five people lack health insurance; it leads the “States of Misery” in health, poverty, and crime statistics; and has the highest level of obesity in the country at 34.9 percent. Despite Governor Phil Bryant calling for a stall on Obamacare, Chaney is creating a health insurance exchange (HIX) under his own authority, and with an Obama victory, plans to file a blueprint on November 16, unless he receives a court order from “some idiot out there trying to stop me.” Though his words could be considered somewhat crude, the logic behind them is solid: State’s ignoring the law does not mean the law disappears, and these words come from someone against Obamacare.

Exit polls from last night showed that roughly a third of voters listed health care as an important factor in their vote. Despite Obama being reelected, several states had voter efforts approved to limit Obamacare, including Missouri, Alabama, Wyoming, Florida, and Montana. Although some states were opposed to health care reform from the beginning, those that started the exchange planning process are finding that they have run out of time, and will likely adopt the federal exchange until a state-based exchange can be built.

With a scramble to hit the 2014 deadline, procurement strategies may be expedited, like Connecticut’s sole-source award to Deloitte for both its HIX and its integrated eligibility system. Expect to see even the early innovators relying heavily on federal hub resources for the first enrollment period. As Chaney pointed out, there is no more waiting; the Affordable Care Act is the law. Deltek will be watching as blueprints are submitted to the Center for Consumer Information and Insurance Oversight by November 16, 2012, and how federal-state relationships play out as the nation addresses health care reform.

As always, be sure to follow Deltek’s Health Care and Social Services Team on Twitter @GovWin_HHS, or connect with us through LinkedIN. Stay tuned for more information around a new Health Insurance Exchange Vertical Profile addition in the near future!

Continuing from my previous blog on Government  2.0’s effect on the traditional IT procurement process, I wanted to take a look at trends in government’s approach to acquiring Gov 2.0 technology. Part 1 of this blog series highlighted how small Gov 2.0 IT firms have begun to use non-traditional purchasing options to circumvent the traditional procurement process. Gov 2.0 firms are trying to avoid the procurement process because it has historically been more difficult for small IT firms to compete in the government IT market. However, today’s trends in IT procurement hint that times are changing. Since governments continue to face shrinking IT budgets against expanding IT costs and needs, they are now looking for alternative ways to do business as well. For many IT bureaucrats and contracting officers interested in Gov 2.0 technology, that means looking outside of the conventional procurement process, and toward smaller IT firms.

Code for America (CFA), an example of Gov 2.0 realized, is an organization that describes itself as “Peace Corps for geeks.” Established in 2009, CFA assigns programmers on year-long fellowships to work with local governments on in-house IT projects, to provide faster and more affordable alternatives to procuring vendor services and solutions. CFA noticed that new IT products, which it calls “civic startups,” were often created once the fellows had completed their assignments – essentially spawning new businesses. However, these civic startups that had created products for governments were having trouble selling their products. Finding the government procurement process difficult to navigate, many fizzled.

In response to this issue, CFA is setting up its first civic incubator, where a handful of IT entrepreneurs will participate in a five to six-month-long program that will provide funding and mentoring, while bringing their applications and solutions directly to local governments and school districts. This incubator is something CFA’s leadership hopes will turn the traditional procurement process on its head.

Another noticeable trend on the rise is localities across the country sponsoring crowdsourcing events and hackathon competitions as an alternative approach to the traditional solicitation processes for Web development solutions and services. In 2010, after working with CFA, the city of Boston took a one-day hackathon event to the next level by creating a permanent office within local government. The New Urban Mechanics Office was created to hire full-time programmers for in-house IT development projects as well as to conduct outreach to encourage, field, and partner with small IT entrepreneurs.

In another CFA spinoff, White House Chief Technology Officer Todd Park created the Presidential Innovation Fellows (PIF) program to  pair “top innovators from the private sector, non-profits, and academia with top innovators in government to collaborate on solutions” using technology. On August 23, 18 innovators from outside of government were selected to work on one of five projects over the course of six months. The PIF program’s goal is to synthesize open data, expand e-government services, and simplify the RFP process by “building a platform that makes it easier for small high-growth businesses to navigate the federal government, and enable agencies to quickly source low-cost, high-impact information technology solutions.” 

One of the five projects, RFP-EZ, was born after Sean Green, head of the Small Business Administration’s Investment and Innovation Program, remembered an instance with the Department of Health and Human Services (HHS). The department had a need for an IT project, but the project’s estimated cost was $5 million to implement by a traditional IT vendor. After some research and outreach, HHS partnered with smaller IT companies that were able to complete the project for just more than $400,000.

During the PIF announcement, Green gave an open call to developers, contracting officers, and small Web development firms to join the effort and participate through Github.com, which is an open platform where RFP-EZ will be demoed. If successful, many state and local level governments will likely partner with or imitate the RFP-EZ project. Park took to Twitter after the announcement to confirm that the PIF will also be working with both state and local governments, in addition to the federal government, to create these IT solutions.

Analyst's Take

At all levels of government, innovation and affordability have been contradictory terms. The Code for America debunked the idea that quality Gov 2.0 solutions and services had to come at a premium. CFA seems to have been the catalyst for the future direction of Gov 2.0. Governments willing to take the early leap by circumventing their IT procurement process and engaging with innovators directly can expect some growing pains, but they will likely be dulled by ultimate cost savings.

The traditional format of government procurement has been grounded in the 1950’s-style door-to-door salesman. Governments release a solicitation and wait for the salesman to ring their door bell to peddle goods. Now, government agencies with strict budgets have the option to shop around without going through a lengthy and expensive procurement process. Governments want convenience and efficiency without having to sacrifice quality and they are willing to go outside the traditional procurement process to get it.