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President Obama’s 2015 budget: Bringing back homeland and justice grants

The White House and President Barack Obama posted the fiscal year 2015 budget, which includes a number of initiatives from job growth and fiscal responsibility, to improving the nation’s security. Usually we think of national security at the federal level, with the Department of Defense and intelligence agencies, but often the first line of defense within the United States is held by state and local officials.
 
For nearly a decade, most Homeland Security and Justice Department grant programs have been reduced or remained stagnant. In cases like with the Federal Emergency Management Agency (FEMA), there are numerous grant programs, each with their own rules and regulations. As part of President Obama’s budget for the Department of Homeland Security (DHS), these grant programs will be simplified and consolidated into the already existing Homeland Security Grant Program (HSGP). While it is unclear the amount of funding that will be allocated, a more easily understood program will benefit state and local agencies vying for that money. Oftentimes agencies, particularly smaller ones, get bogged down with grant proposals and ultimately fail to win funds for reasons such as being unqualified for the grant to begin with.
 
As part of the budget proposal, both DHS and the Department of Justice (DOJ) would offer billions of dollars in grant funding. The DHS would have $1 billion for border protection and another half-billion dollars for technology research and development, and other initiatives. The DOJ and the DHS would offer local agencies millions to retain and rehire employees, including emergency management agents and police officers. The Byrne Justice Assistance Grant (JAG) has been funded in previous years, but a renewed commitment to these funds would be a vital source of money for local agencies. Agencies that are not connected to many of the federal criminal databases could utilize these funds to get up to speed as well as invest in officers.
 
Analyst’s Take
 
It is too soon to know whether President Obama’s budget will pass as constructed today. However, the inclusion of the public safety, emergency preparedness and other justice programs is a promising sign, especially to cash-strapped state and local agencies. There are numerous programs, including state criminal history initiatives that could move forward if funding is made available. The use of new technology in the justice system and within homeland security and emergency management would be welcomed by vendors with new tools, software and hardware that could reduce time in the field. Vendors should begin to follow the budget process to see what grant programs are funded, and reach out to existing clients who may want to expand existing systems or explore new opportunities.
 
 

FY 2015 President’s Budget Request – A First Take

The White House released its much-anticipated FY 2015 Budget request yesterday, a month past its legal and historical due date. Several of my fellow GovWin Federal Industry Analysis (FIA) colleagues and I dug right into reading the budget so that we could provide you with our first impressions of what we found noteworthy.

Like any presidential budget, the FY 2015 President’s Budget Request provides a blueprint for the administration’s policy and legislative agenda for the coming fiscal year and beyond. We reviewed the largest federal departments’ discretionary and information technology (IT) budgets to get a sense of direction and priorities for FY 2015, which begins October 1, 2014. Below is a summary table followed by key funding details and initiatives arranged by department.

 

Defense

DoD’s budget request is down this year as FY 2015 discretionary funding of $495.6B represents a 0.8% decrease from the FY 2014 enacted budget of $496B.

Funding highlights include:

  • $120.3B for the Army (a decrease of $1.3B from the FY 2014 enacted level)
  • $147.6B for the Navy (an increase of $300M from the FY 2014 enacted level)
  • $137.7B for the Air Force (an increase of $3B from the FY 2014 enacted level)
  • $89.8B for Defense-Wide operations (a decrease of $2.5B from the FY 2014 enacted level)
  • $199B for DoD operations and maintenance funding (an increase of $6B from the FY 2014 enacted level)
  • $90.3B for DoD procurement funding (a decrease of $2B from the FY 2014 enacted level)
  • $63.5B in DoD RDT&E funding (a decrease of $700M from the FY 2014 enacted level)

Provisions of Interest

  • $128M for military infrastructure in Guam, $51M of which is to establish facilities for Marine Air-Ground Task Forces throughout the region
  • $47.4B for the DoD Unified Medical Budget
  • $2.9B for the Defense Advanced Research Projects Agency
  • $11.5B for basic and applied research and advanced technology development

Agriculture

The USDA’s budget request is down this year as FY 2015 discretionary funding of $23B represents a 4% decrease from the FY 2014 enacted level of $24B.

Funding highlights include:

  • $7.2B for the Food and Nutrition Service (an increase of $124M from the FY 2014 enacted level)
  • $4.8B for the Forest Service (a decrease of $700M from the FY 2014 enacted level)
  • $2.4B for Rural Development (a decrease of $400M from the FY 2014 enacted level)
  • $1.8B for the Foreign Agricultural Service (same as the FY 2014 enacted level)
  • $1.5B for the Farm Service Agency (a decrease of $100M from the FY 2014 enacted level)
  • $1.1B for the Agricultural Research Service (same as the FY 2014 enacted level)
  • $1B for the Food Safety and Inspection Service (same as the FY 2014 enacted level)
  • $837M for the Animal and Plant Health Inspection Service (a decrease of $8M from the FY 2014 enacted level)
  • $815M for the Natural Resources Conservation Service (a decrease of $14M from the FY 2014 enacted level)

Provisions of Interest

  • The Opportunity, Growth, and Security Initiative provides funding to build a new biosafety research laboratory in Athens, GA
  • $45.2M for the USDA OCIO
  • $15M for IT investments for the Comprehensive Loan Program (CLP)
  • $44 million to address climate change’s risk to agriculture, including investments in cyber infrastructure for big data

Commerce

The president’s budget request provides $8.8B in base discretionary funding to Commerce, a 6% increase over FY 2014 enacted levels.  It requests $2B in IT funding, an increase of 5.3% over FY 2014 enacted levels. 

Funding highlights include:

  • Provides funding for NIST to accelerate advances in areas such as cybersecurity and advanced manufacturing
  • Supports key trade promotion activities to stimulate economic growth
  • Seeks to promote business investment in the US to create jobs and promote US competitiveness
  • Provides $753M for innovative design methods for achieving the lowest cost possible 2020 decennial census
  • Establishes up to 45 manufacturing innovation institutes across the US
  • Continues strong support of NOAA, including $2B to continue the development of polar-orbiting and geostationary weather satellite systems
  • Provides $1.6B for research and development
  • Funds a new investment line item for modernizing IT and business processes at PTO ($64.4M)

Energy

The DOE’s budget request is up this year as FY 2015 discretionary funding of $27.9B represents a 2.6% increase over the FY 2014 enacted level of $27.2B.

Funding highlights include:

  • $11.7B for the National Nuclear Security Administration (an increase of $M from the 2014 enacted level)
  • $6.0B for Department Management and Performance (a decrease of $200M from the FY 2014 enacted level)
  • $5.1B for Science Programs (an increase of $100M from the FY 2014 enacted level)
  • $4.0B for Energy Programs (an increase of $300M from the FY 2014 enacted level)

Provisions of Interest

  • $180M in R&D to facilitate the transition to a Smart Grid
  • $325M for Advanced Research Projects Agency–Energy programs
  • $141M ($91M in Science and $50M in NNSA) for R&D related to exascale computing
  • More than $300M for DOE cyber security initiatives

Health and Human Services

The president’s budget request provides $77.1B in base discretionary funding to HHS, a 1.7% decrease over FY 2014 enacted levels.  It requests $8.6B in IT funding, a decrease of 10.4% over FY 2014 enacted levels. 

Funding highlights include:

  • Supports the Affordable Care Act and operation of the Health Insurance Marketplace
  • Provides $30.2B to NIH for medical research
  • Improves mental health services for youth and families
  • Invests in payment innovations and other reforms for Medicare and Medicaid and other federal health programs to improve program integrity and delivery of high-quality, efficient health care
  • Invests in a new initiative to improve access to high-quality health care providers
  • Funds construction of two new Indian Health Service health care facilities
  • Increases the investment in CMS IT infrastructure by $58.6M, a 19.4% gain
  • Increases the investment in CMS Healthcare Fraud Prevention Partnership (HFPP) by $17M, a 354% increase
  • Decreases IT funding for the CMS  investment that developed the health insurance marketplace (-$297M) and transfers to states for CMS Medicaid Management Information System (-$618M) 

Homeland Security

DHS is slated to receive $38.2B in base discretionary funding in the president’s budget request, a 2.6% decrease over FY 2014 enacted levels. The budget also includes and $6.8B for disaster relief. The budget requests $5.8B in IT funding which includes a $3M reduction from the FY 2014 enacted levels, a 0.1% decrease year over year.

Funding highlights include:

  • $514M for research and development in homeland security technology and developing state-of-the-art solutions for first responders – target opportunities in cybersecurity, explosives detection, nuclear detection, and chemical and biological detection.
  • $300M to initiate construction in 2015 of the National Bio- and Agro-Defense Facility to study large animal zoonotic diseases and develop countermeasures
  • $124M to support, expand, and enhance E-Verify system to aid U.S. employers with employment legality verification
  • $112.5M for Secure Flight, under which DHS conducts passenger watch list
  • $3.8B for the Transportation Security Administration (TSA) screening operations. Supports risk-based security initiatives at the Transportation Security Administration that enhance the efficiency of passenger screening operations, while improving the customer experience for the traveling public.
  • $1.25B for cybersecurity activities including:
    • $377.7M for Network Security Deployment, including the EINSTEIN3 Accelerated (E3A) program
    • $143.5M for the Continuous Diagnostics and Mitigation (CDM) program
    • $173.5M to support ICE cyber and cyber-enabled investigations of cyber-crime, etc.
    • $28M for the classified Homeland Secure Data Network to security and info sharing
    • $67.5M for Cybersecurity/Information Analysis Research and Development
    • $8.5M to establish a voluntary program and an enhanced cybersecurity services capability to support Executive Order 13636, Improving Critical Infrastructure Cybersecurity
    • $3.9M for Secret Service Cybersecurity Presidential Protection Measures to support monitoring of protective sites which directly or indirectly support a Presidential visit

Justice

The president’s budget request provides $27.4B in discretionary funding for the Justice department, $122M above the 2014 enacted level – for DOJ core law enforcement needs, safe and secure prisons, and other Federal, State, and local programs. DoJ’s IT budget is just slightly better than flat (+0.4%) year-over-year at $27.4B.

Funding highlights include:

  • $722M for cybersecurity efforts to combat increasingly sophisticated and rapidly evolving cyber threats
  • $13M to the FBI for investment in the National Instant Criminal Background Check System as part of the DOJ’s overall $182M budget for Federal, State, and local gun violence reduction efforts
  • $8.4B for Federal prisons and detention facilities, to maintain secure prison facilities and to continue bringing newly completed or acquired prisons online
  • $15M under the Smart on Crime initiative for prisoner reentry programs and for Prevention and Reentry Coordinators
  • $15M to expand the Residential Drug Abuse Program at the Federal level and $14M to expand the Residential Substance Abuse Treatment program at the state level
  • $1.7M to develop new multidisciplinary program evaluation and policy analysis capability to improve budget, management, and policy decisions
  • $299M for the Department’s Juvenile Justice Programs
  • $423M (roughly half of which are grants) to combat violent crimes against women
  • $9M to establish a National Center for Building Community Trust and Justice to promote procedural fairness in policing, use deterrence strategies to reduce crime, and encourage police departments to track the quality of their interactions with the public

Transportation

DOT’s budget request is down this year as FY 2015 discretionary funding of $13.7B represents a 2.14% decrease from the FY 2014 enacted level of $14B.

Funding highlights include:

  • $48.6B for the Federal Highway Administration (an increase of $7.2B from the FY 2014 enacted level)
  • $15.3B for the Federal Aviation Administration (a decrease of $584M from the FY 2014 enacted level)
  • $4.9B for the Federal Railroad Administration (an increase of $3.3B from the FY 2014 enacted level)
  • $17.6B for the Federal Transit Administration (an increase of $6.9B from the FY 2014 enacted level)
  • $851M in mandatory and discretionary funding for the National Highway Traffic Safety Administration (an increase of $32M from the FY 2014 enacted level)
  • $669M for the Federal Motor Carrier Safety Administration (an increase of $97M from the FY 2014 enacted level)
  • $261M for the Pipeline and Hazardous Materials Safety Administration (an increase of $51M from the FY 2014 enacted level)

Provisions of Interest

  • $302B four-year surface transportation reauthorization proposal to support critical infrastructure projects
  • Funding for FAA NextGen investments is preserved
  • $370 million for National Airspace System Sustainment
  • $5M for cyber security initiatives, a decrease of $7M from the FY 2014 enacted level

Treasury

The president’s budget request provides $12.4B in base discretionary funding to Treasury, a 1.5% decrease over FY 2014 enacted levels.  However, provides total resources of $13.8B which is a $1.2B increase partially funded by proposed program integrity caps. It requests $4B in IT funding, an increase of 13.4% over FY 2014 enacted levels. 

Funding highlights include:

  • Continues implementation of the Affordable Care Act
  • Continues implementation of the Wall Street Reform and Consumer Protection Act to create a more stable  and responsible financial system
  • Invests $12.5B in the IRS, which includes a $480M program integrity cap adjustment.  Aimed at improving enforcement of current tax laws and reducing the current tax gap.  Includes more than a $100M increase to improve customer service, and an additional $165M is proposed to further enhance customer service through the Opportunity, Growth, and Security Initiative
  • $1.5B for a new round of State Small Business Credit Initiatives
  • Expands the level of detail and capabilities of sorting federal spending data to enable better use of the data
  • Calls for a $227M increase to the IRS Main Frames and Servers Services and Support investment over FY 2014 levels

Veterans Affairs

The president’s budget request provides $65.3B in base discretionary funding to VA, a 3% increase over FY 2014 enacted levels, giving VA total budget authority of $68.4B which includes $3.1B of estimated medical care collections.  The budget requests $4B in IT funding, an increase of 4.7% over FY 2014 enacted levels.

Funding highlights include:

  • $56B for VA medical care, and $58.7B in advanced funding for FY16 appropriations for medical care
  • Emphasis on ending veterans’ homelessness. ($1.6B) Working with HUD
  • Supports continued improvements in delivery of mental health care and telehealth technologies ($7B)
  • $1B in mandatory funding to help put veterans back to work protecting and rebuilding America
  • An additional $400M for high priority capital projects
  • Invests $138.7M in the Veterans Claims Intake Program and $173.3M for the Veterans Benefit Management System to address the claims backlog

Stay tuned to FIA as we will be publishing our complete analysis of the FY 2015 budget request later this month, where we will go into greater detail on the key initiatives, IT investments and contractor implications that will shape the federal IT marketplace for FY 2015.

Fellow GovWin Federal Industry Analysis (FIA) analysts Angela Petty and Alex Rossino contributed to this entry.

State of the Union Highlights: Contractor Implications

On January 29, President Obama delivered his sixth State of the Union address, and the themes are familiar. The President urged Congress to work with him to pass much needed legislation to address key administration priorities, such as job creation, healthcare, immigration, national defense, tax reform, pay equality and income security, and education and training.

Although there was not much detail, my team of analysts and I walked away from the speech with a few takeaways with contracting implications:

  • No more budget crises. While Obama lauded the efforts of Congress in passing a two-year budget deal, he encouraged Congress to continue with investments that will both support our future and reduce the deficit. He also reiterated another key way to address the fiscal bleeding, which is to close tax loopholes, like those that give $4 billion to the fossil fuel industry each year, that impact our revenue.

  • Give Americans a raise. Although he does not have the power to enforce a national minimum wage increase, President Obama intends to sign an Executive Order requiring federal contractors to pay their federally-funded employees at least $10.10 an hour.This will be an interesting story to watch unfold, considering the burden this will place on the profitability of govt. contracts, especially for small businesses.  We may see contractors restructuring their rate schedules to build in increased wage requirements, which would indirectly lay the burden of higher wages onto the government and therefore U.S. taxpayers. It may also inadvertently impact the number of vendors in the federal market – and therefore price competitiveness – if businesses decide it just isn’t profitable enough to work with the federal government.

  • Accept Obamacare or propose a new solution. Now that healthcare.gov is functional, there seems to be renewed confidence in the possibilities of Obamacare.  The President challenged Republicans to come up with a better solution that makes financial sense rather than spend time on another 40 votes to repeal the Affordable Care Act.

  • Don’t skimp on R&D.  The President called for Congress to restore cuts to basic research that facilitates the development of leading edge technology and will help America regain global dominance in technology, medical research and manufacturing.  Obama noted two high-tech manufacturing hubs where businesses and research universities are working together, and the launch of six more hubs. More emphasis on federal R&D could give contractors more opportunities in this area. Funding basic research has been mentioned as a priority by officials from both the Pentagon and the Army.  Work done by DARPA, DOE labs, NASA, and other technology-focused parts of the government would also benefit. 

  • Refocus on CONUS defense.  There will be an interesting shift to using the Department of Defense here at home, which is a huge historical shift from restrictions on this that date back to the founding.  A major part of that strategy is to shore up cybersecurity defense capabilities and as the President stated, “…keep faith with our men and women in uniform and invest in the capabilities they need to succeed in future missions.” Not surprisingly, cybersecurity remains a critical area with gaps that agencies will need contractor support to fill.

  • Take care of our veterans. Judging by the moving reaction to wounded Army Ranger Sergeant First Class Cory Remsburg, veteran care is a one of those rare, bipartisan issues that draws agreement from both sides of the aisle. President Obama indicated that the administration will “keep slashing that backlog so our veterans receive the benefits they’ve earned and our wounded warriors receive the health care – including the mental health care – that they need.” VA’s Medical IT Support and claims processing budget accounts will continue to have consistent (and growing) funding, at least in the near-term.

  • Create new jobs and train people for jobs of the future. President Obama continues his focus on the national infrastructure – rebuilding roads and upgrading ports.  This could mean opportunities for federal and state and local contractors with Architecture, Engineering and Construction expertise. With a declining federal workforce, training programs are likely to translate into contractor opportunities. Vice President Biden will lead the reform of America’s training programs, which will give employees the skills required to match with company needs. Implications:  Could help contractors looking for specific talents/skills. 
  • Invest in education and the technology to support excellence. The President targeted investment (either grants or contracts) to select providers in his pledge to connect 99 percent of students to high-speed broadband over the next four years. With support from the FCC and companies like Apple, Microsoft, Sprint, and Verizon, more than 15,000 schools and 20 million students will be connected without a negative impact to the deficit. 

  • Invest in energy efficiency and independence. The President restated his commitment to working with industry to support natural gas production and set higher fuel efficiency standards, and with business and communities to reduce energy consumption. This implies additional policy, subsidies and training in “green” professions to help facilitate America’s “shift to a cleaner energy economy.”  

  • Fix the immigration problem. President Obama encouraged the House to follow the Senate’s lead and act on immigration reform, which could result in economic growth (and therefore job creation) and a deficit reduction of almost $1 trillion in the next two decades.

Compared to last year’s State of the Union address, there was much of the same.  The President’s priorities have not significantly shifted.  However, he did raise new issues that will have both positive (defense focus on CONUS and cybersecurity) and negative (higher contractor employee wages) ramifications for companies serving the federal government.  As we typically see in federal contracting, the main issue will be in effectively translating policy into execution.

 

Sebelius testifies on federal health insurance exchange ‘debacle’

In a much-anticipated Capitol Hill hearing on Wednesday, Secretary of Health and Human Services Kathleen Sebelius testified before the House Energy and Commerce Committee on the failures of the federal health insurance exchange website.
 
The hearing, which veered far from the infrastructure of the website to the larger structural failures of the Affordable Care Act, took on a predictable tenor with incredulous Republicans grilling the defensive former governor of Kansas, as her fellow Democrats on the committee took a more conciliatory tone. For anyone who has been following the Obamacare saga, the secretary’s testimony offered limited new information. Here is a synopsis of what we learned at yesterday’s hearing:
  • The buck stops with Sebelius, as she advised both Congress and the American public to hold her responsible.
  • The secretary found the entire website experience a “miserably frustrating … debacle,” for which she apologized to the populace while advising them that no delay in enrollment is necessary as the website is fixable.
  • Sebelius believes that when it is judged “by any fair measure,” the Affordable Care Act is working.
  •  Privacy and security concerns are legitimate and are being addressed by the fix currently underway for the website. 
  • HHS spent $118 million on the contracts to develop the Healthcare.gov website, with another $56 million in IT spending to support the website.
  • HHS has a total obligated contract in the amount of $197 million with CGI through March 2014.
Aside from those above, one more revelation seemed to expose the root of the website’s problem. The secretary reported that QSSI was brought in as the systems integrator after the website launched. Sebelius reported that the company had done excellent work with the Federal Data Hub and she believed it would repeat that performance in fixing the structural problems plaguing the system. This begged the question: Who was the system integrator in charge of the project during the run-up to the exchange launch?
 
Sebelius revealed, after intense questioning from a Republican congresswoman, that a team from the Centers for Medicare and Medicaid Services (CMS) operated as the system integrator at the time of launch. The team, headed by CMS Chief Operating Officer Michelle Snyder, was quite obviously deficient in this role and was rightfully replaced by a proven contractor.
 
Analyst’s Take
 
Politics runs rampant in any discussion of the Affordable Care Act. As one of the most sweeping and contentious pieces of legislation in modern history, this comes as no shock. In the nearly five years since insurance reform became a topic of conversation, not a single elected Republican on the national level has expressed support for the ACA. Some provisions have gained Republican approval in the states, but the thrust of one-half of the political system has clearly been to scrap the law and start over.
 
Enter October 1, 2013. The website launch was a bust. Millions of individuals with insurance on the individual market realized, as the Fact Checker Column in the Washington Post points out, that they could not in fact keep their plans. With that as the backdrop, it is no wonder that many lawmakers are out for blood. Still, through all this noise emerge concrete lessons for governments and vendors alike.
  • The alignment of system implementation deadlines around a political calendar often hinders success. Since the passage of the law, the vendor community knew the deadline for exchange implementation on the state and federal level was unrealistic. Yet, absent a more plausible explanation, it seems politics dictated a steadfast deadline of October 1, 2013, for the exchanges to be operational. 
  • The micromanagement of the website launch by the CMS team, ostensibly unqualified for such an involved task, was a poor move with such tight deadlines. Though needing more time for an excellent product delivery, the private sector could have grudgingly met the stringent deadline with, at the very minimum, a functioning website. 
  • The criticism of the cost of the contracts to implement the website has gained traction only because it doesn’t work. Had the website worked on day one, those who criticize the amount paid to vendors for the build would have been neutered by the success of a signature feature of the ACA. The large amount of taxpayer dollars required to build such a complex infrastructure is understandable only if the infrastructure is a success. Absent that success, greater spending scrutiny occurs from politicians and journalists to accentuate tales of failure. 
Finally, it is clear the website will be fixed, eventually. The question becomes: To what end does all this bad press prevent the overall success of the ACA? From the perspective of state government, it seems clear that this debacle is not going far to convince the reticent majority of governors who rejected a state-run exchange. As time goes on, we will see if those leaders will use the federal experience as a warning shot of the perils inherent in implementing a flawed system, or as inspiration for how not to proceed as they take up the exchange mantle.

 

FY 2014 Federal Budget Request: Challenges and Opportunities

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.

 

Federal FY 2014 IT Budget to Grow, but there’s Winners and Losers

Steven VanRoekel, U.S. Chief Information Officer at the Office of Management and Budget (OMB) released a presentation yesterday outlining the Obama Administration’s FY 2014 Information Technology priorities and budget numbers. The bottom line is that they are seeking 2% growth in the overall IT budget year-over-year, but individual department budget changes vary widely, meaning that there are “winners” and “losers.”
 
Preceding the public release of his presentation, VanRoekel posted a series of tweets on Twitter under the theme: All you need to know about the IT budget in 10 tweets. You can find the series under #FedITx10, but here they are in the descending order in which they appeared:
 
10-Flat or declining. IT=$82B in the 2014 Budget 2.1% increase from FY12, flat, 0.78% CAGR since 09, negative adjusted for inflation
9-Cut & Reinvest: Now more than ever we must use IT to drive savings to fund innovations that change how govt works
8-Priorities: IT priorities in 2014Budget: Innovate. Deliver. Protect. Evidence
7-Innovate: 2014 Budget enables the Digital Gov Strategy to build a 21st century govt, increase mobile services and Open Data
6-Deliver: PortfolioStat = +$2.5B in savings through IT consolidations and upgrades (over 3yrs)
5-Protect: Over $15B of the IT 2014 Budget is going to enhance our Nation’s cybersecurity
4-Evidence: 2014 Budget NEW evidence-based innovation initiative in my office to strengthen evaluations & drive results, beyond IT
3-Innovate with Less: Since 09 we flattened IT $ while FY01-FY09 IT increased ~2x At that rate, we’d be at +$110B on IT today
2-Dogfood: For geeks (like me!) interested in an Open Data 2014 Budget, key tables in XML here:
1-Progress: 2014 Budget enables strategic IT investment for a 21st century govt, drives innovation & protects our national assets
 
IT Budget “Winners” and “Losers”
 
The budget submission information included in VanRoekel’s presentation contains some top-line budget numbers which allows for some initial analysis. The IT budget summary table in the presentation calculates the amount and percentage change for FY 2014 based on FY 2012 budgets, even though he provides FY 2013 Continuing Resolution (CR) budget estimates that are different. To provide a more detailed perspective I ran the numbers comparing the dollar and percentage change for all scenarios. 
 
The tables below are grouped by the “Winners” and “Losers” based on the percentage change from FY 2012 to FY 2014. The third table provides a comparison between Defense and Civilian segments, along with total federal IT.
 
 
 
 
 
 
Conclusion
 
While we are still waiting for the release of detailed IT budget information from OMB the proposed $1.4 or $1.7 billion increase for FY 2014, depending on which baseline year you use, is sure to surprise many who watch this market. Certainly, a 2% yearly growth rate is anemic compared to the growth rates we have seen over the last decade or so. (OMB reports a 7.09% compound annual growth rate (CAGR) between FY 2001 and FY 2009 and they are projecting a 0.78% CAGR between FY 2009 and FY 2014) Yet, many expected lower growth – if not an outright decline – in the federal IT budget for this coming fiscal year.  

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.

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Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWin FIA
. Follow me on Twitter @GovWinSlye.

Cyber Executive Order Impacts Private Infrastructure and Network Protection

After months of speculation the White House has released its much-anticipated Executive Order (EO) pursuing comprehensive cybersecurity protection of public & private critical infrastructure. The timing of the EO coincides with the President’s State of the Union Address and as the House Intelligence Committee reintroduces the Cyber Intelligence Sharing and Protection Act (CISPA) that passed the House during the last Congress but died without an up-or-down vote in the Senate.
 
The Executive Order on Improving Critical Infrastructure Cybersecurity centers its efforts to strengthen cybersecurity critical infrastructure protection (CIP) through increased information sharing among industry and government and through standardized cybersecurity practices applicable across public and private infrastructures. Significant aspects include:
  • 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.
Implications
 
The White House considers this EO to be “a down-payment on expected further legislative action,” recognizing that certain executive actions require Congress to legislate such authorities. While we watch for those developments we can anticipate some potential implications for companies offering cybersecurity and other applicable solutions. 
 
The broadened threat information sharing provision opens up participation in the DECS program which, according to media reports, has shown signs of languishing in recent months, while its parent program – the DIB Cyber Security / Information Assurance (DIB CS/IA) Program has grown. Depending on how things progress, this EO may breathe some new life into these programs and work toward broadening the sharing of threat information. A key element here is any costs incurred with the program. This EO provision comes on the heels of January’s 2013 National Defense Authorization Act which included several cybersecurity provisions, including requiring DoD contractors to report penetrations to their networks.
 
The new NIST-led Cybersecurity Framework development will present opportunities for industry to engage with policymakers and influence the future cyber policy. While the resulting Framework is intended to be technology-neutral, the ability to influence what elements constitute “secure” may drive future demand for certain technologies and services. Further, active engagement may place a firm’s solutions in the front of the mind of agency decision makers, producing a residual benefit.
 
The FIPPS privacy requirement may open doors for advisory services and training on FIPPS-related activities and assessments. As new regulations are developed agencies and industry will need help addressing new requirements and applying new approaches and technologies.  

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.

 
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New presidential directive is more "cyber" aware, but its state and local impact is doubtful

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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General government state and local ballot initiatives: lotteries, gaming and other news

While media outlets nationwide concentrate heavily on how Tuesday’s election results will affect federal
government spending, contracting and state and local funding, I would like to shine a light on a series of state and local ballot measures that will certainly fly under the radar in the wake of President Obama’s reelection, but may nevertheless have major impact on business, procurement and IT needs. Here’s a breakdown of several measures that are sure to affect state and local lottery and gaming operations, as well as procurement law:
 
LOTTERY AND GAMING
 
Maryland:
-       Voters statewide weighed in on Question 7, the much-talked about gaming expansion ballot initiative to allow the construction of a casino in Prince George’s County. Public officials argued that tax revenues from the casino would go toward education funding. The measure was vociferously opposed (mainly by a rival casino operator in West Virginia), and led to the most expensive political campaign in Maryland’s history, with more than $90 million spent between supporters and opponents. Despite the opposition, the measure passed by a 52 percent to 48 percent margin.
 
Oregon:
-       Oregon had two proposed amendments to the state constitution that would have legalized privately owned casinos with gambling, and used the tax revenue for various budget purposes. Both measures were defeated.
 
Rhode Island:
-       Rhode Island approved a measure to allow state-operated casino gambling at the Twin River Casino in Lincoln, R.I. Another measure to allow state-operated casinos in Newport received support from statewide voters (67 percent), but failed to pass because the measure had to be approved by a majority of Newport voters. As with all new state-operated gambling venues, there will likely be substantial opportunities for vendors who provide video lottery terminals, gaming systems and other forms of electronic gambling.
 
Florida:
-       Lee County sought to allow slot machine gaming at the Naples-Fort Myers Greyhound track. Voters approved the measure, though it remains subject to authorization by the state legislature. The approval of these machines is expected to lay the groundwork for future lottery and gaming expansions in the state.
-       Volusia County also proposed installing slot machines at designated locations throughout the county. Results for this measure are not available at this time.
 
Illinois:
-       Wood Dale City and Winfield Village both put initiatives on the DuPage County ballot to prohibit video gambling. Wood Dale voted in favor of prohibition, as did Winfield Village.
 
New York:
-       The city of Geneseo voted on whether to allow video gaming. According to the Star Courier, the measure was barely defeated with a 17-vote margin of 1,730 to 1,713.
 
ODDS AND ENDS:
 
California:
-       The cities of Newport Beach and Murrieta placed a pair of initiatives on the ballot to ban the use of red-light cameras. Red-light and speed cameras are produced almost exclusively by the private sector, and cities frequently contract these services out. Murrieta voters approved Measure N to ban the use of such cameras, as did Newport Beach. A fun fact I learned while writing a paper on red-light cameras for my public policy graduate school program: Since 1990, every time the use of red-light or speed cameras has been put to a referendum, the public has overwhelmingly voted to prohibit their use.
-       The city of Santa Rosa voted on a measure to alter the city’s charter to allow the city to contract with a single vendor to provide both design and build services for projects. Previously, the charter required the city to solicit services separately. Though results aren’t final at this time, the Santa Rosa Press Democrat is reporting that the measure is likely to pass (68.4 percent to 31.6 percent).
 
Alabama:
-       A measure to amend the Alabama State Constitution to allow the issuance of general obligation bonds of up to $750 million with the goal of providing financial incentives to existing companies within the state as well as attracting new industry passed with a 69.3 percent to 30.66 percent margin.
 
Florida:
-       The town of Redington placed a measure on the Pinellas County ballot proposing alterations to the town charter codifying a requirement that bidding and purchases be done through a competitive bidding process “whenever practical.” Results are not available at this time.
 
Analyst’s Take
 
As for the large swatch of lottery and gambling initiatives, with the exception of Rhode Island and a few other governments, most of the measures were to legalize privately owned and operated gambling establishments, not state-run facilities with concrete contracting possibilities. Still, for many states, the first step toward state-run gambling is permitting the practice in the private sector. While this may not lead to business opportunities in the immediate future, keep an eye on the state and local governments that passed gambling referendums. Chances are that three to five years down the road, a lot of these governments will be looking to get into the lottery and gaming business as well.

 

Anti-Affordable Care Act initiatives pass in wake of Obama victory

As the dust settles from the two-year-long presidential campaign, and life begins to return to normal in swing states, voters in four states registered their continued disapproval of various provisions of the Affordable Care Act (ACA).
 
In a move that harkens back to pre-Civil War states’ rights advocates, voters in Alabama, Wyoming and Montana overwhelmingly approved ballot measures that seek to nullify the ACA’s most controversial provision: the individual mandate. In Alabama and Wyoming, the question was on amending the state constitution to prevent individuals from being compelled to participate in a health care system, and preserve individual rights in making health care choices, respectively. Montanans approved a measure with similar language that did not amend the state constitution.
 
Missouri, which had previously passed an anti-individual mandate ballot initiative, voted to prohibit the establishment, creation or operation of a health insurance exchange (HIX). State legislative Republicans proposed the initiative to prevent Democratic Governor Jay Nixon from establishing an exchange by executive order. This, however, will not prevent the federal government from running Missouri’s HIX when the state fails to meet the ACA’s deadlines.
Finally, the voters of Florida, which has not been officially called as voting for Governor Romney or President Obama, narrowly rejected a constitutional amendment prohibiting the individual mandate.
 
Each of these ballot measures, with the exception of the Missouri initiative, are widely agreed to be symbolic. States cannot nullify a duly-passed and constitutional law. Though many believed the Civil War had settled this issue, the ballot initiatives prove that a wide majority of voters in the states mentioned disagree. Interestingly, in each of the states (Missouri, Alabama, Wyoming and Montana), the ballot questions were agreed to by a larger margin than Governor Romney carried each state. This means that President Obama voters, ostensibly Democrats, switched their vote to approve measures that oppose the president’s signature achievement.

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