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The waiting game is over: States must act on Obamacare

“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!

 

 

Vendors Should Game Out Potential Sequestration Impacts

Deltek has already discussed the likely impacts of federal budget sequestration on Justice and Public Safety programs here. Sequestration arises from the Budget Control Act of 2011, which established new budget enforcement mechanisms for reducing the federal deficit by at least $2.1 trillion over the 10-year period (FFY 2012-FFY 2021).
Vendors should expect state and local buyers to remain fairly uncertain—maybe even confused—about the potential impact of sequestration on their federally funded grant projects. Many agencies will not implement contingency plans for sequestration cuts. They will wait for sequestration to go into effect and let their state budget offices to sound the alarm and issue orders. So, vendors with projects funded by federal grant dollars should think ahead.
The National Association of State Budget Officers (NASBO) has reviewed the federal government’s most recent sequestration report and found that “the report has certain limitations – for example, its calculations are based on fiscal 2012 appropriated levels rather than fiscal 2013, and its organization by federal account rather than grant program may make it less easy for some state agencies to analyze.”
Federal Funds Information for States (FFIS), the leading analyst of federal aid to states and localities, has found that:
While 73% of the programs that FFIS tracks are covered by the sequester, most of the funding states receive via federal grants (82%) would be exempt from sequester. This is because Medicaid (which accounts for almost half of federal aid to states), several highway programs, and a host of other mandatory programs targeting low-income individuals are not subject to sequester.
However, vendors should keep in mind that grant funds underwriting special IT projects that are unrelated to long-established programs are more likely to be in that 18% of non-exempt funding. For example, the Centers for Medicare and Medicaid Services’ (CMS) funding for “State Grants and Demonstrations” is sequestrable. This means that this pot of $530 million (per FFY 2012 budget) would be subject to a 7.6% cut (or $40 million) over the sequestration period. Unfortunately, as NASBO has pointed out above, the White House report on the impact BCA does not provide the level of detail required to assess the impact of sequestration on specific grant awards.
In reviewing relevant federal documents, Deltek does find any indication that federal funding participation (FFP) on IT projects for means-tested benefit programs, such as Medicaid Management Information Systems (MMIS), would be affected by sequestration. This is in keeping with the fact that programs for low-income individuals are exempt from BCA cuts, but we will keep an eye on this. The BCA, which is due to go into effect on January 2, 2013, will immediately become a political hot potato after the November election.
For the time being, all IT vendors doing business with state and local government projects funded by federal grants (not FFP) unrelated to programs for low-income individuals would be well advised to have a contingency plan for sequestration reductions.  It will be a good exercise for the continuing budget battles that are likely to afflict Washington for the next four years, regardless of the November results.

Government 2.0: Government Trends - IT procurement transformation (Part 2)

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. 

 
Subscribers have access to the full article here, including expanded analysis and recommendations for contractors.
Also, be sure to follow Deltek's General Government Team on Twitter @GovWin_GenGov.

The consequence of the Middle Class Tax Relief and Job Creation Act of 2012

On February 22, President Barack Obama signed the Middle Class Tax Relief and Job Creation Act of 2012 into law. The bill provides a variety of benefits to help middle class Americans, including Medicare payment extensions, social security payroll tax cuts, extension of job incentives to small businesses, as well as moving some public safety radio systems to a new broadcast spectrum (one that has yet to be defined).
In the same month that President Obama signed this bill into law, the Lancaster County, Penn., Board of Commissioners voted to negotiate with ARINC to build a new radio system on a television communications band (T-band). The new bill threatens this project, as it has created an incentive auction of the broadcast TV spectrum. Despite the possibility that this project, and 800 like it across the country, are put in jeopardy, Lancaster County’s public safety radio communications consultant from MWF Enterprises does not see this as a problem. The legislation would require the county to abandon the spectrum in nine years. In addition, the law includes a requirement for TV stations to change channels, which may be unlikely considering the significant branding that stations have for their channel numbers. Also, the legislation would carry a $1 billion price tag for the federal government, which might force a future change.
Analyst’s Take:
While it might be too soon to determine what the end result of this new legislation will mean for public safety agencies, vendors should not change course. They should continue with plans to develop T-band radio communication systems and should ensure that they offer full disclosure when providing plans for these systems, whether it is at the planning and consulting phase or in the implementation phase. Local governments may be hesitant to spend tens of millions of dollars on a system that may have to change bands in less than 10 years. As the federal government continues its plans for the spectrum, vendors must keep a watchful eye to determine how this may affect their radio system development.

Deltek Pulse: Health care and social services – February 2012 recap

As the January 2014 implementation deadline fast approaches, February was yet again chock-full of news surrounding health insurance exchanges (HIXs). While some states continue to make progress toward meeting the deadline, others are still contesting the federal HIX mandate and plan to wait out the results of this month’s Supreme Court case surrounding its legality.
On Feb. 22, the Department of Health and Human Services (HHS) awarded additional Level One and Two establishment grants to 10 states, totaling nearly $230 million. Among them, Colorado, awarded $18 million, completed proposal submissions for two HIX-related procurements: HIX Services and HIX Operational Services. Other consulting and quality assurance-related procurements are in the pipeline. Nevada, awarded its second Level One grant worth $15.3 million, will use the funding to build a rules-based eligibility engine, to develop an operational plan, and to determine certain business and IT requirements unrelated to eligibility.
As the 2013 fiscal year (FY) approaches, governors continued to release state budget recommendations throughout February. A commonality amongst states is the continued battle to fund the ever-growing Medicaid population, particularly in the face of Medicaid eligibility expansion resulting from the Affordable Care Act (ACA). Beginning January 1, 2014, states will be required to expand Medicaid eligibility to all people below 133 percent of the federal poverty level, adding approximately 15.9 million newly-eligible beneficiaries to the Medicaid program. Based on the state budgets Deltek has analyzed since the start of the year, Massachusetts will see the biggest increase in Medicaid spending in FY 2013, with a 64.4 percent increase since FY 2010. Other major increases since FY 2010 include Alaska at 49.7 percent, Delaware at 36.4 percent and California at 35.4 percent.
On Feb. 23, North Carolina announced it would once again extend its current contract with Hewlett-Packard (HP), while Computer Sciences Corporation (CSC) – awarded the replacement Medicaid management information system (MMIS) contract in December 2008 – continues to build its MMIS for the state. This $122 million, two-year contract extension is the second awarded to HP for the MMIS, bringing the total contract value up to an estimated $616 million. Meanwhile, CSC was awarded another replacement MMIS contract with the Maryland Department of Health and Mental Hygiene, valued at $297 million.
Further, Florida was selected by the Centers for Medicare and Medicaid Services (CMS) to pilot the latest version of the Medicaid Information Technology Architecture (MITA) initiative, MITA 3.0. In doing so, the Agency for Healthcare Administration (AHCA) will complete a state self-assessment (SSA) and develop a roadmap to be used in planning future system upgrades and replacements to be completed by the end of June 2012.
Continuing to work toward the HIX implementation deadline, I predict states will be busy hiring consultants, producing technical plans, and releasing HIX solicitations throughout the next few months. However, this all may come to a halt pending the outcome of the March 26 – 28 Supreme Court case surrounding ACA. Expanded Medicaid eligibility may also be affected by the outcome of the case.
Throughout March and April, Deltek will continue to delve into state budget recommendations and take a closer look at Medicaid spending data. Be on the lookout for the round 3 of our series on the rising price of health care costs! As always, remember to follow Deltek’s Health Care and Social Services team on Twitter @GovWin_HHS, or connect with us through LinkedIn!

Breaking down President Obama's FY 2013 budget: Health and human services

While most people were occupied with last-minute Valentine’s Day preparations earlier this week, President Obama was busy announcing the FY 2013 budget. Rest assured that Deltek will be analyzing every inch of the data to uncover key trends and opportunities for our member network. This analysis will focus on funds trickling down to the states from the health and human services vertical. The Department of Health and Human Services’ (DHHS) Deputy Secretary Bill Corr spoke to the public on Feb. 13 and highlighted the health objectives the budget package addressed. DHHS plans to strengthen the nation’s health care, continuing on the Affordable Care Act (ACA) of 2010. Initiatives include health insurance exchange development, expanding community health programs, and increasing the health care workforce. Fighting fraud, waste, and abuse continues to be priority number 1 – the department collected almost $4 billion last year in improper payment recoveries. Corr also stated the FY 2013 budget and, specifically, Medicaid reform will help reduce the federal deficit by $366 billion over 10 years.
 
Following the same trend as last year, discretionary spending (Table 1, below) is set at $30 billion, which is down nearly 3.5 percent from FY 2011. Programs seeing major cuts include the public health and social services emergency fund and low-income home energy assistance (LIHEAP). The Distance Learning, Telemedicine, and Broadband Program saw a 68 percent increase to $42 million, following through on DHHS’ promise to strengthen health care, especially in rural areas. Mandatory spending (Table 2) also corresponded with DHHS goals and saw an 82 percent increase in funding for health insurance exchange establishment, totaling $868 million. Grant funding to states for Medicaid totals $269 billion. Stay tuned for FY 2014 numbers as eligibility enrollment is estimated to increase by nearly 16 million Americans. 

Table 1: Federal Grants to State and Local Governments, Discretionary (in millions of dollars)

 Click on image above for full-sized version

 

Table 2: Federal Grants to State and Local Governments, Mandatory  (in millions of dollars)

Click on image above for full-sized version

Other areas of the budget proposal include:

  • Temporary Assistance for Needy Families (TANF): TANF funding rises nominally to $17 billion in FY 2013.
  • Supplemental Nutrition Assistance Program (SNAP): The budget includes $7 billion in SNAP benefits, a 5 percent increase from FY 2011. Although states are seeing record food stamp numbers, the Department of Agriculture (USDA) transferred $400 million to support the Women, Infants, and Children (WIC) Program for FY 2012.
  • WIC: Program funds increased by 14 percent to $7 billion, which includes $14 million for infrastructure funding and $30 million for management information systems.
  • Child Support Enforcement: Funding took a 7 percent dip to $3.8 billion. The budget request includes new investments of $305 million in FY 2012 and $2.4 billion over ten years for the Child Support and Fatherhood Initiative.
  • Child Care: Proposes $6 billion for child care, which includes $2.6 billion for the Child Care and Development Block Grant to supplement assistance for low-income families; and entitlement to states is $3.4 billion.
  • Child Welfare: Requests $7.2 billion for foster care and permanency services including adoption and guardianship assistance, foster care, and independent living.
Overall, the FY 2013 budget produced minimal funding changes for health and social services programs. Vendors playing in the health care field will see the most benefit in those pocket areas of increased funding, especially surrounding health insurance exchange implementation, Medicaid system reform, and eligibility redetermination. Those thinking that the ruling on the ACA later this summer will stem exchange development should think again. Many states are planning to continue developing systems whether the act holds or not. With the major push to cut down on federal spending and fight abuse in the human services arena, vendors need to keep reporting systems up to date with all required mandates and regulations. As health information exchanges start to be rolled out this year, it should be interesting to see which states will find success in transferring electronic medical records, and which will not. It seems that health care will continue to be the hot topic of FY 2012 and FY 2013.

 

President Obama's FY 2013 budget: $6 billion in state and local public safety programs

On Monday, President Obama released his proposed fiscal year 2013 budget, which outlines proposed budget figures for highly-relied-upon grant programs within state and local governments. President Obama’s budget provides $632.7 billion to aid state and local governments in 2013 – an increase of $20.2 billion from 2012. Grant outlays for justice programs are estimated at $6.9 billion in 2013. A total of $2.57 billion will be discretionary funding made available to state and local public safety agencies via the Office of Justice Programs (see below). In regards to homeland security, the budget provides the Federal Emergency Management Agency (FEMA) with approximately $4 billion in discretionary funding (see below). In all, states and localities will have access to nearly $6 billion in public safety and homeland security grants for FY 2013.

 

Office of Justice Programs Budget Authority ($M)

 2011 Actual

2012 Estimate

2013 Estimate

% change (2011-2013)

State and Local Law Enforcement Assistance

1,219

1,094

945

-22%

Juvenile Justice Programs

241

211

202

-16%

Community Oriented Policing Services

304

162

278

-9%

Violence against Women Prevention and Prosecution Programs

404

390

392

-3%

Totals

2,168

1,857

1,817

-16%

FEMA Budget Authority ($M)

 2011 Actual

2012 Estimate

2013 Estimate

% change (2011-2013)

State and Local Programs

2,818

2,237

2,900

3%

United States Fire Administration and Training

4

3

3

-25%

Disaster Relief

2,523

1,204

1,204

-52%

Totals

5,345

3,444

4,107

-23%

Highlights:

Department of Homeland Security:
  • The budget provides $2.9 billion for state and local programs to equip, train, exercise, and hire first responders. To better target these funds, the budget proposes eliminating duplicative, stand-alone grant programs, and consolidating them into the National Preparedness Grant Program.
  • To retain an acceptable level of fire and emergency response coverage in the current constrained budgetary environment, the budget anticipates $1 billion in immediate assistance for the retention, rehiring, and hiring of firefighters in 2012, as requested by the president in the American Jobs Act.
  • The budget provides $6.1 billion for the Disaster Relief Fund.

Department of Justice:

  • The budget pro­vides $312 million for Juvenile Justice and Child Safety programs that assist states with their ju­venile justice systems.
  • The budget provides $257 million to support America’s first responders and the hiring and retention of police officers, sheriffs, and deputies across the country, and includes a preference for the hiring of post–9/11 veterans. This funding builds on the $166 million in COPS Hiring Grants enacted in 2012. These investments assist in building capacity to enable state and local law enforcement partners to make the most of their resources and encourage their most promising and effective public safety efforts. The budget includes $4 billion in immediate assistance for the retention, rehiring, and hiring of police officers in 2012, as requested by the president in the American Jobs Act.
  • The budget provides $413 million to continue efforts to combat the hundreds of thousands of violent crimes against women that are committed each year.

Department of Commerce:

  • The budget provides more than $10 billion of mandatory budget resources to help build an interoperable public safety broadband network that will strengthen economic growth and public safety, while benefitting from commercial innovation.

The federal government has had to tighten its belt, and the effects will be felt at all levels. Grant funding available to state and local governments for justice and homeland security programs has decreased, but the demand and need for those grants is likely to be just as high. The increased competition among governments for grant funding could leave some governments without the funding needed to pursue projects.

For more information on the public safety and homeland security market, Deltek and the Industry Council for Emergency Response Technologies (iCERT) have released Justice and Public Safety Market Overview, FY 2010-2012, which examines IT spending levels, trends and drivers, technology segments and their impact, and a look ahead to FY 2013 for the state and local justice/public safety and homeland security market.

 

 

 

Georgia Seeking To Boost Education With NCLB Waiver Request

In September, the Obama Administration announced plans to offer more flexibility from federal education mandates in exchange for a commitment from states to adopt reforms that boost overall student achievement.
After the announcement, a handful of states formally submitted requests to the U.S. Department of Education for waivers from key provisions of No Child Left Behind (NCLB), with numerous states indicating they plan to apply for waivers in a second round next year.
In this week’s installment, Deltek discusses Georgia’s plans to “increase the quality of instruction and implement a system to support continual improvement of student achievement.” Georgia said it’s seeking a waiver to fully implement a multi-dimensional system that supports the state’s core educational principles.
In its request, Georgia disclosed a few IT-specific initiatives, including a plan to 1) Develop and Administer Annual Statewide, Aligned, High-Quality Assessments that measure student growth (IT project A), and 2) Develop and Implement a State-based System of Differentiated Recognition, Accountability, and Support (IT Project B).
As part of its waiver request, Georgia is aiming to Develop and Administer Annual Statewide, Aligned, High-Quality Assessments (see IT project A above – at this time, there is no related Deltek tracked opportunity) which will support the development of a new system that will measure student knowledge and skills against a common set of college- and career-ready standards in mathematics and English language. It will also provide an accurate measure of student achievement across a full performance continuum and an accurate measure of student growth over a full academic year or course.
Georgia said that once the minimum requirements are determined for the assessment system, the GaDOE will evaluate district readiness. It also said that implementation may require additional infrastructure (such as hardware and bandwidth) for some districts.
Note: In developing their assessment system, Georgia may work with a state consortium in which other states may issue RFPs for procurements.
Elsewhere, Georgia is looking to develop and implement a state-developed system of Differentiated Recognition, Accountability, and Support (see IT project B above – at this time, there is no related Deltek tracked opportunity). The goal of this system is to provide meaningful information about school performance that guides initiatives to effectively improve student achievement and graduation rates; promote capacity for sustained progress over time; close achievement gaps for all schools across the state; and target interventions at those schools with greatest need.
Note: The system is expected to be implemented no later than the 2012-2013 school year.
While Georgia seeks to develop and improve its overall systems of Assessments and Accountability, the state currently has 8 Deltek tracked opportunities dealing with primary/secondary education While none of these are related to the state’s NCLB waiver-related IT projects listed above, when further information is available from the state, look to Deltek to track and publish the associated contracting opportunities.   

 

 

Obama American Jobs Act: Contractor Implications

On Thursday night, President Barack Obama revealed the American Jobs Act, an ambitious $447 billion package of spending plans and tax cuts designed to stimulate the U.S. economy and create badly needed jobs. And according to Obama, the plan will be paid for in full by rolling it into the list of spending to be offset by the Joint Committee focused on a deficit reduction plan.

Overall, Obama pushed for more federal spending to help jump-start the economy, although he avoided the word "stimulus," which has become an issue with Republicans. Clearly, the GOP will continue to oppose anything resembling the last stimulus, and is quite weary of the threat of continued out-of-control spending.

Below are some key points from Obama's speech which could affect the government contracting community:

  • Helping Small Businesses – As part of his infrastructure revitalization plan, Obama called for significant investments in schools, roads, rail and airports while helping small business contractors compete for infrastructure projects. He also called for tax cuts, reforms and regulatory reductions to help entrepreneurs and small businesses access capital and grow, which could benefit smaller contractors just getting started and those looking to expand their operations.

    Contractor Impact: Obama's plan includes changing the way the government does business with smaller firms. The Administration will soon announce a plan to accelerate government payments to small contractors to help put money in their hands faster. The President is also charging his CIO and CTO to, within 90 days; stand up a one-stop, online portal for small businesses to easily access government services.

  • Transportation Infrastructure - Transportation infrastructure presents a double opportunity for Obama - a chance to get Americans working, while modernizing the U.S.'s deteriorating infrastructure. In total, Obama called for $50 billion to be spent on immediate investments for highways, transit, rail and aviation. The President's plan includes investments to improve America's airports, support NextGen Air Traffic Modernization efforts, and resources for the TIGER and TIFIA programs, which target competitive dollars to innovative multi-modal infrastructure programs. Another $10 billion will be spent on an infrastructure bank to help get private funding to support infrastructure-related projects.

    Contractor Impact: Infrastructure work would benefit AEC contractors over the next several years. According to Deltek's "Federal Architecture and Engineering Market Outlook, 2011-2016" report, demand for architecture and engineering (A/E) services by the U.S. government will increase from $8.1 billion in 2011 to $9.5 billion in 2016 at a compound annual growth rate (CAGR) of 3.2%. As transportation infrastructure modernization progresses, so does the embedded technology, which could mean additional opportunity for technology contractors.

  • School Infrastructure - Obama also wants to create jobs to work on construction projects at thousands of deteriorating schools, with rural and Bureau of Indian Education funded schools having top priority. Obama aims to invest $25 billion in school infrastructure, including Internet-ready classrooms. He also emphasized the need to rehire teachers who have been laid off, and will look to spend $35 billion to help protect those teachers.

    Contractor Impact: Infrastructure work would benefit AEC contractors and firms that could provide IT enhancements and upgrades. Projects would include energy efficiency upgrades, modernization of science and computer labs and technology upgrades.

  • Expanding access to high-speed wireless - The President is calling for a deficit reducing plan to deploy high-speed wireless services to at least 98% of Americans, including those in more remote rural communities, while freeing up spectrum through incentive auctions, spurring innovation, and creating a nationwide, interoperable wireless network for public safety.

    Contractor Impact: There is opportunity for not only companies that provide wireless network capabilities, but also adjacent technology areas that would be facilitated by broader access, such as telehealth and telework.

  • Supporting the Unemployed – The President proposes an overhaul of the Unemployment Insurance program, extending benefits and giving states more responsibility and flexibility to design better programs for reemployment, particularly for the long-term unemployed. There are some 6.2 million Americans who have been out of work for more than six months. States would also have the flexibility to help long-term unemployed workers create their own jobs by starting their own small businesses.

    Contractor Impact: Depending on the scale and nature of the overhaul, states may need assistance in developing, implementing and monitoring new programs and information.

  • Creating Tax Benefits: The Act has several tax incentives for businesses to spur hiring:

    • Payroll taxes - Topping the President's jobs initiative is the cutting of payroll taxes. The plan is to expand cuts worth $240 billion so that workers could expect to see their share halved through 2012. This provision would also cut the payroll tax in half to 3.1% for employers on the first $5 million in wages.
    • Tax Credits for Hiring the Long-Term Unemployed - President Obama's plan would also give companies a $4,000 tax credit for hiring from the 5 million, long-term unemployed Americans.
    • Tax Credits for Hiring Veterans - The unemployment rate for U.S. veterans below the age of 30 hovers around 24%, and that rate could expand. Currently, there are 2 million veterans of the Afghanistan and Iraq campaigns back home. But once those missions fully draw down, that number could easily double, reports say. The "Returning Heroes tax credit" will set aside $5,600 to $9,600 to encourage the hiring of unemployed veterans.

    Contractor Impact: Tax incentives are useful to any company struggling with cashflow issues.

Spending Summary

Source: White House Office of the Press Secretary

The biggest criticism of the plan that seems to be leading the online debate is the tax credit element, the argument being that businesses only hire when the demand for their product or service is there, not simply to take advantage of tax credits. I tend to believe this will be true, except for those specific areas of investment that will drive demand and therefore the need to hire (e.g. transportation, education, wireless). Driving demand for struggling businesses in flattened industries outside of these will be an issue.

In the current environment, the first question might be "how will the government pay for all of this?"To pay for the plan, President Obama is calling on the Joint Committee that is currently working on a deficit reduction plan (required as part of the debt ceiling agreement) to find additional cuts. Obama noted that in the coming weeks, he would further outline his deficit reduction plans.

So what are the chances of this act passing Congress? Considering the level of contentious debate that has occurred since the 111th Congress was formed, particularly around budget-related legislation (e.g. FY11 budget, debt ceiling), this bill will likely face the same level of scrutiny. However, there are no less than 26 other job bills that were introduced and stalled in Congress in 2011 (some of them with very interesting names such as the "Keep American Jobs from Going Down the Drain Act of 2011," and "Don't Default on America's Debts and Destroy American Jobs Act of 2011").

I'm sure President Obama is hoping for the "Can We Please Just Pass This Bill Without Drawn Out and Stubborn Debate Act of 2011." And he may get his wish. Spurred by plummeting Congressional approval ratings, negative public perception and plain old weariness of continuous head-butting over numerous issues, Congress may be more willing to compromise than we've seen on any other issue in 2011 - as long as Obama's plan to pay for it comes to fruition.

President Obama's jobs package and its impact on state and local Public Safety agencies

Tomorrow, President Obama will release details on a new jobs package that looks to boost the economy and reduce unemployment. Part of this package will be aid provided to state and local governments. This aid is expected to come in the form of funding to keep teachers and first responders employed. This will most likely follow the same format as the 2009 American Recovery and Reinvestment Act (ARRA), which allocated funding for grant programs aimed at job retention. If this is the case, you can expect the Community Oriented Policing Services (COPS) program to receive the bulk of this funding ($2 billion in ARRA).

So, what does this mean for vendors? State and local agencies will be able to apply for funding to keep necessary project management and project-specific personnel employed. This also means that projects currently funded and in the implementation stage will be able to continue since a reduced workforce could severely jeopardize project milestones. This is especially true for agencies in the process of working toward the FCC's narrowbanding mandate. With the January 2013 deadline nearly 15 months away, it is imperative that agencies retain staff to ensure compliance. The fines associated with not meeting the mandate are expected to be high come January 1, 2013.

Vendors should work closely with their customers to properly identify positions that are vulnerable to cuts or have seen cuts. From there, vendors can begin formulating a grants team to help their customers apply for the upcoming funds. The last thing a vendor wants is to have a resume with a bunch of unfinished projects, especially if they are new to the market and looking to showcase performance and success.

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