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Governors focusing on educational performance, corrections, and mental health

2014 finds the governors as committed as ever to their growth agendas launched over the previous two year. Continued budget surpluses open the door to state innovation and experimentation.

Each year Deltek compiles the forward-looking agenda items from each of the governors' state of the state addresses.  This year found some interesting shifts in the areas of emphasis.  States have been out of recession for more than two years now, and governors have been ambitious with their agendas.

Deltek classifies each of the governors' agenda items by vertical (as shown in Figure 1 below).  We also track the popularity of each vertical as compared to the recent trend.  For 2014, Education, Justice/Public Safety, and Social Services are the stand-out verticals.

Figure 1. 2014 Agenda Item Popularity vs. 2012-2014 Average, by Deltek Vertical

Source: Deltek

Deltek also subclassifies each agenda item below the vertical level (not shown above).  In the Education vertical, the governors were specifically interested in improved performance for Pre-K through 12 public education.  They are also keen to blend high school education into the two- and four-year higher educations systems to create a seamless pipeline of educational attainment for workforce development purposes.  Containment of higher education tuition costs is also a significant interest and a key part of performance measurement for these institutions.

Corrections continues to dominate the Justice/Public Safety vertical, where governors want to contain costs by moving non-violent offenders to community supervision.  They also want to develop better processes for reintroducing ex-cons back into society and the workforce.  This year marks the first time government have begun to look at the economic impacts of incarceration as well as the fiscal impacts.

Governor interest in Social Services increased for the first time since the recession.  With little federal direction in this area, the vertical has been adrift.  However, this year found governors interested in addressing public mental health concerns, driven in part by school shootings, veterans, and drug addiction.  Drug addiction and treatment, given recent upswings in crystal meth and heroine usage, has emerged a top level priority.

Learn more at our FREE upcoming webinar (May 8th).

More detailed information for all of the verticals covered in Deltek's recent report "State of the State, 2014." The report is available for immediate download by Deltek State & Local Industry Analysis subscribers.  It can be purchased online by those who are not subscribers.  The report comes with a spreadsheet that includes all of the governors agenda items categorized for easy sorting and reference by market strategists.

 

IT Contracting Half-way Through FY 2014 – Civilian is Chugging, but Can DoD Catch Up?

A year ago at this time, if you will recall, we were watching and waiting to see if federal agencies would have FY 2013 appropriations made and budgets approved or whether they would face full-year continuing resolution-level spending and sequestration. What a difference a year makes, with FY 2014 budgets passed months ago. So how are agencies doing at getting their information technology (IT) contract dollars obligated at the mid-point and what might we expect in the second half of FY 2014? Let’s take a look.

Last week, I looked at the total market contract obligations at the mid-fiscal-year point. This week I’ll look specifically at IT obligations. In this, and other similar scenarios that I have explored, I took a rough “back of envelope” approach to projecting potential contract obligation rates for the remaining two fiscal quarters. For consistency, I will use the same baseline: If agencies obligate at least 90% of what they did in FY 2013, what might that project for spending on contracts in the second half of this fiscal year.

In the latest federal FY 2015 IT budget request, OMB reported the total enacted FY 2014 IT budget to be about $75 billion, which is $2.5 billion (3.5%) more than agencies spent in FY 2013.  So this 90% threshold that I am using for potential FY 2014 spending, while not a perfect comparison, might be conservative. We’ll just have to see.

Contract Obligations Compared

For IT, these twenty top-spending departments account for $16.2 billion in combined Q1 and Q2 obligations for FY 2014 so far, although DoD’s reporting lag will most certainly increase that amount. If they spend 90% of what they did in FY 2013 they will have $43.2 billion left to obligate in the remaining two quarters of this fiscal year. (See table below.) Under that assumption, the remaining federal departments and agencies would account for roughly $1.1 billion for Q3 and Q4, reaching the overall $44.4 billion mark for the second half of the year.

Observations

  • The civilian agencies in the top twenty have reported yearly obligations of $9.4 billion, $8.9 billion, and $9.5 billion for FY 2012, 2013 and 2014 respectively. So for FY 2014 these civilian departments are currently running on par with FY 2012.

  • The defense branches have reported yearly obligations of $18.4 billion, $16.2 billion and $6.7 billion for FY 2012, 2013, and 2014 respectively. Granted, the FY 2014 Q1-Q2 data is incomplete due to DoD’s reporting lag, which could take up to 90 days to settle out. So the question then is whether we will see another $10 billion in obligations post to the defense branches in the coming days to put them on par with last fiscal year or whether we will see the softening that’s apparent from FY 2012 to FY 2013.

  • Outside of DoD, there is not that much variance year-over-year. Most departments are within $100 million of what they spend in Q1-Q2 of last year. The SSA, USDA, and VA have posted increases of $200 million in obligations over this time in FY 2013.

What we may be seeing in the data so far – at least with the civilian organizations – is that they are enjoying the benefits of having budgets in place relatively early in the fiscal year, compared to dealing with CRs and late-breaking omnibus spending measures. There’s no surprise there. The real story in the data may be what is happening in the defense sector – that draw-downs, realignments, and program delays appear to be having noticeable impacts on their IT contracting run rates. Only time will tell if they will make up the difference in the second half of the year.

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Originally published in the GovWin FIA Analysts Perspectives Blog. Follow me on Twitter @GovWinSlye.

A Possible Contracted Spending Scenario for the Rest of FY 2014

Can you believe that we are half way through fiscal year 2014? Let’s take a look at the data to see what can we tell so far about how much federal departments have spent on contracts at the mid-point in the year and see what might be in store for us in the second half of FY 2014.

When I looked at the mid-fiscal-year spending rates last year, I proposed what I felt was reasonable approach to projecting potential contract obligation rates for the remaining two fiscal quarters. This year I again set a baseline that in FY 2014 agencies will obligate at least 90% of what they did in FY 2013 to drive my general projections for what they might spend on contracts in the second half of the fiscal year. See my previous blog for a more detailed explanation of my approach.

Contract Obligations Compared

The twenty top-spending departments account for $122.4B in combined Q1 and Q2 obligations for FY 2014. If they spend 90% of what they did in FY 2013 they will have $285.5B left to obligate in the remaining two quarters of this fiscal year. (See table below.) Under that assumption, the remaining federal departments and agencies would account for roughly $4.5B for Q3 and Q4, reaching the overall $290B mark for the second half of the year.


Observations

  • Only a few departments have a FY 2014 Q1 and Q2 obligation rate lower than they did in FY 2013, suggesting that their obligation rates may be higher than last year at this time, depending on total final obligations.

  • At this point in FY 2013, each defense branch had reported at least $3 billion more in obligations than they have reported for FY 2014, even under sequestration.
    • Navy has reported $15.2B for FY 2014, compared to $25.3B at this point in FY 2013
    • Army has reported $12.4B for FY 2014 18B, down from $17.8B for FY 2013
    • Defense Agencies have reported $16.6B for FY 2014, compared to $19.1B for FY 2013
    • Air Force has reported $14.1B, compared to $17.3B for FY 2013.

  • Seven of the twenty departments above saw drops of 5% or more from FY 2012 to FY 2013, five of which are civilian agencies, i.e. Energy, NASA, DHS, Justice, and Education. But without exception each of these departments has reported increases in the first two quarters of FY 2014 compared to FY 2013. Energy, NASA, and Education each show increases of 15 percentage points or greater.

  • Energy’s yearly cyclicality continues. During Q1 and Q2 the DoE tends to obligate roughly 45% and 75% alternately from year to year. Looking back at FY 2011 reveals that they spent $11.1B in the first two quarters, which accounted for 45% of their $25.1B total FY 2011 obligations.

  • NASA also reveals cyclicality in its contracting. In FY 2011 NASA reported $6.4B in combined Q1 and Q2 obligations accounting for 41% of their $15.4B total obligations for that year. Looking at the chart above we can see an oscillation in NASA’s obligations since then with $7.8B reported so far in FY 2014. Depending on whether my 90% assumption is pessimistic regarding their final spending will determine whether they have between 40-50% of their budget yet to obligate this fiscal year.

Implications

Some of the year-to-year changes shown above may be due to the appropriations levels and funding priorities that these departments received under the FY 2014 Omnibus funding bill passed earlier this year. However, what these changes more likely indicate is the impact of agencies having actual budgets earlier in the fiscal year, compared to having full-year continuing resolutions that freeze priorities and limit flexibility.

How useful or accurate this kind of macro-level estimation is depends in large part on its main assumptions. Last year this approach pointed to roughly $300 billion in potential combined FY 2013 Q3 and Q4 obligations. The final data shows that actual obligations came in at $265 billion, so my 90% assumption was optimistic in the age of uncertainty, sequestration, and year-long continuing resolutions. Actual combined Q1-Q2 obligations among the top twenty departments declined from $237.1 billion in FY 2012 to $194.0 billion in FY 2013, an 18% drop.

So far in FY 2014, these same departments have reported combined Q1 and Q2 obligations of $122.5 billion, BUT the four largest spenders – the defense branches – have not fully reported their Q2 data. Looking at the civilian departments only give us $65.7 billion, $57.6 billion, and $64.2 billion for FYs 2012, 2013, and 2014 respectively, so FY 2014 is running only 2% below FY 2012 levels and is nearly 12% ahead of FY 2013.  We’ll just have to wait and see what comes from DoD.

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Originally published in the GovWin FIA Analysts Perspectives Blog. Follow me on Twitter @GovWinSlye.

Business Opportunities in DOT’s Fiscal 2015 IT Budget

The Department of Transportation’s information technology (IT) budget request for fiscal year 2015 is $3.3 billion, an amount almost identical to that enacted in FY 2014. Of this total 51%, or $1.7 billion, is slated to be development, modernization, and enhancement (DME) funding. Compare this to $1.6 billion in operations and maintenance (O&M) funding for FY 2015 and what appears is yet another year that DME spending on IT surpasses spending on legacy IT assets at the DOT.

This remarkable situation (remarkable because IT budgets have stagnated everywhere) makes the DOT one of the more attractive business development targets in FY 2015. This post takes a look at a few of the programs receiving the highest percentage of DME funding at the DOT and examines the competitive environment surrounding some those programs.

Federal Aviation Administration



Not surprisingly, all of the top programs receiving 2015 DME funding are at the Federal Aviation Administration (FAA). I noted in a previous post that the FAA is slated to receive $836 million in FY 2015, plus an additional $186 million if Congress chooses to fund the president’s so-called “Opportunity, Growth, and Security Initiative” for the Department of Transportation. The programs listed in Table 1 will benefit from those DME dollars, as all are related to either the Next Generation Air Transportation System or the legacy National Airspace System that preceded it. Table 2 below shows that major support contracts related to some of those programs are due to expire by the end of fiscal 2015, providing a potential business opportunity for competitors and follow-on opportunity for incumbents.
 
 
Non-FAA Programs

Having looked at NextGen/NAS related programs at the FAA, what about other programs across the DOT that may be of interest and have DME funding in FY 2015? Table 3 below lists several programs offering potential business opportunities based on new funding in FY 2015.
 
 
Contract information for the DOT Common Operating Environment is readily available, but the opportunity here is limited given the long-term support contracts (#DTOS59D1000008 and #DTOS59D1000009) held by ActioNet which don’t expire until 2019. This leaves the remaining programs to consider. Of these, available details are hit or miss. Here is what could be found.
  • National Pipeline Information Exchange (NIPX) – A program planned by the Pipeline and Hazardous Materials Safety Administration, the NIPX is an integrated database of state and non-PHMSA data sources tracking “unregulated miles, inspection results, enforcements, SRCR and incident investigation on operators” that will enable information sharing between the PHMSA and state partners. No incumbent contract could be found, suggesting this may be a new requirement.
  • FMCSA Drug and Alcohol Clearinghouse – A program planned by the Federal Motor Carrier Safety Administration to create a controlled substances and alcohol test results database for Commercial Driver's License holders, the D&A Clearinghouse is part of MAP-21 legislation requirements intended to improve safety by ensuring the effectiveness of testing programs. No incumbent contract could be found.
  • MARAD Ready Reserve Force (RRF) Support – Automation capabilities provided by the Nautical System 5 (NS5) and Ready Reserve Force Management System (RMS) for the Maritime Administration’s RRF program. The current support contract (#DTMA91C20120008) held by Management Systems and Consultants expires in December 2016.
  • DOT Departmental Procurement Platform – A program for which the DOT last carried out market research in 2010, the DPP consolidates departmental procurement systems that integrate with DOT's Delphi financial system. An incumbent contract for DPP support couldn’t be found.
Summing up, this handful of programs illustrates that there are pockets of opportunity in the DOT’s $3.3 billion IT budget for FY 2015.  These aren’t multi-million dollar programs the size of many FAA investments, but winning contracts for this work would provide respectable revenue for small and mid-sized businesses in particular.

 

FAA’s NextGen Remains a Winner in Fiscal 2015 Budget Request

The Federal Aviation Administration, a perennial “winner” when it comes to appropriations, is slated to once again receive nearly $1 billion in funding for work related to the Next Generation Air Transportation System (NextGen).  The president’s budget request for the FAA actually works out to $836 million, plus an additional $186 million if Congress also chooses to fund the so-called “Opportunity, Growth, and Security Initiative” for the Department of Transportation.  One billion dollars per fiscal year is a lot of money under good circumstances.  In the context of the United States’ currently dire fiscal condition, it is an eye-popping amount

What has the DOT/FAA been doing with this annual budgetary largesse, generally untouched even in the face of sequestration?  Falling behind schedule and making bad business decisions, according to a recent audit by the DOT’s Office of the Inspector General.  To quote from the report “While FAA is making progress with elements of NextGen, [its] work continues to find longstanding problems with cost increases, schedule slips, and performance shortfalls.”  Some specific problems cited in the report include:

  • Failing to make “key Enterprise Architecture decisions … such as investments needed for a NextGen weather-related system that was scheduled for 2010.”
  • Failing “to develop an executable implementation plan that addresses costs and technology development and integration.”
  • Allowing the production schedules of “key modernization projects … needed to implement NextGen capabilities” to slip.

The result of these “challenges” is that members of the aerospace industry are becoming increasingly skeptical of spending money on the installation of NextGen electronic components in their aircraft given the lack of clear benefits to do so.  This is a remarkable observation considering NextGen has been touted for years as the future of air travel in the United States.

The picture that emerges from the OIG audit is not uniformly bleak.  In fact, for IT providers there is considerable opportunity in the FAA’s chaos.  NextGen schedule slips suggest the potential for more contractor work in the future and if the government is going to continue throwing close to $1 billion at the problem, who are industry partners to complain? 

For example, the longer NextGen systems remain under development, the longer legacy National Airspace System components will require sustainment.  The DOT proposes to fund the FAA’s NAS Sustainment Strategy to the tune of $370 million in FY 2015 “to reduce some of FAA’s multi-billion dollar maintenance backlog.”  Therefore, what we are really talking about in FY 2015 is a total of $1.37 billion for NextGen/NAS sustainment funding.

Finally, if all this screams legacy contract recompetition to you, then we’re on the same page as the DOT OIG.  To again quote from the report, the “FAA will need a sufficient workforce to manage FAA’s increasing acquisition workload.”  By my count there are at least 7 NextGen/NAS related contracts expiring by the end of FY 2015.


Of these contracts, two stand out – the ERAM support contract held by Lockheed Martin and the System Wide Information Management (SWIM) System Engineering and Business Support Services contract held by the North Star Group.  The ERAM contract deserves attention because it is by far and away the largest of the contracts listed and because the implementation of ERAM has experienced repeated delays over the years.  The SWIM support contract is worth knowing because the SWIM system is the SOA-based information sharing interface that sits at the center of NextGen.  Obviously, the others are worth having on the radar as well.  It’s just that these efforts stand out to me more than the others.

 

 

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.

Congress Set to Pass FY 2014 Funding – Would Avert Shutdown, Mute Sequestration

The U.S. Congress is expected to pass an omnibus funding bill for the remainder of fiscal year (FY) 2014 that includes $1 trillion in discretionary federal funds.

The Hill reported that H.R. 3547 passed the House and is now moving onto the Senate. The bill is a compromise measure in keeping with the budget agreement the two parties reached late in 2013. As such, the bill is set to increase total discretionary spending to $1.102 trillion in FY 2014, an increase over the $986 billion that was originally planned.

If the final bill passes the Senate and is signed by the President, as is expected at the time of this writing, another looming government shutdown will have been averted. Further, departments and agencies that have been coping with the limitations imposed under the “same stuff, different day” scenario that accompanies continuing resolutions (CR) will have real appropriations with operating budgets and more program flexibility, even if their budgets don’t necessarily grow.

Year-over-Year Changes

The pending omnibus would, in one sweeping appropriations, address funding for each of the agencies covered under the twelve individual appropriations bills that traditionally make their way through Congress.  Barring any unexpected changes in either chamber, a summary of the appropriation’s impact on departmental budgets is presented in the table below and following descriptions.

Department of Defense

Total FY 2014 funding is set at $572B and includes $487B in base budget and $85B for OCO.

  • Military Personnel (MILPERS) - $129B, up $1.3B from FY 2013. Includes 1% pay raise for armed forces and civilian workforce, the first civilian raise in 4 years.
  • O&M - $160B, down $13.6B from FY 2013. Priority on essential readiness programs, including $447M for CYBERCOM
  • Procurement - $92.9B, down $7.5B from FY 2013 enacted level.
  • RDT&E - $63B, $6.9B below FY 2013
  • Military Construction (MILCON) - $9.8B, a decrease of $817M from FY 2013
  • These budget categories (MILPERS, etc.) are split and aggregate across the four defense areas as follows:
    • Air Force - $133B, Army - $117B, Navy/Marine Corps - $144B, Defense-wide - $57B
  • Identifiable OCO spending breaks out as follows:
    • Air Force - $16.5B, Army - $40B, Navy/Marine Corps - $14B, Defense-wide - $7.4B
  • Includes a 1% pay raise to members of the Armed Forces and the Department of Defense civilian workforce. This is the first pay raise for Department of Defense civilians in four years.
  • Supports readiness with O&M funding that is $11B higher than under a full-year CR.
  • Provides $1B billion for the National Guard and Reserve Equipment Account to ensure Guard and Reserve units have the critical equipment necessary for both homeland security and overseas missions.
  • Includes $2.4B to continue operation and begin modernization of nine Navy ships which had been proposed for retirement due to budget constraints
  • Adds $175M for the Rapid Innovation Program and $75M for the Industrial Base Innovation Fund to promote the development of new technologies and timely fielding of critical equipment.
  • Instead of across-the-board sequestration cuts, the bill proposes 1,065 specific cuts to programs and redirects some of those funds to higher priorities.
  • Translates delays in acquisition programs into spending deferments and reductions, including:
    • $204M from the Army’s Warfighter Information Network-Tactical Increment II due to test issues
    • $85M from the Air Force’s Space Fence radar system due to acquisition delays
    • $45M from follow-on development of the Navy’s E-2D Advanced Hawkeye aircraft due to contract delays.

Health and Human Services

HHS funding is part of the broader Labor, Health and Human Services, and Education Appropriation which totals $156.8 billion in discretionary funding, and the Agriculture Appropriation.  We estimate the HHS portion of these appropriations to be $80B.  HHS highlights of the omnibus bill include the following:

  • $2.6B for FDA, $217M above FY 2013
  • $3.7B for CMS management and operations, equal to the sequester level
  • $6.9B for the CDC, $567 million above the FY 2013
  • $4.4B for the Indian Health Service, $304M above the post-sequestration level
  • $29.9B for NIH, $1B above FY 2013 post-sequester
  • $30.9B for ACF, $782M above FY 2013 enacted level
  • $3.6B for SAMHSA, $144M over FY 2013 enacted level
  • $8.6B for Head Start, a $1B above the post-sequestration level
  • $2.36B for the Child Care and Development Block Grant, $154M above FY 2013
  • $3.6B Community Health Centers (CHCs), a $700 million increase
  • $2.3B HIV/AIDs Programs, a $70M increase
  • The bill provides no new funding for ObamaCare, and holds the line on ObamaCare funding in CMS.
  • $305 million for CMS to allow for the timely processing and payment of benefits, and the continuation of essential services for the increasing number of Americans who rely on traditional Medicare programs.

Education

  • $250M for Race to the Top—Preschool Development  to be used for grants to States
  • $11.5B for IDEA/Special Education 
  • $14.4B for Title I/Disadvantaged Schools, a $625M increase
  • $1.2B for 21st Century Community Learning Centers, an increase of $58M
  • $1.3B for Impact Aid, an increase of $65M
  • $22.8B for the Pell Grant program

Veterans Affairs

VA funding is part of the broader Military Construction/Veterans Affairs Appropriations.  VA’s discretionary funding totals $63.2B for FY 2014.  VA highlights of the omnibus bill include the following:

  • $55.6B in FY 2015 advance appropriations for veterans medical care
  • $20M above the budget request to upgrade computer hardware, such as servers, in VA Regional Offices to handle the advanced program requirements of the Veterans Benefits Management System
  • $250M for rural health care, including telehealth and mobile clinics
  • Mandates several requirements before the VA can obligate more than 25% of the funding for  Vista electronic health record modernization
  • $4B in FY 2014 to meet the health care needs of veterans who have served in Iraq and Afghanistan
  • $4.9B to provide healthcare for women veterans in FY2014
  • $7.6B for Long Term Care
  • $586M for Medical and Prosthetic Research
  • $3.7B for Information Technology, $20M over the request
  • $140M – an increase of $20 million above the President’s request and $26 million above
  • the fiscal year 2013 enacted level – for information technology upgrades at regional offices to
  • manage the improved paperless claims processing system;
  • $250 million for rural health care, including telehealth and mobile clinics, for veterans in rural and highly rural areas, including Native American populations.
  • Minor Construction within the VA is funded at $715M – the same as the President’s request and $108 million above the fiscal year 2013 enacted level.

State and International Programs

  • $49B includes $6.5B for Overseas Contingency Operations (OCO) and $15.7B in base and contingency funding for operational costs of the State Department and related agencies
  • $1.3B for USAID operations, of which $91 million is for contingency funding

Homeland Security

Overall FY 2014 discretionary spending for DHS is $39.3B, a reduction of $336 million from the FY 2013 enacted level.

  • Coast Guard: $10.2B overall, of which $8.7B is discretionary spending. The bill also provides $425 million in targeted increases above the FY 2014 request to support front line personnel with resources, including $23 million and $2 million respectively for pre-acquisition design work of the Offshore Patrol Cutter and for initial acquisition planning and design of a new polar icebreaker.
  • Transportation Security Administration (TSA): $7.4B for TSA is reduced by $2.1B in offsetting collections and fees. The bill includes funding for investments in explosives detection systems, passenger screening technologies, and air cargo security. The bill includes $177 million for passenger screening technologies, $93 million for Secure Flight, which matches passenger data against records contained in portions of the Terrorist Screening Database, $83 million for expedited and other vetting programs, and $25 million for the Federal Flight Deck Officer and Flight Crew Training program.
  • U.S. Customs and Border Protection (CBP): $10.6B, which adds $111 million above the FY 2013 enacted level. Adds $91 million above the budget request for Air and Marine operations and procurement of critical assets, including enhanced radar for unmanned aircraft systems and restoring the 30% cut to flight hours proposed in the budget. Adds $10 million for trusted traveler programs, including additional Global Entry kiosks and mobile document readers, expanding preclearance activities, and for border transformation programs like the land border integration effort and the port runner/absconder program.
  • U.S. Immigration and Customs Enforcement (ICE): $5.6B for ICE, of which $2.8B is for detention and removal operations, including border patrol, special agents and immigration officials.
  • United States Citizenship and Immigration Services (USCIS): $116 million in direct appropriations for USCIS and with $114 million, fully funds the E-Verify employment eligibility verification system.
  • United States Secret Service: $1.6B, expands cyber training provided by the Secret Service to state and local law enforcement officials, grows cooperation between the Secret Service and the FBI in cybersecurity, and maintains the Service’s primary role in protecting U.S. financial systems in cyberspace.
  • Domestic Nuclear Detection Office (DNDO): $285 million, including $14 million for handheld portable radiation detectors, $71 million for research and development of next-generation detection technologies, and $22 million for the Securing the Cities program.
  • National Protection and Programs Directorate (NPPD): $1.2B for the Infrastructure Protection and Information Security Program, including $792 million for cybersecurity protection of Federal networks and incident response, consisting in part of:
    • $382 million for intrusion detection on civilian Federal networks
    • $200 million to build on a new monitoring and diagnostics program begun in 2013 to better protect civilian Federal networks against threats through real time analysis of day-to-day activity
    • $15.8 million for cybersecurity education to train future cyber warriors
  • Science and Technology (S&T): $1.2B, sustains investment in high-priority research and development efforts, including $404 million in funding for the construction of the National Bio- and Agro-Defense Facility (NBAF).  
  • Office of Health Affairs (OHA): $127 million, including $85 million for the Bio-Watch Program and $2 million to complete demonstration projects through the Chemical Defense Program.

Housing and Urban Development

  • HUD’s operating budget declines this year as FY 2014 discretionary funding of $32.8B represents a 2% decrease from the FY 2013 enacted level of $33.5B.
  • Funding includes:
    • $26.3B for Public and Indian Housing (increase of $411M from FY 2013 enacted and $1.5B below FY 2014 request)
    • $10.5B for Housing Programs ($561M above FY 2013 enacted and $381M below FY 2014 request)
    • $6.6B for Community Planning and Development Programs ($145M less than FY 2013 enacted)
  • Provisions of Interest
    • $36M for the HUD OCIO.
    • $250M for development, modernization, enhancement and maintenance of Department-wide and program-specific IT programs.

Justice

  • Bolsters resources for DOJ capabilities to counter growing cyber threats. Within 120 days of enactment, DOJ is to provide a multiyear strategic plan that identifies resources, programs and coordination structures need to enable prevention of and more rapid response to future cyber attacks.
  • Justice Information Sharing Technology (JIST):  $25.8 million in funding for JIST, as well as enabling the Attorney General to transfer funds to this account from funds available to DOJ for enterprise-wide IT initiatives.
  • National Security Division (NSD): $91.8 million for the NSD, including funds to support the Intelligence Community to combat cyber threats at with resources that at least match FY 2013 levels.
  • Federal Bureau of Investigation (FBI): Receives $8.3 billion, an increase of $232 million over FY 2013 enacted levels.
    • $8.2 billion for salaries and expenses of the FBI.
    • $390.0 million in resources to continue support its Next Generation Cyber Initiative and cyber task forces
    • The FBI is expected to increase resources for the National Instant Criminal Background Check System (NICS) by $60,000,000 to expand capacity of NICS to meet rising demand for system resources.
  • Drug Enforcement Administration (DEA): $2.4 billion, marking a rise of $21 million over FY 2013 levels.
  • Includes $361.0 million for regulatory and enforcement efforts to combat prescription drug abuse.
  • Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF): $1.18 billion, an increase of $47 million over FY 2013 enacted.
  • Includes resources for the updating and expanding of the National Integrated Ballistic Imaging Network (NIBIN).
  • U.S. Marshals Service: $2.7 billion, marking a decrease of $72 million from FY 13 due to reduced estimates for federal detention requirements.
  • Federal Prison System (BOP): $6.9 billion, an increase of $79 million above FY 2013 enacted.
  • Maintains staffing levels and continues activation of new prisons.
  • Grants Program: $2.2 billion for various state and local grant programs, $32 million above FY 2013 enacted level.
  • State and Local Law Enforcement Assistance: $1.17 billion for initiatives including victims of human trafficking, DNA grants, Byrne-Justice Assistance Grant (JAG) subgrantees, as well as National Instant Criminal Background Check System (NICS) Initiative grants.

Energy

  • National Nuclear Security Administration (NNSA): Receives $11.2 billion to maintain the safety, security, and readiness of the nation’s nuclear weapons stockpile.
    • Increases funding for Weapons Activities by $847 million over FY 2013, providing $7.845 billion in FY 2014.
    • Critical defense funding upholds national nuclear deterrence posture.
    • Includes $537 million to extend the life of the B61 nuclear bomb.
  • Energy Programs: Increases funding for energy programs to $10.2 billion, a $620 million rise over FY 13 enacted levels. Including:
    • $562 million for research and development to advance coal, natural gas, oil, and other fossil energy technologies. ($28 million above FY13 enacted level)
    • $889 million for nuclear energy research and development to further next generation of nuclear power. ($36 million over the FY13 enacted level.)
  • Science Research: Office of Science receives $5.071 billion ($450 million over FY 2013) for breakthroughs in energy applications and development of next-generation high performance computing systems.
  • Provides $280 million for Advanced Research Projects Agency-Energy (ARPA-E), an increase of $29 million over FY 2013, to develop promising/high-risk future energy technologies.
  • Energy and Efficiency and Renewable Energy (EERE) programs receive $1.9 billion, an increase of $182 million over FY 2013, to advance biomass, electric vehicle, and energy efficient advanced manufacturing technologies.
  • Defense Environmental Cleanup receives $5.0 billion, an increase of $381 million above FY 2013.
  • Cuts funding for Nuclear Nonproliferation by $289 million from FY 2013, providing $1.954 billion for FY 2014.
  • Provides $147 million for Electricity Delivery and Energy Reliability, including $5 million within Cyber Security for Energy Delivery Systems to enhance full-scale electric grid testing capabilities associated with integration of wireless technologies, power generation, and communications and control systems.

Agriculture

  • USDA’s operating budget is a winner this year as FY 2014 discretionary funding of $20.9B represents a 2% increase over the FY 2013 enacted level of $20.5B.
  • Funding includes:
    • $5.5B for the Forest Service
    • $2.6B for Agriculture Research
    • $292.8M for the Forest Service
    • $828M for the Animal and Plant Health Inspection Service
    • $1.5B for the Farm Service Agency
    • $2.4B for Rural Development ($180M above FY 2013 enacted level)
    • $1B for the Food Safety and Inspection Service ($19M below FY 2013 enacted level)
    • $2.6B for the Food and Drug Administration (Restores $85M in fee revenue lost dues to sequestration)
    • $215M for the Commodity Futures Trading Commission ($100M below President’s 2014 Request)
    • $826M for the Natural Resources Conservation Service
  • Provisions of Interest
    • Budget contains requirements for the Secretary of Agriculture to eliminate waste, fraud, and abuse in the Supplemental Nutrition Assistance Program.
    • Makes cuts to lower-priority programs.
    • Provides $44M for the USDA OCIO, no less than $27M of which is to be spent on USDA cybersecurity requirements.
    • Provides $4.2M for APHIS’ IT infrastructure.
    • Increases CIO governance over IT expenses, requiring the CIO to approve of any investment greater than $25K before the investment is made.
    • Stipulates no new IT system or upgrade of current systems may be acquired without OCIO and Executive IT Investment Review Board approval.

Transportation

  • DOT’s operating budget is flat this year as FY 2014 discretionary funding of $17.8B represents a 0.5% decrease from the FY 2013 enacted level of $17.9B.
  • Funding includes:
    • $41B for the Federal Highway program (same level authorized in the MAP-21 transportation authorization legislation that expires on September 30, 2014); an increase of $557M from FY 2013 enacted
    • $12.4B for the Federal Aviation Administration ($168M below FY 2013 enacted);
    • $1.6B for the Federal Railroad Administration (decrease of $34.6M from FY 2013 enacted)
    • $2.15B for the Federal Transit Administration (decrease of $100M from FY 2013 enacted)
    • $819M in mandatory and discretionary funding for the National Highway Traffic Safety Administration (increase of $8.9M over FY 2013 enacted)
    • $585M for the Federal Motor Carrier Safety Administration (increase of $24M above FY 2013 enacted)
    • $12.8M increase over the FY 2013 level for the Pipeline and Hazardous Materials Safety Administration
  • Provisions of Interest
    • Funding for FAA NextGen investments is preserved.
    • $15.7M for the DOT OCIO.
    • $7M for upgrading and enhancing the DOT’s financial systems and re-engineering business processes.
    • $4.45M for cybersecurity initiatives.

NASA

  • Preserves balance of NASA portfolio across science, aeronautics, technology and human space flight.
  • Asteroid Redirect Mission (ARM): Completion of significant preliminary activities is needed prior to NASA and Congress making long-term commitment to this mission concept.
  • Science: Funding totals $5.15B, including Education and Public Outreach, Earth Science, Planetary Science, Astrophysics, and Heliophysics.
    • Prior to expending any funds on the development of JPSS climate sensors, NASA is to prepare development plans with notional budget and schedule details for submission to the Appropriations Committee.
    • Under Planetary Science, Mars Exploration receives $288 million, including $65 million for the development of the Mars 2020 Rover.
  • Aeronautics: Funding amounts to $566 million.
  • Space Technology: Funding totals $576 million.
  • Exploration: $4.1 billion for Exploration mission directorate, including Multi-Purpose Crew Vehicle and Space Launch System programs.
    • $1.6 billion is provided for the Space Launch System (SLS) to sustain core development of mission components. Due to concerns regarding diversion of funds for activities with only tangential relevance to the SLS, NASA is expected to complete quarterly spending reports on additional potential for the investment along with tracking milestones and development schedules.
    • $1.2 billion is provided for the Orion Multi-Purpose Crew Vehicle, including $3 million for Construction and Environmental Compliance and Restoration.
  • Space Operations: $3.8 billion for Space Operations, including strong support for the International Space Station (ISS).
  • Cross Agency Support: $2.8 billion in Cross Agency Support funds security, infrastructure, and reports.
  • Office of Inspector General to receive $37.5 million.
  • Administrative Provisions include establishing terms and conditions for the transfer of funds.

Labor

  • $2.6B for Job Training through for Workforce Investment Act Grants to States, an increase of $121M
  • $80M for Unemployment Insurance (UI) Program Integrity, an increase of $16M
  • $10.4B for the Employment Training Administration, a decrease of $562M from FY 2013 enacted level
  • $1.7B for the Office of Job Corps
  • $269.5M for Veterans Employment and Training Service (VETS)

Treasury

  • $112M for the FinCEN (Financial Crimes Enforcement Network ), $7M above a FY 2014 full-year CR level
  • $226M for the Community Development Financial Institutions Fund (CDFI), $17M above a FY 2014 full-year CR level
  • $11.3B for IRS
  • $35M Treasury Inspector General, a $7M increase
  • $156.4M Treasury Inspector General for Tax Administration, a $12.6M above a FY 2014 full-year CR level
  • $92M to help address identity theft and refund fraud, combat offshore tax evasion, and improve delivery of services to taxpayers. 
  • The bill includes no additional funding for ObamaCare
  • $3M available until 9/30/15 for IT modernization requirements
  • Up to $250M available until 9/30/15 for IT support
  • $313M available until 9/30/16 for capital asset acquisition of IT systems, including management and related contractual costs for business systems modernization.

Interior

  • $954 million for the Bureau of Reclamation’s Water and Related Resources, $106 million over FY 2013.
  • Bureau of Land Management (BLM): Funded at $1.1 billion, marking an increase of $7 million above FY 2013 enacted. Provides for effective stewardship of public lands.
  • National Park Services (NPS): $2.6 billion, an increase of $28.5 million over FY 2013 enacted. Allows every national park to remain open for the duration of FY 2014.
  • U.S. Forest Service: $5.5 billion, including increases for wildfire fighting and management.
  • United States Geological Survey (USGS): Provides $1.03 billion for Surveys, Investigations, and Research, including an increase of $400,000 for data preservation.
  • American Indian and Alaska Native Programs:  Provides funding for health care, law enforcement, and education.
    • Indian Health Services: Receives $4.3 billion in funding, an increase of $78 million over FY 2013 enacted levels.
    • Bureau of Indian Affairs and Education:  Provides $2.5 billion in funding, an $18 million increase over FY 2013 enacted levels.
  • U.S. Fish and Wildlife Service (FWS): $1.4 billion, a decrease of $32 million from the FY 2013 enacted levels. This funding provides for compensating ranchers for livestock loss, stopping spread of mussel and fish varieties, and species conservation.
  • Fully funds request for information technology management.

Commerce

  • National Oceanic and Atmospheric Administration (NOAA): $5.3 billion, marking an increase of $310 million over the FY 2013 enacted levels.
    • Including $953.6 million for the National Weather Service as well as $187.1 million for the National Environmental Satellite, Data and Information Service (NESDIS) operations, research, and facilities.
    • Fully funds NOAA’s weather satellite programs (GOES-R and JPSS). Although NOAA is expected to focus on the weather satellite program and to better address gaps in its FY 2015 budget, NOAA will continue to provide quarterly updates to the Committees on Appropriations regarding its weather satellite portfolio.
  • Bureau of Census: $945.0 million, including $693.0 million for periodic censuses and programs.
  • United States Patent and Trademark Office (USPTO): $3.0 billion, marking an increase of $91 million over FY13.
    • Maintains provision that USPTO makes available any fees collected in excess of estimates.
    • Adopts language from the House and Senate reports for Patents End-to-End. USPTO will submit a report to the Committees on Appropriations within 90 days of the Act’s enactment.
  • National Institute of Standards and Technology (NIST): $850 million for NIST, increase of $41 million over FY13 enacted, including $651.0 million for NIST’s scientific and technical core programs.
    • Increase of $5.0M for cyber security research. Increase of $1.0M for disaster resilience research.
    • $4.0M for the National Initiative for Cybersecurity (NICE) Program.
    • $15.0M for the National Cybersecurity Center of Excellence.
    • $16.5M to maintain the current operating level for the National Strategy for Trusted Identities in Cyberspace (NSTIC).
  • International Trade Administration (ITA): $470.0 million in total resources, offset by $9.4 million in estimated fee collection.
  • Bureau of Industry and Security (BIS): $101.5 million for operations and administration.
  • Economic Development Administration (EDA): $246.5 million for programs, including $209.5 million for Economic Development Assistance Programs.
  • Minority Business Development Agency: Receives $28.0 million in funding.
  • Economic and Statistical Analysis: Provides $99.0 million in funding.
  • Working Capital Fund: Rather than supporting the level requested for the WCF, the Commerce Department is expected to submit a list of transfers to and activities funded from the WCF along with its 2014 spending plan. The agreement supports the plan to establish the Enterprise Security Operations Center from the WCF.


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

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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 on twitter 
@FIAGovWin.

Deadline Approaches for Critical Next Step in Budget Deal

The December budget deal received a lot of media attention, but it only marked the first step in the budget process. Current stopgap spending expires January 15, 2014. Without new spending authority in place, the government could partially shut down again. This rapidly approaching January deadline is where the rubber meets the road for agency funding decisions.

A month ago, the Bipartisan Budget Act of 2013, proposed by House Budget Chairman Paul Ryan (R-WI) and Senate Budget Chairwoman Patty Murray (D-WA), laid out top-line spending levels for the next two fiscal years, funding agencies through the fall of 2015. This plan essentially split the difference between the Senate and House budget for overall discretionary budget authority for the current fiscal year. It also reduced scheduled spending cuts by $63 billion over two years, essentially dulling the near-term impact of sequestration.

The top-level caps for discretionary budget authority would enable a rise in spending above current law. For Defense, this increase would be 4.5% in FY 2014 and 1.8% for FY 2015 from current levels. Non-defense discretionary budget authority would rise above current levels by 4.7% in FY 2014 and 1.9% in FY 2015.

A week out from the January 15th deadline, negotiators reported progress in reaching agreement on a $1.1 trillion spending bill to fund the government through September. This bill would mark the crucial next step in the budget process. This step is comprised of the line-by-line agency spending for the rest of fiscal 2014.  On Tuesday, January 7th, Senate Appropriations Committee Chairwoman Barbara Mikulski (D-MD) voiced optimism about reaching an agreement on an omnibus spending measure. Agency budgets close to being settled at the start of the week include the Defense Department, along with Commerce, Justice, Agriculture, Housing and Urban Development, Veterans Affairs and Transportation. 

In an interview with the Associated Press, Mikulski noted that negotiators were, “looking at narrow the differences, looking at … how we can compromise without capitulation on both sides.” Issues that could still present hurdles for the bill include health care and financial sector reform, environmental and labor regulations. With current continuing resolution nearing its expiration and Congressional recess on January 17th, a temporary measure has not been ruled out to extend funding if additional time is needed to address final details. In the meantime, the goal for legislators remains completing all 12 funding bills before the January deadline.

These spending bills are particularly important for government contractors looking for indications of agency priorities and program spending over the next two years. While top-level figures provide a sense of overall government spending, that’s just the start of the budget process. Appropriations committees still have to establish department spending limits from which program-level spending will be determined. And, it’s only once those figures are set that agencies are able to make decisions about specific initiatives and contracts.

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Originally published for Federal Industry Analysis: Analysts Perspectives Blog. Stay ahead of the competition by discovering more about GovWinIQ. Follow me on twitter @FIAGovWin.

 

Could We See $230 Billion in Fourth Quarter Federal Spending?

As we enter the second half of July federal agencies and contractors alike are preparing for the close out of fiscal year (FY) 2013, ending September 30th. This is commonly referred to as the “federal busy season,” when agencies work to finish up whatever procurements they need to award within the fiscal year, and is often characterized by a flurry of last-minute spending in a “use it or lose it” mentality. So will we see such a spending spree in the age of sequestration and widely-reported budget constraints?  Even with these uncertain factors, recent spending data suggests that we still could see more than $230 billion in contracted spending in the fourth quarter (Q4) of the fiscal year.

Previously, I tried to beat back some of the fear and uncertainty with some data analysis. In a previous blog post I looked at the reported Q1-Q2 obligations among the top spending 20 federal agencies for FY 2012 to try to estimate what we might possibly see for FY 2013, even if we experience a 10% across-the-board reduction in contracted spending.  Given that the Department of Defense (DoD) and several other departments tend to lag by 90 days in some of their contracts reporting I thought an update and comparison might be informative.

The results for these lagging agencies are not insignificant, especially for the defense branches. (See table below.) The Q1-Q2 data reported by the beginning of July (green) included some sizeable increases compared to the same quarters reported at the beginning of April (blue). The differences are noted in both dollars and percentage (red).  Note that all the FY ’13 percentages and remaining dollars are based on an assumption of 10% reduction from FY ’12 levels.

 

The data reporting lag among these 20 agencies resulted in $60 billion in obligations being reported in the 3 months after the close of Q2. So when it came to assessing where we are at the end of Q3 and what is potentially left to spend in Q4 I wanted to factor in this data lag to get as accurate a picture as possible, given the available data.

FY 2013 Q1-Q3 Obligations and What’s Left for Q4

Completing a similar FY 2012-2013 comparison for Q1-Q3 reveals that the top 20 agencies could have over $225 billion left to spend in Q4, even with a 10% cut from FY 2012. (See table below.) The remaining federal agencies that report to FPDS account for an additional $5 billion under this framework.

In an attempt to account for the delayed reporting by DoD and select other agencies, the Q3 data, which is the lagging quarter, is adjusted according to the percentage difference between April and July Q1-Q2 data in the table above. While this is not perfectly precise, I believe it is a reasonable approach to mitigate for the data lag and give us a little better shot at seeing what Q4 might look like. (The 90% assumption still applies.)

 

 

Comparing the historical Q1-Q3 percentage of total yearly obligations for FY 2012 and a projection for the same for FY 2013 shows that many of the departments have a hefty chunk left to spend and that has been their historical norm, at least for FY 2012.

To put this into the total federal context, all reported federal contract obligations for Q4 of FY 2012 were $161 billion and total FY 2012 contract obligations topped $517 billion. Total FY 2013 obligations for Q1-Q3 total $240 billion, when accounting for data reporting lags by the Defense Department and other agencies.

So if my 90% assumption were to play out and my data lag adjustment is anywhere in the ballpark we could see total FY 2013 obligations top out at $465 billion with nearly half of FY 2013 obligations coming in the Q4. That sounds like folks will be pretty busy to me.

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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.
 

Want more?  Get additional perspectives and a deeper dive into the potential for a big Q4 with our free July 30, 2013 webinar: Pent Up Demand: Prepare for the Fourth Quarter Super-Sized Spending Spree

Get more information and register here.

 

 

North Carolina’s road to long-term success

This year, North Carolina Governor Pat McCrory made it clear that the state’s reliance on quick fixes is over and that his goal is to begin focusing on long-term reparations to ensure the state’s ability to provide for its citizens.

The below graph provides a visual representation of North Carolina’s budget from FY 2010 through FY 2015.

                                   

Governor McCrory’s major focus areas include increasing the State Repair and Renovation Fund to launch a 25-year plan to replace and upgrade aging infrastructure. He is also looking to increase the Information Technology Systems Reserve in an effort to fund high-priority IT projects taking place throughout government agencies. These are quite ambitious projects given the state is only increasing the overall budget by 3.6 percent in the first year, and while the governor has indeed asked for a significant increase in the IT Systems Reserve, it comes at the cost of the Office of Information Technology. While the IT Initiative Reserve is set to increase by nearly $35 million between FY 2013 and FY 2014, the Office of Information Technology is losing more than $39 million. Therefore, technology dollars are more so reshuffling existing resources, and there will actually be less money available in the next few years for IT projects.

Overall, the structure of the state’s departments has remained unchanged over the past few years. The one significant exception is the dissolution of the states’ Departments of Correction and Crime Control and Public Safety, and the advent of the new Department of Public Safety. Funding for the new department remained consistent with the funding levels of its predecessors, and no major initiatives, IT or otherwise, are planned for the next two years.

Unfortunately, not all budget changes involved a simple reshuffling; some departments lost significant amounts of money. The biggest loser was the state’s Department of Commerce, which lost more than $3 billion, followed by the Department of Transportation’s $1.5 billion loss, though it is likely that at least some of that loss was transferred to the Repair and Renovation Fund. 

Analyst’s Take

The small increase in the state’s overall budget means that most departments will maintain the status quo for the next two years. Few costly initiatives are planned, and as the governor stated, the next few years will be used to set the stage for long-term growth.

While the overall budget remains fairly steady over the next two years, the IT budget has dropped significantly, which will likely have an impact on spending for the next few years at least, especially for those interested in the community development, general government and natural resources verticals. As expected, health care continues to be a growth area as well as economic development and regulation, which will likely be heavily focused on regulation and compliance.

Vendors interested in finding out more about North Carolina should check out Deltek’s state profile application.

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