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Energy Department Continues Collaborative Supercomputing Investment


The Department of Energy’s (DOE) Office of Science and the National Nuclear Security Administration (NNSA) provide high-performance computing facilities that enable world-class scientific research. Mid April 2015, DOE extended its exascale supercomputer development program under its Collaboration of Oak Ridge, Argonne, and Lawrence Livermore (CORAL) initiative with a third and final contract. 

The $525 million CORAL project was established in early 2014 with the goal of improving supercomputing investments, streamlining procurement, and reducing development costs for high performance systems that will be five to seven times more powerful than today’s top supercomputers. Through collaborating across the department’s labs on the effort, DOE aims to help the nation accelerate to next-generation exascale computing. The three CORAL labs specified requirements in a single Request for Proposal (RFP) released in January 2014. The recent $200 million award will deliver Aurora system to the Argonne Leadership Computing Facility, completing the final supercomputer investment of the CORAL initiative. DOE earlier announced a $325 million investment to build state-of-the-art supercomputers at its Oak Ridge and Lawrence Livermore laboratories.

The entire scientific community will have access to the system once it is commissioned in 2018. Key research goals for the Aurora system include: material science, biological science, transportation efficiency, and renewable energy. The next-generation system, Aurora, will use a high-performance computing scalable system framework to provide a peak performance of 180 PetaFLOP/s.  The Aurora system will be delivered in 2018. In the interim, Argonne and Intel will also provide the Theta system, to be delivered in 2016, which will help ALCF users transition their applications to the new technology.

Additionally, DOE Under Secretary Orr announced $10 million for a high-performance computing R&D program, DesignForward, led by DOE’s Office of Science and NNSA to accelerate the development of next-generation supercomputers. The recent announcement complements the $25.4 million already invested in the first round of program. Through this public-private partnership, technology firms will work with DOE researchers to study and develop software and hardware technologies aimed at maintaining a national lead in scientific computing.


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


The U.S. Digital Service – “Hey, Mikey!”

Walking the halls of the West Wing in a rumpled casual button-up shirt, Mikey Dickerson’s mission as the Administrator for the new U.S. Digital Service is “to improve and simplify the digital experience that people and businesses have with their government.”

Mikey’s name immediately brought back memories for me of Life Cereal’s Mikey commercials in the early 1970s.  The line “He likes it! Hey Mikey!” came to mind.  And in the same way Life was bringing to market a new cereal that was good for you, the federal government is trying to break down barriers to ignite innovation. 

Mikey is different from the typical Washington government leader, from his casual attire to his unassuming name.  What he brings to the table is experience, knowledge, speed and out-of-the-box thinking.  He’s not weighed down by bureaucratic work experience.  He comes from a more nibble environment which the White House hopes to bestow across government. 

Mikey’s first foray into government was last year as part of the rescue team.  The aim of the U.S. Digital Service is to build on the success of that effort by bringing a small team of America’s best digital experts together to collaborate with other government agencies and make websites more consumer friendly, identify and fix problems, and help upgrade the government’s technology infrastructure.

The White House press release announcing the establishment of the U.S. Digital Service states that it will accomplish its mission by:

  • Establishing standards to bring the government’s digital services in line with the best private sector services  
  • Identifying common technology patterns that will help us scale services effectively  
  • Collaborating with agencies to identify and address gaps in their capacity to design, develop, deploy and operate excellent citizen-facing services  
  • Providing accountability to ensure agencies see results

During a testimony in May, federal CIO Steve VanRoekel called the idea of a U.S. Digital Service a "centralized, world-class capability...made up of our country’s brightest digital talent."  This team will be "charged with

removing barriers to exceptional government service delivery and remaking the digital experiences that citizens and businesses have with their government."


To get to know Mikey better, click here to watch the White House’s video “Day One: Mikey Dickerson, U.S. Digital Service Administrator.”  I find his demeanor and persona refreshing.  He states in the video that a lot of people want to know if he’s wearing a suit every day.  It’s their way of asking, “is this the same old business as usual or are they (the government) actually going to listen.”  His philosophy, as well as that of much of Silicon Valley, is that innovation doesn’t happen in a suit.


New RFP-IT Legislation Grants CTO Authority

FITARA, FITSATA, and now RFP-IT appear as vegetable soup to many outside of the beltway, but all are legislative attempts to improve federal IT acquisition, implementation and management.  Representatives Ann Eshoo (D-CA) and Gerry Connolly (D-VA) began floating the Reforming Federal Procurement of Information Technology Act (RFP-IT Act) this week, which would give the U.S. CTO powers over government IT projects.

The proposed RFP-IT legislation would establish a Digital Government Office (DGO), headed by the U.S. CTO, which would review all agency proposals for IT projects focused on citizen services or are determined to have high development, operating or maintenance costs.    The DGO would decide whether to manage the project, assist the agency with management of the project, or direct the agency to management project on its own.

The DGO would be funded by fees collected from executive agencies on government-wide IT IDIQ contracts, GWACS and GSA Schedules.  Five percent of agency fees collected from these contracts would go to a new DGO Fund.

It’s unclear whether current Federal CTO Todd Park would be slated to move into the newly created U.S. CTO position.   Additionally, I found any mention of the role of the Federal CIO, strangely absent from the proposed legislation.   And what about CTO purview over existing “major” IT projects? 

The draft RFP-IT Act follows on the heels of FITSATA, introduced in the Senate in December, and Congressman Issa’s FITARA legislation which has been making its rounds for over a year.  A Connolly spokesman stated that the RFP-IT bill and FITARA complement one another and are not competing legislation.  

In the wake of, Congress seems ready to act on IT reform legislation.  However to date, much of the legislation and proposed reform has centered around additional reporting and oversight rather than more authority and action.  FITARA proposes more budget power for CIOs, but for the most part requires additional reporting and transparency into IT projects and spending.  But is this the answer to fixing ailing IT programs and acquisitions? 

The IT Dashboard was meant to help mitigate risk in federal IT programs and it has increased visibility and garnered success.  But as GAO points out in its most recent review of the IT Dashboard, “the Dashboard was not updated for 15 of the past 24 months.”  GAO recommended that OMB make Dashboard information available independent of the budget process and appropriately address identified IT investment weaknesses.

In another example, the House Veterans Affairs Committee continues to pressure the VA over security of veterans data and systems.  Currently, the committee has 111 outstanding requests for information since June 2012.  Are all of these unanswered requests for information solving the problem?

Eshoo and Connolly’s legislation is less about transparency and reporting, and is more about authority.  To date additional reporting requirements have not solved the problem.  Could increased CTO power and control be part of the answer? 





The Federal Program Inventory Provides Visibility, but with Limitations

On May 31st, the administration took another step forward in implementation of the GPRA Modernization Act of 2010 by releasing Federal Program Inventories on the website.  Centralizing program inventories on will provide greater visibility into federal programs with the intent to improve program outcomes, efficiencies, and root out duplication and waste.

Significant amounts of information currently exist about federal programs, such as the President’s Budget, Congressional Budget Justifications,, the Catalog of Federal Domestic Assistance.  However to date, the information has been decentralized and difficult to analyze.  The new Federal Program Inventories will provide greater visibility for Congress and the general public regarding government operated programs.   

Since the beginning of his administration, the president has waged a campaign against federal waste, fraud and abuse.  To that end, eliminating duplication in federal programs has the potential to save billions of dollars.  The 2014 President’s Budget proposes 215 cuts, consolidations, and savings proposals, which are projected to save more than $25 billion in 2014, a number of which are achieved by reducing duplication.  For example, the budget includes proposals to streamline Science, Technology, Engineering, and Math (STEM) programs, and training and employment services.

Program inventories on are a step in the right direction.  However, their current usefulness is limited.   To date, 24 departments and agencies present links to program information via the website.   Agencies chose to present program information in various formats and organizational structures.  Most of the agency links lead to formal program inventories in a pdf document format.  Others lead to agency web pages with links to budget documents and justifications.  At present, it is difficult to spot overlap and duplication of programs across agencies.   Centralization of the information is helpful, but I’m hopeful that future iterations of the information will contain consistent formats and tools to analyze the program data across varying departments and agencies. 





Highlights of the President’s FY2014 Budget Request

Today President Obama delivered a $3.8 trillion spending plan to Congress which includes a $1.2 trillion request in discretionary funding levels and nearly $82 billion for information technology for FY2014.  The budget focuses on jobs creation, economic growth and to strengthen the American middle class.

The budget proposal also includes $1.8 trillion in additional deficit reduction measures over 10 years to reach a total deficit reduction of $4.3 trillion.   The proposed deficit actions would reduce the deficit to 2.8%of GDP by 2016.

Additionally, the budget proposes $400 billion in cuts to health programs including Medicare.  Savings and cuts would come from negotiating better prescription drug prices, fighting waste and fraud, and requiring the wealthiest seniors to pay more.

The table below shows the FY2013 enacted budget levels and the proposed FY2014 levels.


Other budget highlights:

  • Includes $50 billion for upfront infrastructure investments to invest in repairs to highways, bridges, airports, transit systems, and to encourage innovative infrastructure projects 
  • Invests in in education reforms and training with a commitment to early childhood education
  • Simplifies the tax code and raises $580 billion for deficit reduction by limiting tax benefits, but not raising tax rates
  • Creates new “ladders of opportunity” to ensure that hard work leads to a decent living by developing pathways to jobs and partnering with communities to rebuild after the recession 
  • Includes $200 billion in savings from other mandatory programs, such as reductions to farm subsidies and reforms to retirement benefits 
  • Proposes $200 billion in discretionary savings from both defense and non-defense programs 
  • Offers $230 billion in savings from changes in the way the government calculates inflation for annual cost-of-living adjustments for benefits programs

Information Technology

The president’s budget proposes nearly $82 billion in IT funding, a 1.8% increase from the FY 2013 CR and a 2.1% increase over FY 2012 estimated level.

IT-related budget highlights:

  • $575 million in savings is anticipated from DoD Data Center Closures. 
  • $324 million is being cut from the DoD’s Global Hawk UAV program. 
  • $22 million is being cut from Computer and Information Science and Engineering Research Programs at the National Science Foundation; CISE is the organization responsible for promoting R&D on big data.  NSF’s budget takes big hits for its small size, which will affect grant spending on technology R&D.  
  • $81 million is being cut from the DoD’s Precision Tracking and Space System, which is part of Ballistic Missile Defense at the Missile Defense Agency. 
  • $38 million in savings related to the Joint Polar Satellite System is anticipated at the Department of Commerce. 
  • $29 million in savings is anticipated from IRS Business Systems Modernization at the Treasury. 

All told, the president’s budget request includes 215 cuts, consolidations, and savings proposals, which according to the administration, are projected to save more than $25 billion in FY2014.  The budget proposal outlines the administration’s priorities and proposed methods for generating more revenue, cutting costs, and reducing the deficit.  However, it joins competing budget plans in the House and Senate.  Serious Capitol Hill budget negotiations are not likely to take place until this summer.





Contractor Survival Tactics: Booz Allen Makes C4ISR Acquisition, Expands Into Commercial Cyber

In today’s challenging federal market, contractors of all sizes are evaluating their current strategies to achieve success over the next several years, while bracing for potential budget cuts that could significantly impact the way they do business moving forward.
At FIA, we are always keeping tabs on what’s going on in the federal market, and I recently noticed that consulting firm Booz Allen Hamilton is making some interesting moves in order to remain competitive and continue its success in today’s evolving government market.
In fiscal 2012, Booz Allen derived 98% of its revenue from services provided to more than 1,200 client organizations across the U.S. government under more than 5,800 contracts and task orders.
FIA Perspective:
Booz continues to look for “opportunistic” acquisitions. Last week, Booz Allen agreed to acquire the Defense Systems Engineering & Support (DSES) division of ARINC for $154 million. This acquisition will bring strong capabilities in advanced aviation and maritime engineering, advanced weapons modernization and sustainment, and advanced systems engineering and integration to complement Booz Allen’s existing services, which span engineering and operations, technology, analytics, and strategy and organization. DSES is well-positioned in the growing C4ISR and engineering services/prototyping segments of the defense market, and Booz sees opportunities for these capabilities in adjacent intelligence, law enforcement, homeland security, and international systems sectors.
Taking a look at its acquisition strategy, Booz said it’s seeing consolidation in the market, and is “open to evaluating potential opportunities” with a focus on companies that are a cultural fit that will bring additional client access or enhanced capabilities. It also said it would “pursue inorganic growth options ideally in the $100 to $200 million range.”
Booz continues to win significant contracts despite tightening market conditions. In terms of contracts, Booz Allen was recently one of 12 vendors who won a $7 billion Army contract for software and engineering services. In August, Booz was also one of five contractors to receive an Army award (with a $489 million ceiling) to manage chemical weapons. In addition, Booz said it won 35 healthcare contracts, totaling more than $112 million, in August and September timeframe to support a wide range of federal healthcare agencies and private organizations.
In its fiscal first quarter, Booz Allen also won a series of major awards totaling over $300 million to support the U.S. Navy Space and Naval Warfare Systems Command in areas such as cyber, intelligence systems, infrastructure protection, and C4I. Booz also added an IDIQ contract with a ceiling of $20 billion from the National Institute of Health for services and solutions with the Chief Information Office, and a $73 million contract from the Department of Energy to provide scientific, engineering, and technical support.
For fiscal 2012, Booz said it achieved an overall win rate of 55% on new contracts and task orders that it pursued, and a win rate of more than 91% on re-competed contracts and task orders for existing or related business.
Booz Allen looking for commercial opportunities in cyber security.  While cybersecurity is one of the federal market’sfew bright spots in terms of spending,Booz Allen is aiming to use its federal cyber expertise as a bridge to commercial opportunities in the field, according to a recent Washington Post article.
Currently, Booz is one of a handful of contractors looking to make the transition to the commercial sector to expand its addressable market in cyber. Other firms seeking to make this jump include KEYW Holdings Corp., ManTech International, SAIC and Computer Sciences Corp., according to the article.
As part of its foray into the commercial market, Booz Allen recently entered into a consulting and services partnership with EMC’s security division, RSA, to provide enhanced offerings and make it easier for commercial and public sector customers to use both companies’ information security expertise and specialized technologies. The partnership’s objectives include: developing joint information security service offerings; simplifying client engagements for security preparedness and incident response; and further assessing the commercialization of advanced security technologies (from Booz Allen) that play a crucial role in detecting and defeating today’s sophisticated computer attacks.
In its annual report, Booz noted that it will continue to pursue new opportunities in the commercial market by building on its cyber-related work and leveraging its core competencies, with a focus on serving industries in which there is a strong intersection between government and commercial interests, such as financial services, healthcare, and energy.  
Currently, Booz Allen’s key service offerings to commercial clients include: dynamic defense (cyber), next-generation virtual infrastructure, decision analytics, design for affordability, and smart compliance. Its commercial clients include major commercial banks and investment banks, healthcare providers, energy companies, and utilities.
Booz posts nice bottom-line growth in latest quarter. In the latest fiscal first quarter, Booz Allen’s profit jumped 21% to $61.9 million, or 43 cents per share. This compares with $51.1 million, or 37 cents per share, in last year’s comparable quarter. At the same time, the company’s revenue slipped 1% to $1.43 billion, compared with $1.45 billion in last year’s first quarter.At June 30, Booz Allen had total backlog of $10.23 billion, of which $2.58 billion was funded.
Looking ahead, Booz said it expects adjusted earnings of between $1.60 and $1.70 per share for the year, down from its earlier estimates of between $1.71 and $1.81 per share. Moving forward, Booz believes that the investments it’s making in areas such as cyber, cloud, health, engineering services, enterprise effectiveness and efficiency, commercial, and international businesses will “position the company well for future growth.”
On its first quarter earnings call, Booz highlighted that it’s “investing resources and deploying leaders to business areas that are growing, while noting that it “will continue to grow in government, commercial, and international markets, such as health, finance, and intelligence surveillance reconnaissance.”
Booz also noted that it continues to win major contract awards across all markets in its government business, despite the generally challenging conditions in that sector. The company has also been “proactive and diligent in managing its cost base which has enabled Booz to continue to deliver on bottom-line commitments.”
Our Take:
Overall, we believe that Booz Allen will continue to be aggressive in making moves to remain competitive in today’s challenging federal market, especially in the wake of expected defense budget cuts and increased competition from top-tier rivals.
We like that Booz is making opportunistic acquisitions to expand into new and adjacent markets (especially commercial cyber), while continuing to win key contracts in markets in which it already competes. Looking ahead, we believe that Booz’s growth strategy will ultimately payoff for the company and allow it to achieve success in today’s evolving markets. 




M&A Activity Dips In 3Q: Deals In Cloud Computing And Cyber Lead Transactions

Mergers and acquisitions activity in the defense and government services sector continued to move along in the latest third quarter, and is expected to remain robust for the remainder of the year as larger contractors continue to seek out smaller firms operating in hot sectors like cloud computing and cybersecurity to help offset expected federal budget cuts.
Among the contractors we track, there were 40 deals announced during the latest third quarter, off slightly from 43 deals announced in the second quarter, and 47 deals in last year’s third quarter.
M&A activity in the third quarter was driven by five transactions which had valuations of over $1 billion, including Dell’s acquisition of IT management software maker Quest Software for $2.4 billion, and Chicago Bridge & Iron Co.’s purchase of AEC firm Shaw Group Inc. for roughly $3 billion.
Other significant purchases in the third quarter included VMWare’s buyout of software-defined networking firm Nicira for $1.26 billion, and IBM’s purchase of HR management software provider Kenexa Inc. for $1.3 billion. Also in the latest quarter, private equity firm Thoma Bravo acquired enterprise software firm Deltek Inc. for $1.1 billion.
FIA Perspective:
Smaller deals in federal growth markets drive M&A activity. During the latest third quarter, there were several M&A transactions announced in the cloud computing and cybersecurity markets, and we expect these trends to continue going forward. M&A activity in the cloud sector was very strong in the latest third quarter, continuing its momentum from earlier in the year. 
In one of the larger deals announced in the cloud market (besides IBM/Kenexa above), VMWare agreed to acquire DynamicOps, a Burlington, Mass.-based cloud computing startup that was spun out of banking giant Credit Suisse’s IT department, for between $100 and $150 million. DynamicOps is a leader in the emerging market for cloud automation solutions.
Cisco also continued its foray into the cloud in the latest third quarter, acquiring Virtuata to help secure virtual machine data in multi-tenant data centers. Virtuata helps to isolate each virtual machine from others in the same virtualized data center or cloud environment, and will allow Cisco to address security concerns among enterprises and service providers.
Other notable deals in the cloud sector included Rackspace’s purchase of e-mail application integrator Mailgun, and Citrix’s acquisition of Beetil, which provides cloud-based service desk technology. In addition, Lenovo agreed to buyout Stoneware, which makes cloud products used in the education and government sectors, for an undisclosed amount.
Overall, top-tier IT companies enhancing their presence in the cloud computing space should come as no surprise; the cloud market is slated to be one of the most attractive growth markets for IT firms over the next several years. According to Deltek’s Federal Cloud Computing Services Outlook, 2012-2017 report, the demand for vendor-furnished cloud computing services by the U.S. government will increase from $734 million in FY2012 to $3.2 billion in FY2017, representing at a CAGR of 34%.
For the remainder of the year, we expect top-tier IT firms to continue their expansion into the cloud market, targeting smaller firms providing unique or distinctive solutions to enhance their overall market share, while allowing them to compete for future opportunities.
On the cybersecurity front, there were five deals announced in the latest third quarter which involved firms providing cyber solutions or products, up significantly from the number of cyber-related deals announced in the second quarter. 
Notable deals included Apple’s acquisition of AuthenTec for $356 million, and General Dynamics’ purchase of Fidelis Security Systems for an undisclosed sum. AuthenTec designs security products for mobile devices such as fingerprint sensors, while Fidelis provides cyber tools that provide real-time network visibility, analysis and control.
Earlier this month, KEYW Holdings Corp. also made two significant cyber purchases, acquiring Poole & Associates for $126 million and Sensage for $34.5 million. Poole will expand KEYW’s software engineering presence in the Intelligence Community (IC), while Sensage will allow KEYW to expand its addressable market into securing critical infrastructure. Both of these acquisitions should significantly enhance KEYW’s top-line growth moving forward.
We believe that M&A activity in the cyber arena will continue to be robust for the remainder of the year, as larger IT firms look to extend their addressable markets while recognizing the vast number of smaller firms with unique cyber-related capabilities. 
Elsewhere, there were several notable acquisitions in other markets which were previously hot sectors (health IT, geospatial and wireless). In July, SAIC acquired health IT consulting firm maxIT Healthcare for $493 million, while DigitalGlobe acquired rival satellite imagery firm GeoEye for $900 million. AT&T also made a significant purchase in the latest third quarter, snapping up mobile service provider Nextwave Wireless for $600 million.
Our Take:
Looking ahead, we expect M&A activity in the defense and government services sector to continue to be strong for the remainder of the year, as federal contractors look to acquisitions in new and adjacent markets to make up for lost revenues resulting from expected future budget cuts. 


Contractor Survival Tactics: General Dynamics Making Acquisitions To Offset Tightening Budgets

Over the past few weeks, we have been highlighting how various vendors are dealing with today’s challenging federal market, and outlining some of the steps these contractor’s are taking to achieve success going forward.
In this edition, we would like to turn the spotlight on defense giant General Dynamics Corp., which has been among the most active participants in the M&A arena since early May, acquiring five companies to expand its list of capabilities and addressable markets.
FIA Perspective:
General Dynamics expanding capabilities in several growing markets via recent acquisition spree. Below we highlight the recent acquisitions GD has made, and detail how these purchases may help the company going forward.
  • In early May, GD acquired IPWireless Inc. for an undisclosed sum. Based in San Francisco, IPWireless provides 3G and 4G LTE wireless broadband network equipment and solutions for first-responder and military customers. The acquisition will allow GD to expand its commercial networking solutions to better serve the needs of its customers, including municipalities who are moving to broadband public safety networks such as the FirstNet nationwide interoperable broadband network.
  • In late June, General Dynamics bought Earl Industries ship repair and coatings division to enhance its ability to compete for Naval contracting opportunities. The ship repair and coatings division of Earl Industries is a prime contractor for nuclear aircraft carrier programs, and provides maintenance and repairs for other Naval ships. Financial terms for the transaction weren’t disclosed.
  • In mid-August, GD said it would acquire Fidelis Security Systems, a provider of network security tools that provide real-time network visibility, analysis and control. Based in Waltham, Mass., Fidelis' solutions help customers stop advanced threats and prevent data breaches by providing visibility into the complex layers of a network, exposing malicious content in real-time. This acquisition will allow GD to expand its capabilities in the growing cybersecurity market, with a particular focus on incident response and situational awareness. Earlier this year, GD opened its Cyber Intelligence and Solutions Center located in Annapolis Junction, which houses experts working on cyber threat detection and mitigation solutions.
  • In late August, General Dynamics acquired the defense operations of Gayston Corp., which supplies precision metal components used in several munitions programs. Gayston's defense unit makes rocket motor tubes for the U.S. Army's Hydra-70 air-to-ground rocket program. It also provides liners and cartridges for 40mm ammunition rounds and components for 60-120mm mortar rounds, among other things.
  • Earlier this month, GD also acquired virtualization security software start-up Open Kernel Labs Inc. for an undisclosed amount. OK Labs provides virtualization software for securing wireless communications in the corporate and government sector. In addition, Open Labs creates apps and content for mobile devices and in-vehicle 'infotainment' systems. This acquisition will expand GD’s capabilities as a provider of secure mobile devices for public safety, civilian, military and commercial customers.
In 2011, General Dynamics spent $1.6 billion on six acquisitions, compared with three purchases in 2010 for $233 million.
Our Take:
Overall, we believe that General Dynamics will continue to be aggressive in making moves to remain competitive, while expanding its capabilities in growing markets such as cybersecurity and wireless.  
Over the next few years, companies which will succeed in this challenging environment will need to be flexible and make strategic adjustments where needed. We believe General Dynamics is taking these necessary steps, and that the company’s M&A strategy will expand its addressable markets and list of customers moving forward, while enhancing its ability to pursue future opportunities in growing markets.
At the end of last quarter, GD had about $2.54 billion in cash and cash equivalents in its war chest to put towards future acquisitions.


The Potential Impact of Sequestration on the Department of Transportation

As required by the Sequestration Transparency Act of 2012, the White House released a report last week on the impact that sequestration could have on agency budgets. The data provided by the White House lists agency accounts at the budget account level. The report does not provide details on the specific accounts, but we can develop insight into the potential impact on agency IT by comparing the listed budget account with information provided in the FY 2013 agency budget requests.
In this blog, I will point out notable exemptions as specified in the White House report, as well as notable sequestration amounts for the Department of Transportation.
Notable Exemptions:
The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) as amended, identifies programs exempt from sequestration and subject to special rules. The percentage cuts in the Office of Management and Budget’s sequestration report, and the identification of exempt and non-exempt accounts, reflect the requirements set forth in the BBEDCA. The administration cannot choose which programs to exempt, or what percentage cuts to apply.
Notable exemptions (>$200m) to budget accounts for the Department of Transportation are shown below:
Budget Account
Total Budget Amount ($m)
Exempt Amount ($m)
Office of the Secretary
Working Capital Fund
Working Capital Fund, Volpe National Transportation Systems Center 
Federal Aviation Administration
Grants-in-aid for Airports (Airport and Airway Trust Fund) 
Administrative Services Franchise Fund 
Federal Motor Carrier Safety Administration
Motor Carrier Safety Grants 
Motor Carrier Safety Operations and Programs 
Maritime Administration
Ready Reserve Force
National Highway Traffic Safety Administration 
Highway Traffic Safety Grants 
The highest dollar value exemptions for Department of Transportation are the Federal Aviation Administration’s Operations budget and Airports Grants-in-Aid program. The exemption of $7 billion in the FAA’s operations budget leaves approximately $4.5 billion vulnerable to sequestration. The exemption of $3.5 billion in the Airports Grants-in-Aid program means those grants will be protected.
The FAA’s Operations budget provides funding for the Air Traffic Organization (ATO), the entity responsible for managing the air traffic control system.  Cuts to this budget could therefore potentially have a major impact on the funding of components for the Next Generation Air Transportation System, including the following systems:
  • Aviation Surface Weather Observation Network (ASWON)
  • Aeronautical Information Management Program (AIM)
  • Terminal Automation Replacement System (STARS)
  • Terminal Primary Surveillance (TPS)
  • Instrument Flight Procedure Automation (IFPA)
  • Next Generation Air/Ground Communications (NEXCOM) Segment
  • Voice Switching and Control System (VSCS) Tech Refresh
  • Wide Area Augmentation System (WAAS)
  • Weather and Radar Processor (WARP)
  • Airport Surface Detection Equipment - Model X (ASDE-X)
  • Alaskan Satellite Telecommunication Infrastructure (ASTI)
  • ATC Beacon Interrogator Replacement (ATCBI-6)
  • En Route Automation Modernization (ERAM)
  • Oceanic Automation System: Advanced Technologies and Oceanic Procedures (ATOP)
  • Traffic Management Advisor (TMA) System
  • Terminal Automation Modernization and Replacement (TAMR)
  • Automatic Dependent Surveillance-Broadcast (ADS-B)
  • Traffic Flow Management (TFM)
  • NextGen CATMT Work Package Programs
  • Data Communications NextGen Support (DataComm)
  • NextGen NAS Voice System (NVS)
  • Terminal Automation Modernization and Replacement Phase III (TAMR3)
  • Next Generation Air/Ground Communications (NEXCOM) Segment 2
  • NextGen R&D Collaborative Air Traffic Management (CATM)
  • NextGen R&D Reduce Weather Impact (RWI)
  • NextGen R&D Demonstrations and Infrastructure
The FAA had been poised to gain $99 million for work related to the Next Generation Air Transportation System in the FY 2013 budget request, making it a program area where increased spending previously had been anticipated.
Notable Sequester Amounts:
Notable sequestration amounts per budget account (>$200m) for Transportation are shown below:
Budget Account
Total Budget Amount ($m)
Amount ($m)
Federal Aviation Administration
Trust Fund Share of FAA Activities (Airport and Airway Trust Fund) 
Facilities and Equipment (Airport and Airway Trust Fund) 
Federal Highway Administration
Payment to the Transportation Trust Fund 
The most notable amount potentially relevant to IT programs is the $377 million sequestered from the FAA's Operations budget.  Given that a total of $4.5 billion of this budget was vulnerable to sequestration the fact that only $377 million is actually slated for sequestration is encouraging for those working on FAA Next Generation projects.



Sequestration Report: Notable Exemptions and Sequester Totals for Treasury, Justice, and State

On Friday (9/14), the White House released its report regarding the impact of potential sequestration at the budget account level for each agency as required by the Sequestration Transparency Act of 2012. Although, the report provides little detail about each budget account, when cross referenced with each agency’s detailed FY2013 budget request we can glean tidbits of the potential impact to some areas involving IT.
In this blog, I will point out notable exemptions as specified in the White House report, as well as notable sequestration amounts for the Department of Treasury, Department of Justice, and the Department of State.
Notable Exemptions:
The Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) as amended, identifies programs exempt from sequestration and subject to special rules. The percentage cuts in OMB’s sequestration report, and the identification of exempt and non-exempt accounts, reflect the requirements set forth in the BBEDCA. The administration cannot choose which programs to exempt, or what percentage cuts to apply.
Notable exemptions (>$200m) to budget accounts for Treasury, Justice, and State are shown below:  

The most notable and highest dollar value exemptions for Department of Justice include Salaries and Expenses for the US Marshals Service and the FBI. With exemptions of $1.6 billion and $1.4 billion respectively in these budget accounts, 58% of the US Marshals and 29% of FBI’s Salary and Expense funding will be protected. 
Department of State shows an exemption of its entire Administration of Foreign Affairs Working Capital Fund of $4.2 billion. The Working Capital Fund finances, on a reimbursable basis, certain administrative services, such as printing and reproduction, editorial material, motor pool operations, inter-agency cooperative administrative support services, acquisition services, information technology desktop support, and aviation services.
Notable Sequester Amounts:
Notable sequestration amounts per budget account (>$200m) for Treasury, Justice, and State are shown below:
The most notable and highest dollar value sequestration amounts for Treasury include the IRS’ Enforcement, and Operations and Support budget accounts. 
The Enforcement account sequester amount of $436 million equates to 8% of the total requested budget authority for this account for FY2013. This budget account provides for necessary expenses for tax enforcement activities of the IRS to determine and collect taxes, to provide legal and litigation support, to conduct criminal investigations, and to enforce criminal statutes related to violations of internal revenue laws and other financial crimes. The Enforcement program also protects federal revenue by identifying fraud and preventing the issuance of erroneous refund payments. Information technology contracts and tools are used by the IRS under this budget account, especially in the area of identifying improper payments. 
The IRS Operations and Support budget account supports taxpayer enforcement and services by providing funds for rent payments, facilities services, printing, postage, physical security, administration activities, telecommunications, and information technology development, enhancement, operations, maintenance, and security. The Operations and Support account sequester amount of $325 million equates to 8% of the total requested budget authority for this account for FY2013. Sequester in this account will likely cause some reductions in IRS IT spending.
The most notable and highest dollar value sequestration amount for Justice includes the Federal Prison System’s Non-Defense Salaries and Expenses budget account with a sequester amount of $537 million. The Federal Prison System employs approximately 37,000 people according to OPM. Only 1.2% of these employees are classified as IT. So, the reduction in the Salaries and Expense area is likely to have minimal impact on the Federal Prisons Systems’ IT employees.
The State Department Administration of Foreign Affairs Diplomatic and Consular Affairs Programs Non-Defense budget account will be hit the hardest by sequestration at $1.1 billion out of a total gross budget of $15.9 billion. The Diplomatic and Consular Affairs Programs budget account provides funding for human resources, including training, human resources management, and salaries. The account also includes funding for overseas programs, diplomatic policy and support, and security programs. The relative amount of IT included in this program is difficult to decipher.
Determining the specific impact to federal IT contracts from sequestration action is difficult at best, given the information in the current report.   How agencies will implement these budget cuts remains to be seen. OMB stated that they will need more time to provide details regarding sequestration impact for each account at the program, project, and activity (PPA) level. In the meantime, contractors are bracing for the worst.



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