GovWin
The Other JIE: Engineering the Mission Partner Environment

All eyes are currently focused on the Department of Defense’s efforts to engineer a Joint Information Environment that will enable the secure sharing of information across the DoD enterprise, as well as the delivery of enterprise services by both the Defense Information Systems Agency and, eventually, commercial cloud partners.  There is another network integration effort going at DISA, however, which receives significantly less attention, yet its importance to the future of U.S. national security is every bit as critical.  That effort is the transformation of the Multinational Information Sharing portfolio of programs into a new Mission Partner Environment.

The current MNIS portfolio consists of four capabilities:

  • The Combined Enterprise Regional Information Exchange System (CENTRIXS), which includes the Common Mission Network Transport (CMNT) backbone that enables the management of federated networks and provides common transport for encrypted traffic between mission partners.
  • The Pegasus System, which interconnects the National Command and Control systems of Australia, Canada, New Zealand, the United Kingdom, and the United States using cross domain solutions.
  • The Combined Federated Battle Laboratory Network (CFBLNet), which provides a controlled Research, Development, Trials, and Assessment coalition information sharing sandbox for evaluating new technologies and developing new tactics, techniques, and procedures (TTPs).
  • The Unclassified Information Sharing Service (UISS) All Partners Access (APAN) Network, which provides information sharing capabilities to mission partners, U.S. Combatant Commands, U.S. Government agencies, host nations, inter-governmental organizations, non-governmental organizations, and coalition partners.

Support services for these pieces of the MNIS are currently provided under a variety of contracts held by Harris (Cross Domain Solutions), CACI (Cross Domain Solutions), Raytheon (Engineering Support), Ingenium (Program Support), SAIC (Program Support), ViaSat (Cryptographic HW), Information Analysis (Connection Approval Process), and MCP Computer Products (DNS Management).

When engineering work is complete, the component parts of the MNIS will be merged into a single Mission Partner Environment that provides interoperable email, chat, video conferencing, VoIP, and other collaboration capabilities.  The MPE will also connect to the Joint Information Environment, providing access to data located throughout the Defense enterprise.


The projected Research, Development, Testing, and Enhancement (RDT&E) budget for work related to the MNIS totals $31.1 million over five years (FY 2015-2020), averaging approximately $6.2 million per year.

One piece of the puzzle not mentioned so far is the U.S. Battlefield Information Collection and Exploitation System – Extended (US BICES-X), which will also be part of the new MPE.  Budget data for US BICES-X was classified for FY 2015, so no numbers can be provided for it here.  Investigating BICES-X for potential future business opportunity should be on industry’s radar, however, as there may be requirements at Hill Air Force Base for cryptographic HW, engineering a VTC network, and integrating Intelligence, Surveillance, and Reconnaissance components from the Distributed Common Ground System and Defense Intelligence Information Enterprise.  Requirements for program office support and technical integration support may also be available, if these haven’t been awarded already.

Lastly, commercial cloud providers take note.  DISA intends to host the UISS-APAN system in a commercial cloud environment in FY 2016.  UISS-APAN is currently hosted in DISA’s Enterprise Service Center, part of its Defense Enterprise Computing Center, in Montgomery, Alabama.  Supporting vendors include Carahsoft, Exalt Integrated Technologies, Alvarez & Associates, and DLT Solutions, which provide Software and Documentation Localization licenses, DocAve software, Google Maps, and Google Translation software and support, respectively.  DISA intends to migrate UISS-APAN to a vendor-hosted Infrastructure-as-a-Service environment, meaning that if the procurement appears soon, there are but a few competitors certified by the DoD to provide hosting services.

 

FY 2016 Budget Analysis Points to Increase in Contractor-Addressable Federal Spending

Deltek's new report, FY 2016 Federal Budget Request:  Challenges and Opportunities, indicates growth in federal contractor-addressable spending from $638 billion in FY 2015 to $660 billion in FY 2016.  

The FY 2016 $1.2 trillion discretionary budget request provides new, higher discretionary caps designed to replace sequestration limits set in the Budget Control Act. If passed as-is this budget proposal would offer some reversal of previous spending restrictions and infuse additional funds for both defense and civilian agencies.  As a result, the budget reflects FY 2015-2016 increases for nearly every major agency.

The budget request reintroduces the administration’s strategic priorities which include infrastructure, national defense, education, research and development, homeland security, public health (including veteran care), cybersecurity and cross-government customer services.

The largest projected increase is seen in the area of equipment with a planned increase of 24% from FY 2015 to FY 2016, from $32B to $49B for contractor-addressable spending.  The equipment category encompasses purchases of durable assets that normally may be expected to have a period of service of a year or more after being put into use such as transportation equipment; machinery; construction equipment; furniture and fixtures; tools and implements, instruments and apparatus; and information technology hardware.  This category excludes aerospace and defense equipment.

The aerospace and defense (A&D) market segment is expected to grow 5.8% over FY 2015 to $137B in contractor-addressable spending in FY 2016.  The A&D segment includes full-scale development, production, and modifications of durable assets related to the aerospace and defense industries.  The slight growth of A&D forecast for FY 2016 in the Navy and Air Force reflects a shift in U.S. defense strategy away from U.S. ground forces and toward naval and air power.  Growth among civilian agencies is highest at Homeland Security/CBP, Justice/FBI, Commerce/NOAA, and NASA.

Deltek’s analysis shows a nearly 3% increase from FY 2015 to FY 2016 in the contractor addressable portion of the federal information technology budget, growing from $101B to $104B.  The IT budget shows a continued shift of dollars from Development, Modernization, and Enhancement (DME) to Operations & Maintenance (O&M).  The budget also proposes $450M for initiatives such as Cross-Agency Priority (CAP) goals (e.g. shared services, strategic sourcing), funding for U.S. Digital Service teams at 25 agencies, and PortfolioStat.  It also includes $14B for cybersecurity, including Continuous Diagnostics and Mitigation (CDM) and CyberStat program expansion. 

Although intact passage of the FY 2016 budget request is unlikely, it gives a glimpse at administrative and agency priorities which will remain in place even if requested funding levels are not attained during the appropriations process.  Click here for more information on Deltek’s FY 2016 Federal Budget Request:  Challenges and Opportunities report.

 

DISA FY 2016 IT Budget Snapshot

Last week’s post took a look at Defense Working Capital Fund dollars that the Defense Information Systems Agency (DISA) anticipates Defense customers will spend with it in Fiscal Year 2016. This week’s post examines the formal portions of the information technology budget that DISA anticipates it will have in FY 2016, including funding it has requested for operations and maintenance, procurement, and research, development, modernization, and enhancement. The programs on which DISA forecasts spending the most under each category in FY 2016 will also be examined.

For its total IT budget in FY 2016, DISA has requested $3 billion.  This funding breaks out as follows:

Not surprisingly, the highest number of forecast dollars can be found in DISA’s Revolving and Management Funds account.  This account is where Defense Working Capital Fund spending is located, which is why it was the focus of last week’s post.  This week’s focus is on spending in the other three categories, beginning with operations and maintenance.

Breaking down O&M, we can see that not all of the programs receiving O&M funding are “programs,” per se. The White House Communications Agency (WHCA), for example, is part of the DISA organization.  The Defense Information Systems Network (DISN) is where much work related to Joint Information Environment is taking place, primarily, but not exclusively, under the GIG Services Management –Operations (GSM-O) and GIG Services Management – Engineering, Transition, and Implementation (GSM-ETI) contracts.  Spending on DoD mobility programs comes in at the far right of the spectrum, with $23 million in spending anticipated.

Moving to procurement, we see that new dollars for tech refreshment and other acquisitions are going into the DISN, SATCOM, and other transport-network related programs.  DISN investments focus primarily on the procurement of network switching (MPLS) and optical network equipment related to engineering the JIE.

DISA anticipates spending $0 on DoD mobility procurement in FY 2016.

This brings us to RDT&E funding, of which DISA has requested very little. There are no surprises here. The Joint Interoperability Test Command (JITC) receives most of the funding in this category. Some funding here goes to the DoD Mobility program for “tech insertion and the deployment of two Device Mobile Classified Capability (DMCC) gateways OCONUS which will include Top Secret (TS) and Secret capabilities in the Pacific and Southwest Asia.” Funding for the DISN will focus on the purchasing and testing of “optical and IP routers, switches, and Communications Security equipment” related to the upgrading of DISA’s optical network.

In conclusion, this snapshot of the FY 2016 DISA budget shows that engineering the DISN to provide the backbone for the Joint Information Environment will remain DISA’s highest priority in FY 2016, with funding spread out in all categories of IT spending – O&M, Procurement, and RDT&E.  DISA’s FY 2016 spending will remain heavy on communications and network equipment, with DISA personnel and service contractors already in place providing the support required to install and configure the equipment for the agency.

 

A Look at DISA’s FY 2016 Information Technology Budget

The Defense Information Systems Agency (DISA) is playing an increasingly important role in Defense IT, a role that is expected to grow with maturation of the Joint Information Environment (JIE).  Funding for DISA’s programs garners a lot of attention, therefore, as vendors seek to understand where contract dollars in the agency’s IT budget may be going and which Defense organizations are buying DISA’s services.  Today’s post takes a look at the broad outlines of DISA’s proposed budget for the upcoming fiscal year and breaks down some salient points vendors need to know.

DISA’s IT Budget in Context

Where does DISA’s IT budget fit into the broader Department of Defense IT budget request for FY 2016?  The chart below shows the Defense-Wide IT budget for fiscal years 2014 through 2016 alongside DISA’s IT budget for those same years.


As a reminder, the big drop in DISA’s FY 2015 IT budget was caused by a change in the way the DoD CIO calculates the Defense Working Capital Fund.  For FY 2015, funding is now identified in the ‘senders’ accounts (i.e., Defense customers) rather than the investment owner's (i.e., DISA’s) account. 

The FY 2015 calculation change aside, DISA’s proposed IT budget for FY 2016 shows a continuing decline despite the fact that most of the DoD is relying more on the agency for its services.  Overall, DISA’s IT budget is expected to decline from an estimated $3.19B in FY 2015 to $3B in FY 2016, a drop of $190M, or just under 6%.

New Orders from Defense Customers – Computing Services

Moving to the specific services that DISA provides, the chart below shows the orders for DISA’s computing services that Defense customers have placed (or are expected to place, as the case may be) from FY 2014 to FY 2016.


The computing services DISA supplies include Core Data Center services, DoD Enterprise Email, DoD Enterprise Portal Service, GIG Content Delivery Service, and the agency’s milCloud infrastructure service.  The data for these services reveals a few interesting trends.

First, both the Army and Air Force continue to use DISA-provided computing services more than the Navy.  DISA, however, expects orders from Air Force customers to drop in FY 2016, while those from Army customers will grow.  The implications of this are clear for Defense contractors – in FY 2016 the Army will spend less money on contracted efforts for computing services outside of DISA.  Conversely, the Air Force may be a better place to search for specific opportunities in this area.

Second, Defense-Wide appropriations are expected to nearly double, suggesting that the Defense Agencies are continuing to embrace the enterprise services provided by DISA under the JIE concept.

Third, Navy new orders are expected to decline slightly, from $44M in FY 2015 to $42M in 2016.  The Navy’s ongoing flat/declining use of DISA services continues to suggest the service will spend its computing services contract dollars with its big CANES and NGEN prime contractors.  The Marine Corps’ new orders are expected to grow slightly, up from $28M in FY 2015 to $33M in FY 2016.

New Orders from Defense Customers – Telecom/Enterprise Acquisition Services

Turning now to transport and enterprise acquisition services, which DISA reports in combination, the new order trends are similar to those in computing services.


Nearly all parts of DoD are expected to spend more with DISA in FY 2016 than they did in FY 2015.  Only the Navy ($571M in FY 2015 dropping to $569M in FY 2016) and Marines ($111M in FY 2015 dropping to $110M in FY 2016) show declines.  Dropping Navy/USMC spending is consistent with statements by officials from both services that they will continue to rely more heavily on their own networks rather than DISA’s for transport and communications services.

In conclusion, in FY 2016 DISA will continue to play the central role in the DoD’s new Joint Information Environment, with spending on its services by the MILDEPS dependent on the level of each department’s involvement in standing up the JIE.  Spending by the Army, Air Force, and Defense Agencies will continue to be the strongest, while spending by the Navy and Marine Corps continues to lag.

 

Software-Defined Networking: The Army Prepares to Reap the Rewards of Joint Modernization

For many years the U.S. Army has been the butt of jokes about the antiquated state of its information technology infrastructure.  Army personnel returning from deployments had better connectivity and IT services available to them in the field than they have in garrison and bandwidth into and out of Army camps, posts, and stations has been measured in megabytes, not gigabytes.  Dedicated Army IT professionals from the CIO/G-6 down to the Program Executive Offices have worked hard to change this situation by implementing initiatives like Defense Enterprise Email and by leading the move to a Joint Information Environment.  In doing so, they have changed the game for the U.S. Army and put the service in an excellent position to advance rapidly down the timeline of technology evolution.

Lest readers think I overstate the case for the Army’s advancements in modernizing its IT infrastructure, I refer them to a procurement that recently appeared.  The Global Enterprise Fabric acquisition (Solicitation #W91RUS15GEF1) demonstrates that the Army’s Network Enterprise Technology Command also sees the advancements that have been made.  NETCOM is seeking to take advantage of those advancements by implementing a software-defined infrastructure that enables centralized management of the JIE, Joint Regional Security Stacks, and Multi-Protocol Label Switching architecture.

That NETCOM is researching the possibility of implementing an enterprise SDN solution speaks volumes about how far the Army’s network modernization has come and where it is going.  The CONUS deployment of MPLS routers across the enterprise is targeted for completion sometime later this calendar year.  Similarly, the standing up of Joint Regional Security Stacks in the CONUS is also slated for later this year.  Add the Army’s recent transition to Defense Enterprise Email and you have a much more secure network with much higher bandwidth.  These network upgrades will also allow the Army to take advantage of cloud computing services offered by the Defense Information Systems Agency and commercial partners.

The Global Enterprise Fabric envisioned by NETCOM will help deliver computing enterprise services in three broad areas - Infrastructure-as-a-Service, Network Services, and Computer Network Defense – all of which are managed and monitored within a software-defined framework.  NETCOM’s turn to SDN is a harbinger of things to come across the DoD.  Deltek’s recent Emerging Federal Technology Markets, 2015 report documented that throughout the federal government two steps are leading agencies to SDN: modernizing IT infrastructure and planning for/adopting cloud computing. Cloud computing is not necessary for an agency to implement SDN, but in evolutionary terms the adoption (or desired adoption) of cloud may be decisive because it spurs on other foundational investments.

As agencies grow more comfortable with cloud computing, their adoption of SDN will increase or, as NETCOM’s Global Enterprise Fabric concept illustrates, their adoption of SDN and cloud computing will go hand-in-hand.  Herein lays the opportunity for those seeking new business.  Agencies already walking the path toward the cloud, particularly the use of Infrastructure-as-a-Service, will already have some idea of the viability of SDN.  Seek out those agencies making IaaS investments and you’ll find those most interested in discussing SDN as the next step.

 

What Agencies Really Spend on Cloud: A Case Study

Several years ago, Deltek’s Federal Industry Analysis team developed a sophisticated system for estimating what the actual federal information technology budget is every year. FIA did this because the figures released by the Office of Management and Budget capture only a portion of yearly IT spending, meaning government contractors had only part of the picture to work with when it came time to set strategic goals. The deficiencies in OMB-provided estimates on cloud computing spending are no different than the overall IT figures. They also don’t capture everything that is being spent, leading vendors to develop flawed assumptions about where money is going toward cloud efforts.

Basing strategic goals on the estimates provided by federal agencies is a big unstated risk to government contractors. Bid and proposal dollars may be pushed in the wrong direction, sales targets may be set unrealistically high/low, etc., and yet these kinds of decisions are made all the time using the government’s partial data. How far off are the government figures when it comes to spending on cloud?  Let’s look at an example.

According to the Department of the Interior, it spent approximately $11.4 million on cloud services in FY 2014. The programs on which the money was spent are:

So far so good, right? Sure, however, the numbers you see are only part of the picture. According to data from Deltek’s Cloud Computing Database the actual amount that DOI customers spent on cloud services in FY 2014 was at least $21.6 million; $10 million more than was reported by the DOI. The table below shows these investments.

Comparing the two tables we can see that the investments listed in table one don’t match those in table two. This is because DOI contracting personnel reported spending data by service rendered (table two), not by investment title. It follows, therefore, that an investment called “Cloud Hosting & Support Services” could related to one of the program investments mentioned above.

The point of this exercise is to offer a word of warning when it comes to strategic planning. The fact is that the IT spending data provided by federal agencies is incomplete, meaning it can strongly skew our view of where a respective agency’s IT investment dollars are going. Understanding this can make the difference between setting realistic and unrealistic goals, so having the right tools is critical for making the best possible decisions.

 

Industry Leaders Chime In on Likely Federal CIO Priorities

New federal CIO Tony Scott is being welcomed with cautious optimism by federal IT industry leaders.  Most believe he has the right skills and experience for the job. 

A recent Federal Times article speculates about Scott’s likely priorities as CIO:  cybersecurity, IT workforce, and IT project performance. 

Cybersecurity heads the list of expected priorities for the new federal CIO.  Backed by administration support, cybersecurity is allotted $14B in the president’s FY 2016 budget request.  Protecting federal data and networks is a high priority for the administration.   Scott will play a vital role in coordinating cyber efforts, capitalizing on technology and communicating policies to department and agency CIOs.  Forums where CIOs can share best practices and challenges, such as the CIO council, will be very valuable in these endeavors.

Scott is also expected to address IT workforce issues.  To bring government to the cutting edge of technology, the IT workforce must undergo continual training and also bring in private sector expertise.  According to OPM, nearly 50% of the federal IT workforce is over 50 years old.  While age doesn’t limit expertise or creativity, it does call for continual training to be on the cutting edge.  Industry hopes that that training extends beyond the traditional IT workforce and stretches to contract, acquisition and program personnel.

Federal industry executives also believe Scott will focus on IT project performance.  They suggest that the focus should be on using data to improve projects rather than looking at reporting requirements as just required mandates.  

Industry experts also see the new CIO as playing a role in the implementation of new digital service teams across agencies.  The federal budget request calls for creating teams at 25 agencies.     

Scott is the first federal CIO who comes to government with experience as a CIO.  He brings a private sector perspective to the business of government, along with commercial best practices.    “He’s going to be looked at as somebody to be a coordinator and also a leader in terms of identifying what are the top priorities and really leading the federal CIO community,” according to Jason Kimrey area director of Intel Federal.   Federal and industry IT leaders are hopeful that Scott will make a positive and lasting impact on federal IT.

 

Opportunities for Cloud Providers in the FY 2016 Budget Request

As part of the President’s Budget Request for Fiscal Year 2016, the Office of Management and Budget released figures for spending on cloud computing that agencies anticipate they will make.  The figures released this year don’t provide the same granularity into spending on service delivery types and deployment models that the same data has provided in past years.  The data does, however, more closely align with spending on other categories of information technology investments in that it has been divided into operations and maintenance (O&M) and development, modernization, and enhancement categories (DME).  Putting spending (FY 2015 estimated and FY 2016 forecast) into O&M and DME buckets helps OMB understand the percentage of overall agency IT dollars that are going into cloud vs. other types of investments. It also helps industry understand where new investments are being made versus spending on steady state programs.

Top Ten Agencies Forecast to Spend on Cloud in FY 2016

Here is a list of the top ten federal agencies by forecast cloud spending in FY 2016. Keep in mind that only Civilian sector agencies were included in the data as the Department of Defense has not yet released detailed information for FY 2016.

The spending forecast in this chart totals just north of $2.4B, representing only a small percentage of what agencies spend annually on IT.  Of the agencies listed, the surprises that stick out to me are Labor and the Office of Personnel Management.  Both of these agencies are small compared to the agencies around them, especially Homeland Security and Treasury, and yet they intend to spend considerable amounts of money on cloud.

Where the New Dollars Are

How much of this spending will be new dollars?  The chart below illustrates these forecast totals in terms of O&M and DME.

As we can see, the forecast spending picture takes on a different flavor once we know where new investment is intended.  From this perspective Labor remains an attractive target for business development efforts; OPM less so.  It is Commerce, though, which emerges as the greenest field of all.

Labor and Commerce: Green Fields for Cloud Providers in FY 2016

The graph below shows the four organizations in the Department of Labor where DME (i.e., new) dollars are forecast to be spent on cloud computing in FY 2016.

The specific programs in each organization slated to receive this funding are:

Departmental Management

  • Digital Government Integrated Platform (DGIP) - $84M
  • Enterprise Consolidated Network (ECN) - $17M                                                                                                                
  • Customer Service Modernization Program (CSMP) - $1M
  • Integrated Acquisition Environment - $1M
  • National Core Financial Management System (Shared service provided by the Department Of Transportation) - $8M

Wage & Hour Division

  • Strategic Enforcement Achieves Compliance System (SEACS) & Prevailing Wage System (PWS) - $3M

Employment & Training Administration

  • ETA BPM IT Modernization - $1M

Mine Safety and Health Administration

  • MSHA Internet/Intranet Maintenance - $1M

At the Department of Commerce the following organizations forecast spending DME dollars on cloud computing in FY 2016.

The specific programs in each organization slated to receive DME funding are:

U.S. Patent and Trademark Office

  • USPTO Patent End-to-End 2 (PE2E-2) - $87M
  • USPTO Network and Security Infrastructure II (NSI-2) - $24M
  • USPTO Trademark Next Generation 2 (TMNG-2) - $9M
  • USPTO Fee Processing Next Generation (FPNG) - $8M
  • USPTO Consolidated Financial System (CFS) - $8M
  • USPTO Dissemination Capability (DC) - $6M

National Oceanic and Atmospheric Administration

  • NOAA/NWS Integrated Dissemination Program - (IDP) - $4M

Bureau of the Census

  • Census IT Infrastructure - $3M

Departmental Management

  • BusinessUSA - $2M

Department of Commerce

  • Commerce Business Application Solutions (BAS) - $1M

Despite the allocation of new dollars for cloud efforts at the USPTO, the Next Generation requirements are almost certain to be fulfilled under the Software Development Integration and Testing – Next Generation (GovWin IQ Opp #37269) and SDI-NG for Small Business (GovWin IQ Opp #63628) contracts awarded in 2011. Work for the other efforts may remain in play.

 

The 2015 NDAA Mandates Open Architecture for Defense IT Systems

Provisions in the annual National Defense Authorization Act legislation affect the Defense sector of the federal information technology market over many years.  Consider, for example, the mandate in the FY 2012 NDAA calling for the Department of Defense to utilize cloud services provided by commercial partners.  The DoD has been working ever since to find a viable way of implementing this mandate.  The far-reaching impact of NDAA provisions thus make it imperative that federal contractors understand how the legislation will affect their business at the DoD in the future.
 
The FY 2015 NDAA promises to have a significant impact as it features an important provision calling for the DoD to adopt open architecture for all of its IT systems. Specifically, Section 801 calls for the Under Secretary of Defense for Acquisition, Technology, and Logistics to create a plan that “develops standards and defines architectures necessary to enable open systems approaches in the key mission areas.”  The discussion about using modular approaches to acquisitions has been evolving at the DoD for several years, resulting in a shift in the length and complexity of contracted efforts.  Rather than procuring a single end-to-end solution, Defense customers tend increasingly to initiate program procurements in increments.  These increments have shorter time spans and defined objectives that set parameters for the acquisition of the next increment. In Section 801, Congress gives this “modular” approach the weight of law, meaning vendors should expect to see even more short-duration, lower dollar value, limited objective procurements.
 
Equally important is the call for DoD to develop a strategy for using open architecture.  The department is currently in the process of creating a unified transport network based on internet protocol.  This may work well for newer systems, but thousands of legacy systems across the DoD remain locked in proprietary configurations.  A clause in Section 801 mandates that the USD AT&L submit a report which “outlines a process for the potential conversion [of legacy systems] to an open systems approach.” Engineering those systems to operate on an open architecture will unlock data, make the systems interoperable, and enable Defense customers to transition more easily from one IT support vendor to another.
 
If this sounds like the next, deeper level of the Joint Information Environment, you are right on target.  IT vendors should take heed and get ahead of the curve because in all probability open architecture is going to be a requirement for every unclassified (classified too?) solution that the DoD procures in the future.  If your solution isn’t open, it won’t be purchased.  End of story.
 
The open architecture requirement will also compel Defense customers to take a hard look at commercial cloud as an alternative.  Why spend money engineering an antiquated legacy system to operate on an open architecture when you can hire a vendor to host the data and implement a comparable, new interoperable system? 
 
In short, the 2015 NDAA should stimulate business opportunity at the DoD as funding locked in Operations and Maintenance funding for legacy systems moves into new efforts to re-engineer and/or cloud-enable those systems for use in an open architecture.

 

State of the Union – Potential Opportunities and Impacts for Federal Contractors

In Tuesday night’s State of the Union address, President Obama highlighted issues and initiatives he hopes to tackle in his last two years in office such as improving “middle-class economics,” building U.S. infrastructure, and increasing cybersecurity.  

Reading between the lines we can attempt to predict the impact some of these initiatives may have on the federal contracting community.

The potential upside for federal contractors:  

  • Obama’s plan to improve infrastructure in the form of trains, bridges, ports, and internet speed and access could provide opportunities for heavy construction and IT contractors. 
  • Strengthening cybersecurity efforts may provide companies with additional opportunities to sell cybersecurity services and solutions to the federal government, as well as the commercial market.  
  • Easier, more affordable access to higher education and increased training will provide employers with a larger, better trained labor pool. 
  • The president’s Precision Medicine Initiative may provide contracting opportunities in the area of health IT, health informatics, medical research, medical technology, and medical devices. 
  • Revisions to the tax code may adversely or positively impact contractors and other companies depending on specifics of proposed tax code changes.  
  • The president’s commitment to continue to fight terrorism may provide opportunities for defense contractors. 
  • Obama’s statements about surveillance and privacy allude to continued funding for intelligence agency surveillance programs, but with emphasis on simultaneously safeguarding citizen privacy.  

The potential downside for federal contractors:  

  • Obama’s call for higher wages in the form of equal pay for women and increasing the minimum wage, may negatively impact companies’ profitability.  
  • The appeal for guaranteed paid sick leave for all employees may place a financial burden on small businesses.  
  • Potential new cybersecurity legislation could impose additional security requirements for federal vendors and service providers.  
  • Revisions to the tax code may adversely or positively impact contractors and other companies depending on specifics of proposed tax code changes. 

The President’s FY 2016 Budget Request, due for release in less than two weeks, will bring to light many of the proposals and initiatives mentioned in the State of the Union address, and is rumored to contain a substantial increase over current year budget levels.

For detailed budget information and federal contractor impacts, watch for Deltek’s future analysis of the President’s FY 2016 Budget Request in the coming weeks.

 

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