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Federal Busy Season – Which Agencies are Ramping Up to Spend in September?

August is here and that puts us right at the mid-point of the fourth and final quarter of the fiscal year – the federal “busy season.” But that doesn’t mean that half of this business is already accounted for. In fact, historical spending trends suggest that things are just ramping up for its climax in September and several agencies will have billions of dollars to spend on IT before they face expiring funds.

Recently, I showed how federal agency spending trends in Q4 accounted for an average of 39% of agency contracted IT spending for the year, translating into an average of $30 billion in IT products and services contracted during the fourth quarter. Yet, the spending is even more concentrated than that. Upon further analysis, we can see that federal contract spending is disproportionately large in September, the final month of the fiscal year. Agencies obligate 18% of their total contract dollars across all goods and services and 23% of their yearly contracted information technology spending in September alone. That works out to nearly 60% of Q4 IT contract spending and means that about $17.3 billion in IT is likely to be contracted in the month of September.

Twenty five federal departments and agencies account for about 99% of this IT spending. So which of these biggest spending departments and agencies will have the largest percentage of their IT dollars likely to go out next month? See the chart below.


Twelve of the 25 highest spending departments – roughly half – will obligate 25% or more of their FY 2014 IT contract dollars in September, based on a 5-year average. State and AID will obligate more than a third!  The FY 2009-2013 average September contract spending for these 12 agencies is provided below.


Again, we are looking at an average of over $17 billion in IT spending at these agencies in September. Not all of these funds will necessarily expire at the end of the fiscal year, but the historical spending data averaged over the last five years still supports the trend that these agencies will spend at or near these levels, as it reflects some of the spending impacts of recent trends like shifting and tightening budgets, program delays, and sequestration.

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

Lackluster Spending on GSA’s Infrastructure-as-a-Service BPA

 

Remember back in 2010 when the cloud computing hype-cycle was shifting into high gear?  Articles appeared every day describing the benefits of moving to the cloud, industry partners anticipated high agency demand, and then federal CIO, Vivek Kundra, announced his 25 Point Implementation Plan to Reform Federal IT Management.  Based on Kundra’s plan, the Office of Management and Budget mandated that agencies move 3 systems to the cloud.  This motivated the GSA to spend time, money, and effort putting a Blanket Purchase Agreement in place for vendor-provided Infrastructure-as-a-Service solutions.  By all indications the great migration was off and running.  Analysts projected the swell of cloud adoption would become a wave and the wave a white-topped crest that drove federal IT into a new paradigm of utility-based computing, unlimited scalability, and vastly increased savings.

This is what was supposed to happen.  The reality is that agencies dragged their feet and the cloud wave evaporated into puddles that dotted the federal technology landscape.  Among the flotsam and jetsam littering the market shoreline was GSA’s IaaS BPA.  Once anticipated to be THE way that agencies entered the cloud, the IaaS BPA became instead just another little used contract vehicle with poor ROI for the GSA.  You can’t fault GSA for trying to capitalize on a trend.  After all, as an agency driven by the fees it collects from government customers, it was doing what any investor does – try to front-run the market.  Alas, the data below showing spending on the vehicle has been the result.

  • DHS - $2.7M
  • DOE - $579K
  • NEH - $124K
  • Labor - $13K
  • DOJ - $11

By my calculations, federal customers have awarded cloud contracts worth approximately $24 billion since fiscal 2010.  In comparison, 5 agencies have obligated a total of $3.4 million on GSA’s IaaS BPA.  Prefer to compare spending to spending and not to TCV?  According to OMB’s data federal agencies spent $2.1 billion on cloud computing in fiscal 2012.  This number rose to $2.3 billion in fiscal 2013.  By any measurement the amount of money obligated for cloud solutions on the IaaS BPA has been very, very low.  The numbers break out as follows by vendor over the same period of time.

  • CGI Federal - $3.3M
  • Autonomic Resources - $124K
  • AT&T - $13K
  • Verizon - $11K

CGI Federal’s earnings have come from hosting Department of Energy and Department of Homeland Security data, while Autonomic Resources’ earnings from a single hosting project at the National Endowment of Humanities.  Curiously, both AT&T and Verizon won business providing cloud-based mobile telephony services for the Department of Labor and Department of Justice, respectively.

It’s anyone’s guess why spending on the IaaS BPAs has been so low.  Deltek’s cloud contracts data shows that from FY 2010 through FY 2014, federal customers have awarded IaaS contracts worth close to $13 billion dollars.  Most of these contracts have been awarded via Full and Open ($11 billion), GSA IT 70 ($299 million), and Alliant Large Business ($249 million) competitions.  It’s clear that agency customers prefer to compete cloud infrastructure contracts on their own using more expensive unrestricted competitions and other acquisition avenues provided by GSA.  Therefore, the problem with the IaaS BPAs can’t be too high a fee structure.  It can’t cost more to compete contracts unrestricted than to compete them via a BPA, can it?

My guess is that most agency contracting shops simply aren’t aware that the IaaS BPA is available.  In the end they’ve chosen to use the methods they know best and the contracts that are most familiar.  This conclusion is reinforced by the similarly poor use of GSA’s Software-as-a-Service BPA for email.  Spending on it too has been lackluster, but I’ll save this tale for next week.

Federal Fourth Quarter FY 2014, Part 2 – $30B in IT Contracts Likely

The last two months of fiscal year (FY) 2014 are nearly upon us and that puts us on the cusp of the height of the 4th quarter (Q4) “federal IT busy season.” Even with several disruptions that have marked the first half of FY 2014, agencies do have budgets in place and are spending. If historical averages hold, several agencies will spend more than 50% of their FY 2014 contracted IT dollars in Q4.

Last week, I looked at potential total fourth quarter spending for the top 25 departments and agencies across all categories of contracted products and services, based on their reported historical contracted spending over the last several years. This week, I will focus on the Information Technology (IT) category in a similar fashion. (See last week’s entry for more detail on my approach.)

From FY 2009-2013 federal departments reported spending an average of 32% of their yearly contract dollars in the fourth quarter across all spending categories. However, the percentage of Q4 IT contract spending was 39% among the same departments for that period. Agencies tend to buy more of their IT in Q4 compared to other products and services, on average. Translating that into dollars, over the last five fiscal years federal agencies spent an average aggregate of nearly $30 billion on IT hardware, software, and services in Q4 alone. This is the case based on historical spending data, even in the era of sequestration and other budget constraints.

Which departments are the best targets for a firm’s Q4 IT capture efforts? Over the last five fiscal years the following 25 departments or agencies reported the largest overall contracted IT spending and make up 99% of the federal market. The chart below shows their average contracted IT spending in Q4 over the last five years.


Sixteen of the 25 top-spending departments will spend an average of 40% or more of their yearly contracted IT dollars in Q4 (and several more departments are not far behind in percentage points.) Those 16 departments account for an average of $20 billion in combined Q4 IT contracts from FY 2009-2013.

Three departments or agencies historically obligate more than half of their yearly IT contract dollars in the final fiscal quarter: AID (55%), State (56%) and HUD (70%).  Their 5-year average Q4 IT contracted spending is:

  • AID = $141.5 million
  • State = $690.5 million
  • HUD = $181.9 million

Not far behind, the departments that spend between 45% and 48% of their yearly IT contract dollars in Q4 – like HHS, DOJ, SSA, Energy, and DOI – tend to have even larger IT budgets. These five departments account for a combined average of $3.2 billion in Q4 IT contracts over the last 5 fiscal years.

Much of these contract dollars will flow to commodity IT products like software and peripherals, but significant dollars will also go toward IT services. Proposals that were submitted weeks or months ago may come back to the foreground for potential action and companies that can quickly turn around competitive quotes for their federal customers may have a chance at stealing business from incumbents. 

With FY 2014 getting a bit of a slow start due to delayed budgets and agency shutdowns, the rebounding we are seeing in the second half of the year may result in a record-breaking Q4. We will have to wait and see.

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

 

Federal Fourth Quarter FY 2014 – Who’s Got the Money?

It’s that time of year again in the federal contracting world – the final quarter of the fiscal year, i.e. the Q4 “busy season.” After a rocky start to FY 2014, marked by budget impasses, shutdowns, continuing resolutions and sequestration, contracted spending appears to be catching up and may be on track for a record fourth quarter. Some federal departments will spend more than 40% of their contract dollars in the next few weeks.  

Due to the topsy-turvy environment over the last few years taking a bit of a historical perspective on spending may help to get a sense of what is likely in store for this Q4. According to their FPDS reported contracted spending over the last seven years, federal departments spent an average of 43.4% of their yearly discretionary budgets with contractors. Applying that percentage to the enacted FY 2014 discretionary budget of $1.127 trillion means over $489 billion in contract spending would be spent in all of FY 2014. Further, from FY 2009-2013 federal departments reported spending about 32% of their yearly contract dollars in the fourth quarter. That means more than $156 billion of FY 2014 contracted spending is likely to be obligated in the last 12 weeks of the fiscal year. Given a slow start in Q1, the actual Q4 amount could be billions higher as agencies work to catch up.

So which departments and agencies are most likely to have big money to spend between now and the end of September?  Looking at total contract obligations over the last five fiscal years, the following 25 departments reported the largest overall contracted spending and make up 99% of the market. The chart below shows their average contracted spending in Q4.

Eight of the largest departments on average spend at least 40% of their contract dollars in the last fiscal quarter and the State Department averages nearly 60%. In average dollar amounts, the Army, Navy, Air Force and DoD will have the most to obligate. From the civilian side HHS, VA, DHS, Energy, and State will be the biggest Q4 spenders.

Contractors need to be well-prepared to meet the needs of their federal customers to effectively and efficiently get these contract needs met by being highly responsive and by providing compelling proposals and bids. The dollars will flow, but where they go may be still up for grabs.


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

 

GSA Reports Agency Buying Trends through Networx

In early June, the General Services Administration (GSA) reported on government telecommunications buying habits from the first half of fiscal 2014. Using data collected through their Networx program, GSA analysis found $332 million in agency savings amid increased acquisition.

GSA’s “big data” from Networx acquisition details stems from over 136 federal agencies buying through the program. These agencies purchased over $762 million in services through Networx during the first half of fiscal 2014. This amounts to a 12.8% year-over-year increase in purchases from FY 2013, and it means that agencies are spending more through the Networx contracts.

Several services have been purchased more during the first half of this year than last. These include Network-Based Internet Protocol Virtual Private Network Service, Managed Network Services, and call center services. GSA also observed an increase in storage services, such as Network Attached Storage and Storage Area Networks. Their analysis also noted a decrease in several services, particularly Frame Relay Service and Asynchronous Transfer Mode. Since GSA uses percentages to report its findings about changes from FY 2013 to FY 2014, it’s difficult to tell exactly how much growth (or contraction) was seen in the various services it highlights.

According to GSA, these trends are indicative of trends in the broader market. As an analyst covering communications and network services in the federal space, I couldn’t help but wonder how patterns through Networx weigh against other major vehicles like Transformation Twenty One Total Technology Program (T4) and Schedule 70. Leveraging the Federal Industry Analysis team’s market segmentation and reported IT obligations for FY 2013, the communications and network services (CNS) market saw over $2 billion in spending. Across the government, the top ten vehicles for CNS FY 2013 obligations are as follows:

  1. GSA Schedule 70
  2. Networx Enterprise
  3. Operations Maintenance and Defense of Army Communications (Southwest and Central Asia)
  4. Transformation Twenty One Total Technology Program (T4)
  5. Networx Universal
  6. DISN Satellite Transmission Services – Global
  7. Total Engineering and Integration Services (TEIS III)
  8. Department of Navy Wireless Services
  9. End-to-End Solutions for the Future Commercial SatCom Acquisition
  10. Information Technology Enterprise Solutions 2 Services (ITES 2S)

In total, these ten vehicles comprise 41.5% of reported spending for that fiscal year. Both Networx vehicles (Enterprise and Universal) fall in the top five contract vehicles. Combined, these two vehicles represent 11.9% of the spending in this segment of the IT market for FY 2013. While those contracts represent a growing portion of the CNS market, it still leaves room for wondering how trends through roughly 12% of the market align with the other 88%.

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

 

Positioning for Federal Cloud Business

The Office of Management and Budget (OMB) set June 5, 2014 as a deadline for cloud vendors to comply with federal cloud security certification. This mandate for federal systems highlights a debate that started in the vendor community as soon as the Federal Risk and Authorization Management Program (FedRAMP) outlined its process two years ago: Cloud providers have a few paths available to achieve compliance, some aspects of the processes depend on which route a provider takes. So, which one is best?

Whether they are commercial or government entities, cloud service providers have a number of responsibilities. They’re responsible for working with a third party assessment organization to conduct initial and annual assessments. Along with maintaining an authorization (once granted), they must comply with continuous monitoring requirements. And above all, they are responsible for ensuring their cloud offering or service implements the FedRAMP security controls.

There are three paths for cloud service providers (CSPs) to become FedRAMP compliant. The first is to submit documentation to the FedRAMP program management office (PMO) for review by the Joint Authorization Board. The second path is to submit documentation to the FedRAMP PMO and review by an agency for Authorization to Operate (ATO).  If a vendor receives ATO from one agency, the FedRAMP process will enable other agencies to use that service faster by decreasing the time for approvals. Finally, the third path is for a vendor to submit their documentation to the FedRAMP PMO. This “CSP supplied” path also shortens time for approvals because documentation and testing are prepared and in order for agency review. Ultimately, the difference between these categories is the level of review. JAB provisional authorization relies on review by the FedRAMP Information System Security Officer (ISSO) and JAB. Vendor offerings working toward Agency ATO will receive agency review. CSP supplied offerings have not yet been reviewed.

While there are several paths to compliance, there are only two types of cloud security authorization. One is awarded by the Joint Authorization Board (JAB), which is comprised of security experts from the Defense Department, Department of Homeland Security, and General Services Administration (GSA). The other type is agency sponsored. One difference between these two processes is the timeframe for each. (Obviously, the scale and complexity of the offering being evaluated also comes into play.) The FedRAMP PMO has estimated the time for each path to authorization, pending CSP readiness and responsiveness at each stage.

It takes the JAB approximately 6 months to complete the process to award a Provisional Authorization to Operate (P-ATO). The JAB path focuses on government-wide offerings. At the same time, the JAB is unable to accept risks on behalf of an agency, which is why the authorization is provisional. If an agency decides to use a solution that’s received P-ATO, the agency will need to issue its own ATO letter saying they accept the risk associated with the system.  If a provider is working directly with an agency to establish ATO, the process can take around 4 months. Agencies are likely to target capabilities that align with their mission areas, technology strategies, and pain points. Since these vary from one agency to the next, an agencies stamp of approval might draw mixed interest from other organizations.

A provider who undertakes the process independently can complete the Security Assessment Framework in around 6 weeks. This faster timeline may sound compelling, but there is a catch. At the end of the process, the provider may be a candidate for authorization, but they have yet to undergo review by either the JAB or an agency. This CSP supplied option could be the perfect way for providers of specialized offerings to raise agency awareness. That attention comes at the expense of resources without the guarantee of any business.

Providers that are evaluating options for pursuing FedRAMP certification should also be aware of the program’s recently updated security controls. The vendor transition plan to the updated FedRAMP baseline was released in April 2014. This plan divides cloud service providers into three categories based on their status in the FedRAMP application process. Providers that have reached the in-process stage or that are already in the continuous monitoring stage will have to comply with the new baseline during annual assessment. Their documentation and supporting elements must be updated using the new FedRAMP templates. Annual assessments will test around 140 or 150 controls including both the core ones and new additions. Also, the change of controls will be assessed due to system changes.

 

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

 

Could New Cybersecurity Acquisition Plans Disrupt Federal Procurements?

Growing concern over cybersecurity and vulnerabilities to cyber-attacks that would impact the supply chain of both military and civilian agencies has led the federal government to look for ways to build cyber-protections into the federal acquisition process. But some in industry are concerned that new proposals coming out of the Pentagon and GSA could be disruptive in their own right.

The joint DoD/GSA publication, Improving Cybersecurity and Resilience through Acquisition - Final Report of the Department of Defense and General Services Administration, is one component of the government-wide implementation of Executive Order 13636 and Presidential Policy Directive (PPD) 21, issued in February 2013 and both addressing improved critical infrastructure cybersecurity.

The report included six recommended reforms addressing cybersecurity and federal acquisitions:

  • Institute baseline cybersecurity requirements as a condition of contract award for appropriate acquisitions

  • Include cybersecurity in acquisition training

  • Develop common cybersecurity definitions for federal acquisitions

  • Institute a federal acquisition cyber risk management strategy

  • Include a requirement to purchase from original equipment manufacturers, their authorized resellers, or other trusted sources

  • Increase government accountability for cyber risk management

In the news release announcing the report release GSA Administrator, Dan Tangherlini noted that “the ultimate goal of the recommendations is to strengthen the federal government’s cybersecurity by improving management of the people, processes, and technology affected by the Federal Acquisition System.  GSA and DoD will continue to engage stakeholders to develop a repeatable process to address cyber risks in the development, acquisition, sustainment, and disposal lifecycles for all federal procurements.”

Industry Concerns

The report has been open for industry comment for a few months and several IT industry organizations have expressed concerns over the direction the DoD and GSA are taking, according to a recent account. Specifically, some in industry are concerned that assessing cyber-risk based primarily on the inherent risk of the purchased products or services (i.e. product category) creates additional issues because it ignores the larger risk environment surrounding their implementation and it adds complexity and ambiguity that will make it difficult to use by agencies. If implemented in its current form, it sounds like it could run the risk of “the law of unintended consequences.”

Implication

While the emphasis of the executive order is on using security standards to influence acquisition planning, contract administration, and to ultimately increase resiliency, agencies are also under pressure to improve the economy and efficiency of their IT acquisitions.  Agencies also struggle with delays to procurements due to changing or additional requirements as well as protests. How security and resiliency controls are added to the acquisition process will have direct implications for the complexity, speed and cost of completing procurements. 

Implementing good cybersecurity intentions is important, but it is equally important to implement them in the right way. Otherwise, agencies run the risk that some supply chain disruptions they experience could be self-inflicted.

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

GSA’s 18F: “Hacking Bureaucracy”

In an environment that resembles more of a technology start-up than a government office, sixteen of industry and public sector’s brightest gather daily to develop software for their government clients.

 

Dubbed 18F, because of their location in GSA’s headquarters on 18th and F streets, these innovators and entrepreneurs attempt to improve the way agencies accomplish their missions.  18F was established in April of this year by GSA to accelerate innovation across the federal government, and includes the Presidential Innovation Fellows program and GSA’s digital delivery team.

 

According to Dan Tanherlini, GSA Administrator, “The mission of 18F is to make the government’s digital services simple, effective, and easier to use for the American people.  This service delivery program will make GSA the home of the government’s digital incubator.  By using lessons from our nation’s top technology startups, these public service innovators will be able to provide cutting-edge support for our federal partners that reduce cost and improve service.”

 

Greg Godbout and Noah Kunin, members of 18F, described their jobs in a recent blog as “hacking bureaucracy.”  Unlike criminal hackers, the 18F team’s work is “productively disruptive and curious.”   According to Godbout and Kunin, the term “hacker” in the software development community is not a malicious description, but one of a problem solver.  18F is attempting to integrate their agile style of software development into the broader federal community to drive long-term culture change.

 

18F held an inaugural Demo Day on May 9th, to introduce their mission and services to other federal agencies and the general public. 

 

The opening presentation by Greg Godbout on Hacking Bureaucracy described 18F’s purpose as to

  • Find innovators inside government 
  • Engage stakeholders and users 
  • Launch MVP to get started quickly 
  • Learn and Iterate 
  • Stay aligned with the rules of the bureaucracy 
  • Formalize the process/solution for reuse

During the Demo Day, various members of the 18F team presented projects they had worked on or were currently developing, such as FBOpen.gov, NotAlone.gov, innovation toolkit using Midas, and SAM.gov.

 

Tangherlini stated in an interview with the Washington Post in April that GSA was still determining how to measure success of 18F.  He said one measure would be whether or not agencies are using the products that 18F builds.  He went on to say,”…if agencies don’t want to buy it…then we’ll pull the plug and try something different.” 

 

More information on 18F can be found at 18f.gsa.gov or GSA’s news release regarding 18F.

 

 

Transition Plan Released for Cloud Security Baseline Update

The program office at the General Services Administration (GSA) in charge of overseeing the government-wide baseline for cloud security is set to tackle its first update of requirements. As the Federal Risk and Authorization Management Program (FedRAMP) releases revised security controls, vendors will be tasked with ensuring their cloud offerings comply with the changing standards.

Along with the Federal Information Security Management Act and agency guidance, the initial FedRAMP baseline leveraged the third revision of a special publication from the National Institute of Standards and Technology (NIST), Security and Privacy Controls for Federal Information Systems and Organizations (SP 800-53). Even as the FedRAMP office established guidance around this document, a fourth revision to the document was underway. The update to SP 800-53 was finalized at the end of April 2013, and it marked the most comprehensive update to the security control catalog since the 2005. Changes in this revision incorporate “Build It Right” strategy and continuous monitoring, and additions to the control and control enhancements include mobile and cloud computing. (The update expands the catalog of security controls from 600 to more than 850.) Following the publication of the fourth revision of SP800-53, the FedRAMP program office solicited public comment on the update. It’s expected that the changes to the FedRAMP baseline controls will reflect this feedback.

With FedRAMP’s rolling application process and approvals that incorporate continuous monitoring, hard and fast changes to baseline controls would have raised challenges for agencies and vendors alike. Federal agencies continue to fine tune their cloud security requirements, especially around data sensitivity and privacy concerns. Meanwhile, cloud security providers find themselves at different stages of the FedRAMP process. Considering the ‘crawl, walk, run’ approach the program adopted from inception, it’s fitting that GSA’s transition plan appears to take a phased approach to implementing adjustments as standards evolve.

The FedRAMP program office is offering guidance to cloud service providers (CSPs) through a plan released on Tuesday, April 22, 2014. Under its transition strategy, CSPs fall into three categories: Initiation, In Process, and Continuous Monitoring. All CSPs will be subject to compliance with the new baseline eventually.  While vendors that fall into the Initiation category will need to adopt the new controls immediately after their release, providers in the other two categories will have some time to achieve compliance and submit updated documentation.

Initiation: Vendors in the initiation category include any providers that are not yet in contract discussions with a federal agency, that are in early stages of applying to FedRAMP or in readiness review process. This also extends to vendors expecting to start review for provisional authorization by the Joint Authorization Board after the release of the new baseline and templates. Providers in this group will be expected to implement the new baseline and use updated FedRAMP templates, as well as testing all new controls before receiving authorization.

In Process: This category pertains to CSPs that have made some headway in the approval process. Providers will qualify if they have commenced review for authority to operate by the Joint Authorization Board (JAB) by June 1, 2014. Cloud providers with agency level progress may also qualify. As with review by the JAB, cloud vendors under agency review for ATO by June 1st qualify. Also, providers that have a contract or are in contract negotiation with agencies before June 1, 2014 will be considered “in process.” These vendors will be able to complete the authority to operate review using the current baseline (using SP800-53 revision 3 FedRAMP controls and templates). They will have one year from their authorization date to comply with the new baseline.

Continuous Monitoring: These are the vendors that have already completed the FedRAMP process. CSPs with current authorizations and an annual assessment completed before June 1, 2014 will have one year from the last date of their assessment to comply with the new baseline.

At the beginning of 2013, some 70 providers were reported to be in the FedRAMP application queue. As of April 2014, fewer than 20 providers have achieved compliance. That leaves around 50 vendors in either the Initiation or In Process category. The ones that fall into the Initiation group could face significant additional business expenses as they rush to comply with the new controls and avoid further delays to achieving authorization status. According to a notice from the program office, “the level of effort will require testing between 140 to 150 controls.” This includes around 72 new controls in revision four and 70 core controls for annual testing. The revised FedRAMP baseline is expected to be released on or about June 1, 2014.

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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.

 

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.

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