Preparing for the Administration Change – A Federal Contracting Perspective

Published: December 30, 2020

Federal Market AnalysisAdministration TransitionBudgetCoronavirus (COVID-19) Pandemic

President-elect Biden has ambitious plans for COVID-19 response, economic recovery, healthcare, immigration, climate change, and national security, presenting potential opportunities as well as challenges for federal contractors.

Key Takeaways:

  • Federal contractors should prepare for the impact that the incoming administration will have on human capital, budgets, programs, and procurement.
  • The Biden Administration inherits a large budget deficit, but Congress is unlikely to risk economic recovery with major spending changes in the near-term.
  • As the transition progresses, contractors should determine where they need to form new relationships within agencies and how to align contracts with new priorities and metrics as they are established.

On January 20th, the Biden Administration will take office amid an environment of disruption and challenges, but also great opportunity. The COVID-19 pandemic, economic struggle, racial tensions, and overwhelming national debt set the stage for the incoming administration.

In November, Deltek polled federal contractors for their perspective of the most impactful market condition they were watching for 2021. Respondents were equally concerned about the election outcome, pandemic response, budgets, and policy. However, the incoming administration affects the course of all of these market conditions. 

Presidential transitions influence human capital, budgets, programs, and procurement, and reveal near-term needs that industry leaders can begin preparing for. The full influence of the president-elect typically requires 18 to 24 months into the new term, giving industry leaders the opportunity to begin evaluating key policy areas and start strategic planning.

Agency leadership is reviewing programs for weaknesses, performance issues, and risk factors and communicating them to the incoming transition team. New priorities held by Biden appointees may require contractors to reassess their solutions, value propositions, and sales strategies. Additionally, as political appointees leave positions, industry leaders will need to identify and recruit agency program champions among the remaining employees.

The 2021 administration transition will change the dynamics in the government landscape with new priorities and agency leadership, which will have near- and long-term implications for budgets and the contracting landscape. Some existing acquisition and operational reform initiatives will remain, while others will evolve as the new administration takes ownership. Federal contractors must navigate the change in administration with knowledge of the current environment and the opportunities and challenges a transition may pose to their business.

The Biden Administration inherits a $1.8T budget deficit, as estimate by the Congressional Budget Office, which was calculated prior to the most recent COVID relief legislation at the end of December. The federal government has not had a budget surplus since the Clinton Administration. Deltek projects the full impact of actions to promote economic recovery will not be felt before FY 2022. Congress will begin examining the long-term economic picture but is not expected to institute any significant budget controls until after FY 2022. Due to the scale of the pandemic, the likely pace of economic recovery will be modest. Congress is unlikely to risk that recovery with major spending changes until the economy is more stable.

The Biden Administration’s near-term priorities will be to address a multitude of policy changes that require immediate attention, including COVID-19 response, economic recovery, national security, immigration, and climate change.

Deltek’s research predicts the majority of IT, acquisition, and process initiatives developed or expanded in the Trump Administration will remain in some form in the Biden Administration, however, most will be “rebranded” or reshaped to align with Biden priorities.

As the transition progresses, contractors should evaluate current customer organizations to determine potential agency turnover and where new relationships may need to be formed. As new leadership takes root, contractors should be prepared to make program adjustments on current contracts to align with new priorities, methodologies, or metrics established by the new administration.

For more information on the change in administration and its potential impact on the federal contracting market, see Deltek’s new Federal Administration Transition, 2020–2021 report.