The good news was that there was not a government shutdown to start the new fiscal year on Oct. 1.
The bad news was that a Continuing Resolution (CR) was passed, funding the government only through Dec. 11. A CR is a stop-gap measure that essentially funds the federal government operations for a limited time at the previous year’s levels.
What many people do not understand is that this CR means that sequestration is back in force across the board, at all federal defense and civilian agencies; no new programs may be started, and those that should have ended will still continue to be funded.
To clarify exactly what a CR is, Senate.gov defines a continuing resolution as “… legislation in the form of a joint resolution enacted by [both houses in] Congress to provide budget authority for Federal agencies and programs to continue in operation until the regular appropriations acts are [agreed upon] and enacted.”
While this sounds like business as usual, operating under a CR can have devastating effects on the large and small businesses providing services and products to the federal government.
While the current CR is in place only through Dec. 11, hopefully, Congress continues to work on a full-year fiscal 2016 budget; however, both government personnel and industry executives are bracing for tough times ahead if Congress is unable to come to an agreement by the time the continuing resolution expires in December. In this case, Congress could extend CR contingency spending measures for up to a full year, through Sept. 30, 2016.
In a recent article in Fortune magazine, Bryan Clark, a senior fellow at the Center for Strategic and Budgetary Assessments, said, “Roughly half of the defense executives recently surveyed said they expect a year-long continuing resolution.”
If Congress takes the full year CR instead of passing a clean budget, this complicates contracting and acquisition processes dramatically.
So the government still must operate, even within the constraints of a CR. In order to do so, agencies cannot award contracts for new projects; instead, only existing programs and contract vehicles may be used. In this event, there is heavier use of GSA schedules and other pre-approved contract vehicles.
Wise contractors take advantage of their existing contracts and relationships within the agencies to aggressively market their GSA Schedules or other vehicles used by the target agencies to the appropriate decision-maker. Billions of dollars in services and products will continue to be procured by all agencies, civilian and defense. Those companies connecting the dots between agency need, contract vehicle and trusted relationships will have the best chance to see increased revenues during a CR.
If the budget is not approved by Dec. 11, major programs in both defense and civilian agencies will be negatively affected. This will have an immediate effect on the thousands of businesses that provide services and products for the government customer.
For example, the aforementioned Fortune article states that a full year CR would likely cause the Army to default on the final year of its Boeing contract, thereby incurring nearly $100 million in contract termination fees and canceling out more than $300 million more in cost savings. This would affect not just Boeing, but every small business subcontractor as well.
Small businesses also feel the direct impact of Congress’s indecision. Since a CR mandates that no new programs can be started, any cost-saving ideas brought by cutting-edge, efficient companies cannot be started, and worse, contracts that were designed to end in fiscal 2015 are automatically extended, thus funding work that has no practical purpose.
Because businesses cannot be awarded new contracts for new work, businesspeople once again will pull back on hiring, training and investing; they’ll also cut back on personnel, meaning additional lay-offs and reductions-in-force (RIFs).
This also will stop business growth dead in its tracks, which is of no benefit to anyone on either side of the aisle.
Gloria Larkin is president of TargetGov, in Linthicum. She can be contacted at 866-579-1346 and via www.targetgov.com.