The period prior to the federal government’s fiscal year end (FYE) is a crucial time to build relationships with government agencies. During FYE 2018, USAspending.gov reported that nearly one-third of federal agency dollars were spent in Q4, significantly higher than in Q1, Q2, and Q3. With $4.9 trillion obligated for spending in FY 2018, it is in the best interest of contractors and agencies to have an in-depth understanding of how to align agency goals, obtain additional business, and help drive FYE needs to benefit citizens.
Why does the federal government spend more money in Q4, while spending less in Q1, Q2, and Q3? The answer is time. Agencies have more time in Q1 through Q3 to negotiate with contractors and obtain the best value when it comes to goods and services. However, once Q4 begins, there is a large and intense spike in agency spending for fear that time is running out. Federal agencies tend to frantically spend their unused funds on last minute solutions before the appropriations lapse. Otherwise, government agencies are desperately trying to reprogram funds at the last minute, because they would have to return unused appropriated dollars to the general fund of the U.S. Treasury. This usually spells bad news for future budget requests for these entities.
How can government contractors and federal agencies work together to ensure opportunities are met before FYE? The key is collaboration. Because both parties understand mission-critical needs that must be resolved before FYE, they should work together to achieve FYE spending goals. Contractors need to be proactive and remind their agency contacts, e.g., contracting officers, of their FYE goals and how they can offer prompt service and solutions during the spending time frame, and agencies need to reach out to contractors for the best solutions.
Regulation Changes: An Area of Opportunity for Both Contractors and Agencies
With the calendar now turned to August 2018, rules have changed with regard to many types of procurements. Agencies may now issue sole source contracts and modifications without requiring certified cost or pricing data for actions below $2 million. This increased threshold should enable expedited contract modifications. This presents an opportunity for contractors and their clients to add on scope or add on a nice-to-have feature to a product without as much effort.
Increases to the micro-purchase and simplified acquisition thresholds also are opportunities for agencies to spend FYE budgets without as much process as previously necessary. It’s important to keep in mind that all agency spending is cut off by the middle of September. So, you’re going to need to act quickly for FY 2018 dollars. For more information on the threshold increases, please see our previous blog post, here.
FYE Spending Best Practices
Throughout the year, contractors should ensure that all products and services being provided are up-to-date, prepared to begin work immediately, have capable resources available, and have their GSA schedules and past performance aligned with agency goals. To get the most out of the relationship with your agency, contractors should focus on several key areas:
- Review budget plans for existing and targeted agencies and identify key relationships.
- Utilize existing relationships and identify unspent money that can be used to modify current contracts that will benefit the agency.
- Review past awards and identify key contracts that you’re aligned with that may be looking to spend unused budget dollars.
- Research and understand specific agency spending dollars by utilizing sites like usaspending.gov, fdps.gov and usafacts.org. There are other paid services out there, if you have the resources.
- Continue to stay involved in project planning for upcoming fiscal year planning.
As the government fiscal year 2018 winds to a close, it behooves federal agencies to get money obligated before it’s too late. Recognizing that most federal agencies turn off most procurement dollars by mid-September, federal contractors need to be proactive in reaching out to existing government customers in getting them to modify scope and other contract requirements to take advantage of the last-minute spending frenzy. Furthermore, with threats of a possible shutdown or at least continuing resolutions, both sides of this equation need to be working cooperatively to find win-win solutions to keep pushing agency missions forward once the current fiscal year ends.
For more information on FYE spending best practice for agencies and contractors, contact Jeff Shapiro, Senior Manager, CohnReznick, at 703-286-1709 or Jeff.Shapiro@CohnReznick.com or James DeGenova, Senior Manager, CohnReznick, at 301-280-7928 or James.DeGenova@CohnReznick.com.