FY18 Watch List (The BD Professional’s Cheat Sheet)
2017 was an interesting year for a lot of reasons. Between the dumpster fire of continuing resolutions (CRs), budget ups and downs, major tax reform, and programs fluctuating between inception and conclusion, we are happy to say goodbye to it. One of the most frustrating parts of Government Contracting is the uncertainty of what a new fiscal year brings. Most of our jobs are spent speculating, wondering, and waiting for the Administration and Congress to make decisions on high that affect every money-making element of our GovCon businesses.
And that’s how it’s always been. But in recent years, with the influx of pseudo-experts on social media platforms like LinkedIn, conflicting information is running amuck. Since this is an industry built on people and relationships, we all want to believe what our friends on the hill say to us... hence the old adage of “walking the halls” to know what’s coming down the pipeline. We can’t tell you how many times we’ve presented predictive information and someone in the back scoffs, rolls their eyes, and says, “I have a buddy who’s on the ground that says otherwise.”
But good prognosticating needs to be a combination of this type of hearsay with actual data. And that’s where we come in. We have been listening to Government decision makers and those with their hands on the programs. We have been tracking the data, the publicized facts and listening attentively to all sides. We did this so that we can give you, the GovCon Business Development professional, a GovCon FY18 Cheat Sheet to lessen the blow of those dreaded pipeline meetings that await you in January 2018 - and maybe score you a relationship with a hot agency in the new year.
FY18 SITREP: Outlook For Discretionary Spending
A comprehensive budget agreement remains elusive. In 2017 we saw three short-term funding bills avoiding a Government shutdown – and even kicked FY18 off with another short-term bill. For the past four fiscal years, discretionary spending levels – the roughly one-third of federal spending controlled by Congress on an annual basis – have been set by two-year budget agreements that have provided relief against spending reductions imposed by the 2011 Budget Control Act (BCA). No such budget agreement is in place for FY18, however, meaning that discretionary spending levels must adhere to the BCA’s lower spending. Instead, Congress has continued to fund the federal government through CR’s that essentially extend F17 spending levels, which are higher than allowed under the BCA, into FY18. Any spending over the law’s limits will face sequestration in January unless Congress modifies the law.
Congress has largely been unable to amend the BCA except in the context of multi-year budget agreements that provide relief against the BCA caps. The primary sticking points between Republicans and Democrats in these agreements have been the ratio of defense and non-defense increases and budgetary offsets to the increases. President Trump pledged to increase defense funding during his campaign, a commitment reflected in the Administration’s FY18 Budget.
The House and Senate have also passed, and the president signed, the National Defense Authorization Act for FY18 (NDAA) that authorizes a base defense funding level of $626.4B for FY18 – $77.3B above the $549.1B defense cap set forth by the BCA and above even the original BCA cap. However, the NDAA merely authorizes this level of spending – it does not change the BCA caps – meaning that if Congress were to appropriate this level of funding without amending the BCA to accommodate the increase, the entire $77.3B in higher funding would be canceled through sequestration.
FY18 Contracting Trends
What is an outlook blog post without some trends? In FY18, we expect you to see a lot of this:
Bunding of requirements
More mergers and acquisitions
Increased bridge contracts
Increased sole source contracts
Lots of market research requests that may not evolve until next fiscal year or ever
Increased town halls, reverse industry days and more candid Government interaction event
FY18 Agency Watch List
With a new year comes inevitable change and goals, particularly since it’s easier and less daunting to make resolutions with a fresh, untapped year in front of you. Resolutions come in all shapes and sizes and can range from getting healthy, advancing in your career, or even finding a suitably matched partner. For the latter, January 1st naturally becomes the busiest online dating day of the year. Below is a breakdown of the top agencies to watch in FY18. The Pulse has scoured the data and this a summation of our analysis of which agencies you should “swipe right” for.
Department of Defense
One thing we can always count on is Congress passing the National Defense Authorization Act (NDAA) - even in the most polarized of times. And this year is no different. NDAA is a massive bill that recommends the level of spending for the Pentagon - which doesn’t actually appropriate (or provide) any money - but does give a bat signal to the rest of the audience about what their priorities and policies are.
The law requests nearly $626.4B in base spending for FY18, blowing through the $529B cap on defense spending set by the 2011 BC and also includes an additional $65.7B in a separate Pentagon account that is exempt from the caps. That means that many of the priorities and new policies in this year’s NDAA depend on the ultimate spending deal between Democratic and Republican leaders, which remains in flux.
Department of Homeland Security
Department of Homeland Security is an agency with a conflicting financial future. Although they rank first among the eleven civilian agencies that would get an increase in IT funding in FY18, their cybersecurity office might actually see the largest drop in IT funding in FY18 if the Administration's priorities listed in their latest budget and the NDAA is enforced.
Department of Homeland Security has nine IT programs slated for FY18 that are new or that haven't received money prior to FY16, which could be signaling a potential reinvestment. However, six IT programs, which accounted for $5.5M in FY17, are receiving no funding in FY18, which indicates that they may be coming to an end. Although there will be opportunities for work, Department of Homeland Security is not immune as agencies scramble for cyber funding to respond to President Trump’s cybersecurity executive order.
Department of Agriculture
2017 was a busy year for USDA from massive forest fires to their flagship programs for food stamps, meat inspection, grants and loans for rural development, and school lunches being under siege. USDA typically flies under the radar for most BD professionals when creating their GovCon pipeline, but we believe they are worth your attention. Even with vacant leadership positions within USDA, the USDA Federal workforce has stepped up to the plate to push USDA into the spotlight with various campaigns such as legislation for fixing fire funding and organic agriculture research, extension, and education.
Department of Commerce
Why Commerce you may ask? Well the 2020 Census. Believe it or not, the census typically provides years of opportunities for GovCon competition as it requires immense planning, hundreds of thousands of new internal and external employees, marketing campaigns, real estate leasing for local offices, and of course IT and cybersecurity overhauls.
However, this time around Commerce is taking its sweet time to get requirements out the door because it currently doesn’t have a Director of the Census Bureau - or even a nominee. Census-watchers are increasingly warning that the 2020 census could be botched - but eventually requirements will be released, even if it is more painful than usual. We encourage GovCons to pick up the phone and start walking those halls.
Department of Health and Human Services
When it comes to President Trump’s first year in office, perhaps no department has been more radically altered than Health and Human Services. Human and Health Services saw not one, but two Secretaries in 2017. With Tom Price resigning back in September, President Trump’s nominee Alex Azar, JD, a former Ex-Pharma Exec from Eli Lilly, is now set to sit at the head of the table.
Over this past year, there has been a lot of rhetoric about changes to the Center for Medicare and Medicaid Innovation Center, Affordable Care Act, and the Opioid Crisis Fight - but little funding to back-up the talk, which leaves GovCons wondering if they are wasting their time responding to the dozens of RFIs put out a week. We don’t believe this is the case. In fact, we believe GovCons should double-down and follow-up on their submissions since HHS seems to be one of the leaders in the FY18 IT Priorities push with their new partnership with the CMMI Institute for a new Patient Demographic Data Quality Framework (PDDQF).
National Aeronautics and Space Administration
As part of our “It’s Not the Thought That Counts” series, The Pulse explored The New (Air) Space Race & FY18 NASA Spending Trends. Space is the instinctual name of the game when it comes to working with NASA. However, according to recent FY17 GovCon spending trends and the Congressional FY18 budget resolution, there is additional opportunity for work outside of space flights, space technology, and science. Aeronautics should be in the forefront of everyone’s mind. Advancements in technology and an increase in opportunities for air navigation will start ramping up in FY18.
General Services Administration
There is a lot going on at the General Services Administration right now. Emily Murphy was finally confirmed as the new Administrator and Rob Cook is out as the Director for GSA Technology Transformation Service (TTS), along with TTS Head of Operations, Crystal Philcox. According to FedScoop, these changes came from the top (aka President Trump’s son-in-law Jared Kusher) who leads the Office of American Innovation. This shake-up leaves us all wondering what is cooking at GSA, since they are steadily becoming more powerful and influential, and may become too big for it’s originally intended purposes (i.e. MGT Amazon Amendment).
Maybe they read our IT’S G-S-ALIIIIVE where we compared GSA to Dr. Frankenstein’s monster. GSA holds the keys to the kingdom, therefore all GovCons should have them on their pipeline list. After all, they are the spokespeople for FY18 IT modernization and other impactful policies - but maybe only if you are on e-Buy.
Wild Card - Boom or Bust?
Department of veterans affairs
2017 was a very busy year for Veterans Affairs and it has been hard to keep up. From Medical marijuana, to botching funding for homeless Veterans, to hiring medical workers with revoked licenses, to reforming VA civil service rules, to running out of funding for the Veterans Choice Program (thus impacting the VA Community Care Network (VA CCN) RFP) - the headlines have been running. But it isn’t all negative publicity for Veterans Affairs. VA has been pushing telehealth,behavioral health, and recruitment legislation and programs, which could provide ample opportunity for GovCons to get involved.
So what is our point?
We are already in a weird fiscal state and the year has barely started. Money will be moving and you should focus on agencies where you will get the most bang for your buck. Don’t focus on agencies where funding will decrease or isn't the Administration's and/or Congress's priority. Use this analysis as proof points for pipeline building and to impress your boss at your FY18 pipeline meeting. Good luck!