In the past decade, there has been a 4th quarter upward spending trend in the government sector. Even in times of austerity due to sequestration, all signs point to an upcoming spending spree, particularly in the month of September.
Although government is projected to spend more money this September, as it has on average over the past five years, there will still be some hurdles for contractors to win new business. The furlough of employees could affect the ability of certain agencies to process orders in a timely fashion. That is why it is crucial to have a plan and expectations in place to effectively navigate the contract process. It may sound simple, but companies must know their government customers as well as the products and services they sell.
With the proper research and a forward-thinking approach, contractors can reap the benefits of a Q4 spending boost. This includes:
- Active engagement with government customers and partners
- Understanding the buying patterns of customers and their needs
- Being prepared for dealing with a potential increase in work volume
- Using real-time reporting to keep a handle on the bid and project
- Don’t cut corners on proposal responses and delivery of contracts – have a plan and be prepared
With continuing resolutions for the budget and appropriations delays, this spending increase is of huge importance to contractors and companies need a strategy for adapting.
In last week’s GovWin webinar series by Deltek, the company estimated that spending cuts by sequestration would reduce contract spending by approximately $35 billion. Sequestration looms large, even in a period where spending is expected to jump. Deltek looked at how each agency was affected by sequestration based on the total budget amount to be awarded in Q4. For instance, the Department of Defense’s budget was hit by sequestration while the Veterans Administration was exempt.
The five-year average shows a 33 percent increase in agency spending in Q4, with the State Department jumping to a hefty 55 percent. The Department of Transportation, Homeland Security (DHS), Army, Agriculture and Health and Human Services also buck the trend by increasing their Q4 spending more than the average. The largest areas on which agencies spend are:
- Agriculture, Engineering & Construction
- Information Technology
- Land, Vehicles & Equipment
- Professional Services
On a five-year average, the percentage of total annual obligations by month is September, with the largest increase by far, at 18 percent. The next closest months were March and December at nine percent. As an example of past trends, spending has increased on average by over 53 percent on task order spending by quarter from 2010 – 2012 across agencies. On the top end, the DHS increased their spending in Q4 by 70 percent.
According to Deltek, the 35 percent on average increase in Q4 is the highest spending increase in a decade. With September rapidly approaching, its time to put your plan into motion so you too can be on the winning side of the annual Q4 spending spree.