Last year when the concept of sequestration began to gain traction, FedPulse did a series of posts about how 2013 could potentially be the year that the “sky falls” on government contractors.
Taking a metaphor from the classic fable of Henny Penny, which is a common idiom for a hysterical or mistaken belief that disaster is imminent, we signaled that tougher times lie ahead for all of us.
As we highlighted this spring, things did not shake out as badly as we thought in 2013. In many ways, maybe we acted like Henny Penny and engaged in unnecessary hysteria. Of course, there has been a mixture of the good, bad and the ugly in 2013, but contractors remained viable to government and continued to win major contracts, as chronicled in our Winning Contractor series.
Now, let’s focus on 2014. Frank Kendall, Under Secretary of Defense for Acquisition, Technology and Logistics for the Department of Defense, is preparing to delay and potentially cancel programs in the coming weeks as the government prepares for FY2014.
“I don’t know what’s going to happen next year, and I don’t want to make major commitments to contracts that we may terminate once we get into fiscal year 2014,” he said in a recent Washington Post article. “We’re going to have to make some hard choices, I think, in the next few weeks about what we do with some of our programs.”
Kendall also said that the Pentagon learned how to “cope” with sequestration in 2013 and things would be much more difficult in 2014.
Though all is not dire. Kendall discussed how the Department of Defense would expect to see more M&A activity, as well as support “squeezed” contractors by rearranging the timing of purchases and bringing in larger contractors to help smaller companies.
He is also recommending that contractors continue to invest in research and development (R&D), which often serves as the foundation for some of our strongest national security innovations.
For many contractors, this could be an opportunity to step back and develop the most appropriate M&A and R&D strategies, which can be informed and guided by market opportunity assessments and new product and service testing.
Will the sky fall? This remains to be seen, but by using the market-validated insights generated by actionable research, it will be possible to continue to navigate the rough waters we’ve been bearing during the past 12 months.