Impact of budget uncertainty on government contractors

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While the 2019 fiscal year budget request provides a lot of money to defense and I.T. services, civilian agencies seem to be on the chopping block. In addition, appropriations for the massive 2018 fiscal year budget deal are still on the drawing board. Until these funding sources are finalized by Congress, contractors have some reason to worry.

“For sure I think the priority is defense. On the civilian side, it depends on where Congress wants to land on some of these hot button issues. There’s a consensus that VA will likely get more funding. We saw that in the FY18 budget request, and this new FY19 budget request.” said Deniece Peterson, director of Federal Market Analysis at Deltek. “There are areas on the civilian side that I definitely think will see some uptick. Overall, it is very clear this administration wants to kind of cut some civilian spending so they can transfer that to the Department of Defense, and shore up some of the capability gaps we saw over the past few years.”

Because the 2018 fiscal year is halfway through, agencies are hoping for an extension to use the funds provided, or else they’re going to need to spend the money very quickly.

“What we typically see in a year where we have maybe 1 or 2 continuing resolutions, is agencies really looking for things that they can buy that are fast transactions. We tend to see I.T. hardware and software, things that don’t require a long sale cycle. Contractors in that space can expect maybe a slightly inflated scenario than what they see in a given year,” Peterson said. “But also, I think we may see some opportunities for consulting and strategy-type things in areas that agencies have put on hold because they were not sure what the funding was going to be. They want to make sure they use the funding that they get to kick that can down the road as much as they can.”