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Thursday, March 1, 2012

GOVERNMENT CONTRACTOR ALERT - FUNDING SQUEEZE COMING

Washington Technology has an excellent article below on the mechanics of funding squeezes as the budget ax begins to fall across the federal agencies.

http://washingtontechnology.com/articles/2012/01/18/sequestration-effects-contracts.aspx?s=wtdaily_200112

Here is an extract:

"Should contractors fear sequestration?

If sequestration of federal funds kicks in, agencies will face making deep cuts to programs and that pain will flow down to contractors, experts say.

A sequestration causes automatic, indiscriminate, across-the-board budget cuts. The failure of the so-called super committee to find $1.2 trillion dollars in savings over a decade triggered the cuts. They're set to take effect Jan. 2, 2013.

As a result, contractors too “are hostages in a showdown between the president and Congress over fundamental decisions on taxing and spending,” said John Cooney, former general counsel at the Office of Management and Budget and now a partner at the Venable law firm.

He spoke Jan. 17 at a panel discussion hosted by the Professional Services Council that looked at sequestration in detail. Cooney broke down the possible routes federal officials may take to deal with the cuts.

Cooney expects agencies to:

* Try to avoid terminating contracts. Instead, officials will reduce the amount of money obligated under their contracts.

* Become less willing to extend contracts into their option years.

* Obligate money for one fiscal year at a time on task order and services contracts.

* Possibly use the prospect of the sequester's cuts to renegotiate contracts.

He also said agency officials will more often decide to not award new contracts.
“This will be a common agency practice in year one of a sequester. Procurements that can be put off will be put off,” he said during the discussion.

With available money, agency officials will maximize contracts that meet their agency’s core duties, said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, who spoke on the panel as well."

Please see the following free articles at this site on managing risk in limitation of funds and funding exposure on government contracts. Based on this article you will need it:

http://www.smalltofeds.com/2009/08/contract-baseline-management-in-small.html

http://www.smalltofeds.com/2007/09/limitatoin-of-funds-and-funding.html

1 comment:

Chris Parente said...

Hi Kenneth. Good article -- no doubt across the board cuts are the wrong way to go. We've just launched a new web site that touches on many of these issues -- www.governmentchargecard.us

I'm reaching out to some prominent GSA consultants, asking if they'd like to contribute content. Please let me know, and thanks.