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Nick Wakeman

Are fourth-quarter spending sprees irresponsible?

The reports this week that the Homeland Security Department planned to spend $8 billion – more than half of its IT budget – by Sept. 30 made me wonder if that’s really the best way to manage your money.

I understand the use or lose it mentality but can you really make good, sound business decisions under such a tight deadline? Doesn’t it sound like the priority is just to spend the money, not spend it wisely?

Some in industry might be saying, who cares? Show me the money.

But what bothers me is that the rush likely will increase the risk of making bad choices and executing sloppy procurements, which in the long run will cost money.

I also have to wonder, if you are running your agency efficiently and you have money leftover at the end of year, then maybe you had too much to start with and you should lose those funds. Wouldn’t that be the responsible thing?

I know DHS isn’t the only agency to do this. The fourth quarter traditionally is a rush of task orders as agencies try to deplete their accounts.

But if you focus on the mission, how do you justify running your agency this way? Or it just fear that your mission will suffer if you lose funds?

Maybe I’m sounding like a curmudgeon but there has to be a better way.

Anyone have any suggestions?

Posted by Nick Wakeman on May 17, 2012 at 7:23 PM


Reader Comments

Fri, Mar 15, 2013 Dave

Like many I have seen a number of examples of this in both the military and privet industry. From my point of view, the problem is that there is no incentive to come in under budget. If fact you are punished for coming in under budget by having next years budget cut. So, how do you provide an incentive?? The only solution I have been able to come up with is that a percentage of the unspent money goes into a fund. Those in charge would have more freedom to spend that money then they would for the standard budget money. In addition, you could stipulate that from year to year the budget can't be reduced by more than a certain percent.

Thu, Jul 19, 2012 Deanna California, USA

I feel like the root of this problem is the "use it or lose it" realities in budgets. I have a friend who is a CHP officer. Last year in the late summer, he got a great deal of unplanned overtime to run DUI checks, because they had the money in the budget, but for whatever reason, they had fewer DUIs, and they hadn't used the money yet. If they didn't spend the money to run the checkpoints (on a non-holiday weekend, when DUI risks are fairly low anyway), they wouldn't have the funds in the next budget. This is the very thinking that loses me. It would be great to say they'd never need it again, but considering the huge barriers to obtaining additional funds in any year, I can understand why many agencies spend their full budget (even irresponsibly). If you're going to lose any that you don't spend, then by all means, you'll take it when you can get it. Wouldn't it be better if there was an incentive somehow to keep spending under budget, but not to penalize the fiscally responsible agencies by automatically tightening their belts when they lose a few pounds? Let them walk around with some room in their waistbands for a little bit, just to make sure that's the right size. Then let them tighten.

Tue, Jul 3, 2012 Stephen Cooper Mississippi

When I first started working in the Air Force and saw the insane amount of spending that started every year around July, and compared it to the tight-fisted budgets of December and January, I was as angry and had the same ideas as the people above. However, it was pointed out to me by someone that this is not mismanaged money. We have been doing this for decades, if not centuries, the beginning of the fiscal year does not surprise anyone. Instead, as October 1 rolls around, the Air Force (just to use one government agency as my example. Realistically, you could put almost any of them in here) receives their money and sets some aside for natural disaster relief, some more for different war contingencies, some more in case planes start blowing up for no reason, etc. As the year begins to come to a close and no hurricanes or earthquakes have devastated anywhere, or a new war broken out, then it becomes less and less of a priority to hold those funds aside for emergency situations, so it gets spent. That makes sense to me on a certain level, and I can now understand why we spend so much money at the end of the FY. However, as a private citizen I realize that the federal government is handling its finances like a 19 year old with an hourly job. Do financially mature people get towards the end of every month and say "Well, it is the 29th. I get paid in two more days, I guess I can go ahead and spend my emergency savings now! That savings account will get refilled on the 1st." No, of course not. You save some money and set it aside, then you DON'T TOUCH IT. The federal solution is as simple as it is likely to never happen. If the DoD wants $100 billion (for argument's sake!) for this year, give them $150 billion. Tell them to set $100 billion aside for emergencies, state in VERY clear terms what constitutes an emergency, and then until there is truly an emergency, you can budget the DoD at $50 billion each year. Simplistic and full of holes? Absolutely. Going to happen? Never in a million years. Still, if it works for an individual, it might work for the government.

Thu, May 24, 2012 Mariano Tellarini www.masthink.com

Administrative bottle necks, frantic sales quoting, maxed out credit lines, sure, all these happen by September 30th and it’s painful. Believe it or not, most companies pray for these problems to happen to them. They mean the company will make it one more year. The most serious consequences for this biased, government spending behavior are the ones that most small businesses have to deal with BEFORE those hurdles hit the fan: HUGE revenue swings due to severe business seasonality, serious cash tightness, volatile cash flows and low morale (who likes being in the red 9 or 10 months a year) just to name a few. I wonder how well this problematic is understood within the government spheres. Could the contracting community be in part responsible for not clearly exposing the issue? As for the solution, even though it might help the first year, I don’t see how a four year budget cycle would alleviate this. I agree, the main reason for this frantic, paranoid spending is mainly the “use it lose it” mentality. Now, if it is hard to keep up with one year spending projections, how realistic would be to expect a reasonably smooth spending for a four years period? I mean, imagine the level of paranoia in the last two years of a four years cycle. In my view, extending the cycle doesn’t solve the underlying issue: The need for a more strategic spending planning that takes into consideration ALL stakeholders, and demands responsibility and accountability to stay stick to it. A different approach for the four years plan would be to request each agency to identify in their budgetary annual exercise not only the source of the need for funds but also the timing for it. For instance, if a request for funds is made to replace a bunch of servers, the agency should be required to establish an ETA for Purchase Order. Call it having PO budgets inside the fiscal year. Sounds complicated, it may not be that much.

Wed, May 23, 2012 Ken Larson http://www.smalltofeds.com

Having dealt with the funding process in the government contracting industry (both large and small business) for over 40 years through many administrations and much frustration, I can discuss with some credibility a major weakness in the huge machine we call the US Federal Government -- the one year budget cycle. Its tail end is whipping everybody again and we are surely heading for another sanctimonious "Shutdown" by the time October is over. About mid-summer every agency begins to get paranoid about whether or not they have spent all their money, worried about having to return some and be cut back the next year. They flood the market with sources sought notifications and open solicitations to get the money committed. Many of these projects are meaningless. Then during the last fiscal month (September) proposals are stacked up all over the place and everything is bottle-necked. If you are a small business trying to get the paperwork processed and be under contract before the new fiscal year starts you are facing a major challenge. I believe we will be forced to give up the annual budgeting cycle and move to 4 year plan, synchronous with a new presidential election and put some teeth in it. Surely the one year cycle has become a ludicrous exercise we can no longer afford and our government is choking on it.

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