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By Nick Wakeman

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Nick Wakeman

Early reviews positive for budget deal

For me, the good news around the budget deal announced last night is the two people who brokered the pact: Republican Rep. Paul Ryan and Democratic Sen. Patty Murray.

They’ve been described as an “odd couple” because both are better known for advancing their respective party lines.

It’s bi-partisan, and if passed, both parties are agreeing to the budget of $1.012 trillion dollars, which splits the difference between their respective plans. The Democrats were pushing for something higher; the GOP, something lower.

It’s a compromise between the two parties without a midnight deadline looming just hours away.

A government shutdown is a near impossibility for nearly two years. There is the problem of the debt ceiling being reached this March, but it’s hard to imagine that either party will let the government default.

The pact likely should calm international fears by lessening the impact of the dysfunction of Washington.

What it doesn’t do is important to note; it isn’t tax and revenue reform, it doesn’t provide a solid path forward on reducing the debt and deficit, it doesn’t address entitlements.

Cynically, it looks like they punted those tough but important issues until after the 2014 elections. It’s a long punt for sure, but it still puts off the really hard stuff.

And frankly, that was probably the best thing to do because now brinkmanship is off the table until after the elections, and I’m sure both sides are hoping they can gain control of both houses in 2014, or at least set the ground work for control in 2016.

As Ryan warned when some fellow conservatives turned on him for sponsoring the plan: In divided government, “you don’t always get what you want.” I think the Rolling Stones said that, too, but Ryan left off the “but you get what you need” part of the lyric.

But this is what we need today, or at least it is the best we could hope for under the circumstances.

For government contractors, there has to be a sigh of relief; at least there is greater visibility into the budget, and companies can make decisions on where to invest and how to move forward.

Agencies also will have clarity in how they will operate and meet their missions going forward.

The budget will not mark a return to boom times for contractors. Agencies will still make cost-savings and efficiency priorities. New starts will be the exception, so competition will remain intense.

But it’s reasonable to expect schedules to become more stable and predictable again, which again will increase confidence and certainty as contractors weigh investment decisions.

The next two years will continue to be challenging for contractors because the market will still grow very slowly. No one expected that to change with the budget deal.

But the budget deal sets the stage for the industry to move forward, which means increased mergers and acquisitions in 2014 as companies look for economies of scale and ways to rationalize costs.

Companies also might become more aggressive in how they control their costs and become more efficient because now they’ll have a clearer path forward, at least for the next two years.

The budget deal should bring a sigh of relief for contractors, but also a redoubling of efforts to understand what you bring to your customers, and how you help them meet their priorities.

That held true before the budget deal, and should continue to be your guiding principle going forward.

Posted by Nick Wakeman on Dec 11, 2013 at 10:57 AM


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