Fourth quarter spending gets hot

The fourth quarter of fiscal year 2021 enters the homestretch with more large awards that coincide with both an increase in contract modifications and exercised options.

If it’s September, that means that the annual fourth quarter spending spree is reaching its apex.

Just look at these examples from the Pentagon's awards digest from Friday, Sept. 3:

  • A $46 billion Air Force award to 55 companies.
  • An $800 million Navy award shared by five companies.
  • A $421.6 million Missile Defense Agency sole- source award to Northrop Grumman for booster vehicles.

Including those three awards, there are a total of 26 contract announcements. The first three days of September saw the Defense Department and military service branches announce 69 contract awards and several saw multiple winners.

We also see an uptick in the number of contract modifications and exercised options that are announced. These are happening as agencies push through contract obligations before the budget year ends on Sept. 30.

For example, the Friday digest shows that Raytheon Technologies received a $736.6 million modification from the Navy for propulsion system parts and support. That work came through the Pratt & Whitney business, which was part of the old United Technologies Corp. that merged with Raytheon last year.

Lockheed Martin received four modifications or exercised options from the Navy worth about $320 million.

But don't be fooled: these are not rushed awards.

You don’t put out a potential 11-year, $46 billion contract on a whim. The Air Force contract called out earlier has 55 winners and includes several familiar names: Booz Allen Hamilton, Sierra Nevada, Kratos Defense & Security Solutions, General Dynamics, Raytheon and Northrop Grumman to name a handful.

The Air Force will use that contract to buy digital engineering and model-based systems engineering, agile processes, open systems architecture, and enterprise analytics.

Fifty-eight companies submitted bids, which means three were not selected for an award. The contract runs through to Sept. 6, 2032.

Separately: Booz Allen, CACI International, Science Applications International Corp., Capstone Corp. and 22nd Century Technologies won seats on a large Navy contract for enterprise IT services. Services include architecture, portfolio management, and legacy systems sustainment related to the MyNavyHR system.

Seventeen companies bid on that contract, which has a base value of $556 million over five years. The ceiling value is $800 million if the Navy exercises the option to extend for another year.

All of the awards mentioned here are large examples, but the majority of spending in the fourth quarter is much smaller and quicker.

We often do see those until the quarter is over and we can look back. So look for more analysis and data from us once the year closes.

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