Life under continuing resolutions might continue for years
By
Ross Wilkers
An endless cycle of continuing resolutions sounds familiar by now to the government market, and it might reach a new level of endlessness in the current climate. But that does not necessarily equate to a bad business environment for contractors as one of their top voices sees it.
A pessimistic but increasingly realistic scenario is front-of-mind for the man in charge of the government services industry’s main trade association:
“I think we are definitely facing the possibility of continuing resolutions, dare I say this, as far as the eye can see. That sounds like bad news, but I’m going to explore that a little bit more,” said David Berteau, CEO of the Professional Services Council.
During an event Wednesday hosted by the investment bank Baird, Berteau gave government contracting executives wwhat he sees as a more optimistic outlook than the above quote would indicate.
That is part of how the former Defense Department official opened his presentation at the Baird Government & Defense Conference in Tysons, Virginia.
The prospect of never-ending stopgap spending bills to keep federal agencies open does not automatically translate to a bad business environment for contractors to operate in, Berteau said. He thinks “the money will be there” regarding contracts for this current government fiscal year, plus those of 2023 and 2024.
The likely scenario is no signed budgets and successive continuing resolutions, especially when considering the current political environment and the specter of midterm elections around this time next year.
“Contract funding availability will be at an all-time high. There’s going to be plenty of money,” Berteau said. “The question is what are they going to spend it on?”
An absence of defined budget priorities from the Biden administration, the recurring matter of the debt ceiling and Congress being endlessly deadlocked over appropriations add up to many unknowns.
The only real immediate knowns are that the current continuing resolution expires Dec. 3 and the U.S.’ debt ceiling will be hit in mid-December. Other than China, the debt limit being breached is the one thing Berteau said “keeps me up at night.”
“This is the issue about which I’m most worried, and frankly it’s probably the one about which PSC cannot do a whole lot,” Berteau said.
Neither can industry do much about the budget gridlock or overall deadlock on everything in Congress. Throw in that the Biden administration focused on monetary increases in its fiscal year 2022 budget request versus significant policy shifts.
The fiscal 2023 budget plan due for release in February is where those priorities should be spelled out more. Who knows if there never is a true fiscal 2022 budget passed by Congress.
But in the absence of much legislation, the White House has already signed 67 executive orders since Biden was inaugurated into office on Jan. 20.
That raises the question of how the White House’s priorities flow down to the agencies, followed by how those agencies implement the priorities in a timely manner.
Coordination mechanisms between agencies are not visible, which leads Berteau to believe they “either are so weak as to not be discernable or they don’t exist."
“So what does that mean? It actually means an opportunity to shape what customers will buy, because they’re going to be just as challenged to comply with a set of ambiguous priorities flowing down from those executive orders, and in some cases competing priorities,” Berteau said.
Broad themes that have emerged from the White House are the series of proposed spending bills known as the Build Back Better plan focused on pandemic relief, economic relief, climate change and social justice.
Items one and two have seen trillions in spending over more than one bill, however Berteau sees numbers three and four as potentially finding their way into matters that contractors should pay attention to.
Berteau advised companies to watch for regulatory and compliance issues related to the vaccine mandate; diversity, equity and inclusion efforts; supply chain resiliency; potential climate change regulations; and the government’s emphasis on cybersecurity.
As for how successive CRs affect contract spending, Berteau said Defense Department agencies will see more effects than their civilian counterparts that have spent far lower than what Congress obligated. That means civilian agencies present a “target-rich environment” as Berteau put it.
DOD also did not carry forward the Trump administration’s practice of having a future years document to lay out its priorities over multiple fiscal years. So there again, apparently the fiscal 2023 budget is when more glimpses at those priorities will emerge.
One practice that the Biden administration will carry forward is the still to-be-released President’s Management Agenda that instructs agencies on how they can more efficiently do their missions. The George W. Bush administration started the PMA in 2001.
A vision for the PMA was released by the White House on Wednesday with the full document being worked on.
“That’s going to be the guidance to the agencies of what the administration’s priorities are that will flow down to the contracts,” Berteau said. “It won’t matter as much for DOD, but it will drive the civilian agencies.”