Data shows fourth quarter surge of contract spending
By
Nick Wakeman
Fiscal 2013 was a roller coaster ride full of highs and lows, but the fourth quarter may have been a record breaker as contract spending surged to a five-year high.
Everyone felt the roller coaster ride of fiscal 2013, and now there’s some data to back up why you might have been feeling so queasy.
Data on government contract spending showed that the fourth quarter, as is tradition, was the busiest of the year, with 36 percent of spending for the year coming in that quarter, according to a presentation by Kevin Plexico, vice president of information solutions for Deltek.
He gave his presentation as part of the company’s executive symposium that kicks off the Deltek Insights, the software company’s annual user cover.
The data that Plexico used includes four quarters of civilian contracting, but for the Defense Department data, he only had three quarters and used estimated figures for the fourth.
The 36 percent of spending in the fourth quarter is 4 percentage points higher than the five-year average of 32 percent.
Interestingly, the first quarter of the year also was 4 percentage points higher, with 26 percent of contracting spending for the year, compared to 22 percent for the five-year average for the quarter.
The belief was that spending in the first quarter was strong because the fiscal cliff and sequestration would be solved by Jan. 1, but while the fiscal cliff was avoided, sequestration was not, and that hit home in the second quarter, Plexico said.
Contract spending took a severe dip in the second quarter of fiscal 2013 when it hit 15 percent, compared to 24 percent for the five-year average.
The third quarter returned to some normalcy with 23 percent for fiscal 2013, compared to 22 percent for the five-year average.
Plexico blamed sequestration for the drop in the second quarter, and for the rush in the last quarter to get budget’s spent.
He called the fourth quarter a near “mad dash” of spending. Defense figures haven’t been finalized yet, but he expected the fourth quarter spending to be in the 36 percent range.
“We still need to wait for the dust to settle, but clearly it was still a bigger quarter than we’ve had at any other time in recent history,” Plexico said.
The data on civilian contract spending also shows how small businesses were hurt through the first three quarters of the year, but how they saw a surge in the fourth quarter when a whopping 40 percent of small business contract dollars were awarded. Small businesses received 19 percent of the contract dollars in the first quarter, 18 percent in the second quarter, and 23 percent in the third.
Overall, contract spending for civilian agencies declined 5 percent between fiscal 2012 and fiscal 2013. Of agencies that spend more than $1 billion with contractors each year, only four agencies – Education, Treasury, Housing and Urban Development and Health and Human Services -- reported higher contract spending in fiscal 2013.
Of the remaining 15 agencies, seven saw drops of more than $500 million in contract spending, with NASA and the State Department reporting the biggest drops.
Plexico said he expects 2014 to see a similar drop of about 5 percent in contract spending, but overall growth should return in 2015 as the sequestration caps increase from 1 percent to 2 percent a year through 2021.