WT Business Beat

By Nick Wakeman

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Nick Wakeman

Lots of contract mods? Must be September

I love the early signs of fall – the crisp night air, the leaves just starting to turn, and the explosion of contract extensions and modifications.

You don’t need a calendar to tell you that the fiscal year is coming to an end; you just need to look at the Defense Department contracts and FBO websites and see the rise of contract modifications, extensions and options.

Also, you can throw in an increase in sole source contract awards as well.

It’s an annual passage as agencies rush to use their budgets before the fiscal year ends, and it's been made worse by the use of continuing resolutions each year.

Government buyers have long been programmed to believe that if you don’t use it, you lose it.

It’s a problem with government procurements that doesn’t get talked about much.

I don’t see it on lists of bad management practices, but surely it is one. It has to be, doesn’t it?

Contractors talk about being partners, and the last month of the fourth quarter is when many of those partnerships bear fruit as contractors help customers spend those last few precious dollars.

The reality is that government buyers have no incentive to save money at the end of the year. They can’t park it somewhere for it to be spent more wisely later.

There are problems with parking as well, so I’m not sure that is a real solution.

So what we see is a rush at the end of the fiscal year to obligate funds before it is too late. Obligate doesn’t mean that the money goes to the contract at that moment, so it doesn’t immediately translate to revenue for a contractor. But it does tie the money to a specific action. It is as good as spent.

And September is the big month for that activity. On Aug. 1, there was one modification listed on the Defense Department contracts site. On Sept. 2, (the first business day of the month), there were eight. And on Sept. 3, there were seven.

It goes on like that each day this month, along with an increase in all contract awards.

If the pattern from previous years holds, we’ll see a significant drop when fiscal 2015 begins on Oct. 1.

It’s a reality of the market, but is it a good way to run a government?

Posted by Nick Wakeman on Sep 23, 2014 at 9:24 AM

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