New federal policies are cause for contractor optimism

The 114th Congress is underway, and we're beginning to see signs of change for major policy items, a few of which will have a direct and largely favorable impact on the federal IT community.

It's not often that a midterm election can change the outlook for an entire industry. And although Republicans took control of the Senate and extended their majority in the House, it would be simplistic to point to one political party as the impetus for this change.

Movement can be seen by policy-makers on both sides of the aisle as the zeitgeist slowly evolves from a focus on domestic budgets to concern about international affairs.

This was one of the few elections in which international concerns held center stage, perhaps even outweighing the economy, the Affordable Care Act and other domestic agenda items. Several freshman senators spent millions of campaign dollars touting the ways they would strengthen the United States' national security posture.

And it’s not just talk. The GOP takeover in the Senate means that veteran lawmakers John McCain, Bob Corker and Richard Burr now lead the Senate's Armed Services, Foreign Relations and Intelligence committees, respectively. Those three panels wield significant power over defense legislation, and McCain has said that his first order of business as chairman will be to end the sequester.

That budget rule currently requires the military to make across-the-board spending cuts, and along with lowest price, technically acceptable contracts, it has been shaking up the federal IT community for nearly three years. Those policies might or might not have helped ensure the best value for taxpayers, but they have undeniably led to challenges in the industry.

Then there are matters that are fundamentally foreign policy concerns but might nonetheless alter the IT landscape. One issue that already has Congress stirring, for example, is the renewed expansion of military operations in the Middle East. The shift in the Senate has opened the door to a new authorization for war against the Islamic State group.

President Barack Obama said in his state of the union address that he wants such a resolution, and if one should pass with bipartisan support, we would likely see a large increase in military and intelligence resources devoted to the campaign.

That campaign is already being waged with cutting-edge technologies and weapons systems. A new war authorization, coupled with Ashton Carter’s confirmation as Defense secretary, could substantiate U.S. efforts and signal a shift in strategy that would also require increased services from contractors.

Last and perhaps most important, there is cybersecurity legislation. Republicans have been trying to guide the Cyber Intelligence Sharing and Protection Act through Congress for almost four years but have been stymied by some senators' privacy concerns. Although Obama has expressed similar concerns, his recent proposals suggest a desire to bridge the barrier that exists between the private sector and government to make it easier to create cybersecurity solutions that serve everyone.

Passage of CISPA is hardly guaranteed, but it and other key policies will be debated this year -- and many, if not all companies that provide IT products and solutions to the government will have a stake in the importance that is placed on information sharing and privacy.

Any one of these items by itself might not move the needle significantly, but taken together they show a trend toward a normalization of government spending.

There is a great deal of optimism and confidence right now among contractors. As many companies are going through annual planning efforts, our recommendation is to begin thinking about kicking aggressive business development efforts into high gear.