Why OTAs might be needed to fight the Fourth Quarter spending spree

The federal government’s year-end fourth quarter spend has become an annual ritual in Washington, D.C., every September, similar to the anticipation of kids returning to school and the start of fall sports.

It’s more than just the numbers that have revealed this new reality for fourth quarter spending. The entire contracting market has felt it. Government contractors anticipate the release of RFPs over a typical “federal summer” with contract awards to follow in the fall.

In 2018, the year-end spend was referred to as a spending spree of “historic proportions” with nearly 40 percent of contracts being awarded in the last quarter of the government’s fiscal year. Even in a normal year, it was anticipated that 2020 would continue the trend and final quarter spending was predicted to increase. Of course, 2020 has been anything but normal. And it appears this year’s final quarter spend will surpass the previous ones, but with good reason.

The Impact of COVID-19

Suffice to say, 2020 has had a few more challenges than previous years for federal executives. The COVID-19 pandemic has upended all facets of life, business and government. With so much uncertainty throughout the year, many agencies were not able to move forward with some initiatives as quickly as they hoped, thus they did not spend as much as anticipated in the spring and summer months.

Combined with the now-annual Q4 spending frenzy, it means that this year’s fourth quarter will be unlike any before when it comes to government spending. In IT spending alone, Bloomberg Government estimates that nearly $28 billion will be spent by agencies in fourth quarter of fiscal 2020.

An example of the spending push comes from the Department of Veterans Affairs (VA). The VA has spent only $1.7 billion on IT contracts so far this fiscal year, compared to its $7.8 billion IT budget request, which leaves a massive $6.1 billion that must be spent in the final quarter. Furthermore, the CARES Act appropriated the VA an additional $2.2 billion to modernize its IT and electronic health records systems.

OTAs May Be the Answer

While GSAs push to best in class (BIC) government wide acquisition contracts, has created preferred paths to the market, and the use of those BICs can often lend themselves to short turnaround times to make awards, OTAs seem to be on the rise as another alternative.

Other transaction authority (OTAs) have soared in recent years, as they allow agencies to enter into contracts quicker than some of the traditional procurement methods. These have been most popular within the Department of Defense, as they aim to seek to enlist capabilities faster. Their spending through OTAs has increased from about $1 billion in fiscal year 2015 to $7.8 billion in 2019, according to Bloomberg Government data.

However, the use of OTAs could quickly expand to other agencies in a response to COVID-19 and the need to utilize funding in a timely manner to keep pace with the increased demands that have risen in helping our Country get past this pandemic.

According to federal market analyst Chris Cornillie, this may also become the new normal for procurement moving forward.

“We expect that HHS will continue to use OTAs as it meets the needs of the COVID response, and we may see HHS normalize OTAs as a larger part of their R&D portfolio in future years,” he said.

With many agency leaders facing a “use-it-or-lose-it” deadline for utilizing their budgets before the end of the fiscal year, the use of OTAs may be a critical and needed weapon for agencies to acquire the resources needed to execute on their fiscal 2020 initiatives.