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Analyst: Obama's FY13 budget would mean 8 percent dip in contract spending

Mar. 27, 2012 - 06:00AM   |  
By SARAH CHACKO   |   Comments

Federal agencies plan to reduce contract spending by $60 billion next year, according to an analysis of President Obama's 2013 budget plan by the market research firm Deltek.

Agencies included more than $700 billion in their 2013 budget requests for products and services that contractors will likely provide, which is about 8 percent below the $768 billion in contract spending that agencies budgeted for this year, Ray Bjorklund, Deltek's chief knowledge officer, said at the firm's annual budget outlook event Tuesday.

The biggest hit to contract spending is expected in aerospace and defense programs, where agencies cut about $40 billion or 21 percent for a contract spending projection of $148 billion in 2013, according to Bjorklund. The Army's budget will be hit the hardest: Contract spending is projected to drop by $14 billion, or 38 percent, from this year's level.

Contract spending in architecture and engineering services and construction also is projected to drop about 16 percent governmentwide, from $32 billion in 2012 to $27 billion in 2013, the analysis showed. Funds for investment products, such as machinery, furniture and information technology hardware and software, were also reduced by 14 percent, from $34 billion in 2012 to $29 billion in 2013.

Agencies are likely to redirect some of that money toward services to maintain existing infrastructure, Bjorklund said.

Despite these cuts, there are pockets of anticipated growth in contracting, Bjorklund said. NASA has requested $4 billion for research and development contracts, a 10 percent increase over 2012, and the Commerce Department has asked for $870 million in support services and equipment for the National Oceanic and Atmospheric Administration, an 18 percent increase over 2012, Bjorklund said.

Agencies requested $127 billion for other white-collar services, such as management and administrative support. The request reflects a 10 percent increase over what agencies received in 2012. The Army's budget request of $20 billion for white-collar services shows the greatest growth compared with 2012 as the service prepares to train Afghan security forces, Bjorklund said.

Spending on medical services contracts is also expected to grow by about $5 billion to $75 billion in 2013, an increase of 7 percent over 2012. Most of the growth in medical services will come from the Office of Personnel Management, which is driven partly by health insurance programs for government employees, Bjorklund said.

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