Lexy Kessler Courtesy photo (Lisa Helfert)
In April, Aronson LLC released a whitepaper that told federal contractors they had to “rethink everything,” we believe that advice applies to federal managers as well.
The enormous changes in the government contracting marketplace are undoubtedly the result of the multiple pressures on federal managers to do more with less. Many of these pressures are already evident, and their impact on federal managers will steadily expand well into the next decade.
Federal managers have never before faced so many significant changes at once. Flat-to-down appropriations, dramatically increased congressional and executive oversight, acquisition reforms mean higher costs of doing business with the government and lower profits for contractors, expanded compliance efforts, and what we expect will be a wave of mergers and acquisitions.
These pressures will likely rebound back to federal managers in the form of prolonged acquisition cycles, lower contractor capabilities resulting from lowest price, technically acceptable criteria, compounded with more uncertainty in program costs, timelines and performance goal achievement. As a result, federal managers must rethink both what they’re doing and how they’re doing it if they are going to successfully deliver programs that achieve program goals and performance objectives.
Aronson has identified six reasons why “rethink everything” will be as important a mantra for federal managers as it will be for contractors.
The first is the federal budget. The deficit is projected to reemerge as an economic issue at the end of this decade. That will put even more pressure on appropriations and increase the scrutiny on how money is spent after Congress and the president have approved the legislation.
The pressure on spending will be intense long before the end of the decade, though. Each department and agency will increasingly be asked to defend its investment priorities, and congressional budget politics make individual annual appropriations even less likely. As we have seen, continuing resolutions negatively affect everything from the ability of agencies to shift priorities to limiting programs’ abilities to achieve performance goals to the legality of creating new programs.
Second, General Services Administration’s mandate to increase its market share will place pressure on managers. Not only will this change increase the complexity of acquisition planning by adding another level of involvement, it also means that each agency and department will face more pressure to use GSA and, therefore, have less control over what it buys, potentially resulting in lower schedule prices which may also mean fewer bidders and less choice.
Third, as contractors review the market and make strategic decisions about their future, federal managers will also find a dramatically changed landscape. The next few years will be the start of one of the most volatile periods in the federal contractor community as the shrinking market forces contractors to consider mergers, acquisitions, and even market exits that may not have previously been considered.
Fourth, compliance and oversight will also be increasingly important over the next decade. Appropriations will not increase fast (or possibly at all) as they have over the past two decades. How well dollars are spent becomes managerially and politically more salient. Departments and agencies will be forced to give more scrutiny to contractor compliance or face additional scrutiny themselves.
The fifth is the challenge of protecting sensitive data. Although this has become one of the hottest priorities in government contracting, breaches and attacks will continue to be big news and, therefore, a responsibility that if managers ignore will be at their own peril.
Sixth, federal managers will face the same serious problems with talent recruitment and continuity that contractors are facing as the millennial generation moves fully into the workforce and demonstrates preference for positions in the private sector.
In summary, federal managers will simply have no choice: The priorities and business practices of the past no longer make sense in this overwhelmingly new environment. “Rethink everything” must be as much an imperative for federal managers as it is for federal contractors.■
Lexy Kessler is the lead partner of the Government Contract Services Group at Aronson LLC.