What are the government’s requirements? What are its priorities? What is its budget? When will it receive its funding? When will solicitations be issued? When will contract awards be made? Once contract awards are completed, will they last? Will the program survive? What will be the effect on existing contracts of changes in budget priorities, funding reallocations, funding stoppages, funding shortages, government shutdowns, stop-gap funding, the administration’s changing or still unknown goals and intent, etc.?
The only sure “knowns” in contracting today are the multitudinous “unknowns.” The once weakly supported notion of wider use of multi-year funding — to provide increased program stability, efficiencies and contract savings — is a distant memory. Such uncertainty was the subject of a recent message to Congress by the Secretary of Defense.
Funding and contract uncertainty play havoc with the planning, development and implementation of any significant programs and projects. Even the simple and once routine “incremental funding modifications” are no longer an insignificant undertaking and cannot be taken for granted.
The single largest and immediate impact of today’s complete contract uncertainty is the increased costs to government and industry, including, among other things:
- Smaller quantity discounts;
- Logical program milestone execution;
- Staff departures for greener (and more stable) work; and
- The extra activity (or “tail-chasing”) involved in managing within today’s environment.
In the past, when budgets were passed more or less on time (such as only 30-60 days after the fiscal year began), program, finance and contracting officers could execute their annual allocations close to plan. Many may remember a government fiscal year that began on July 1, similar to commercial business. This was moved to October to permit Congress and the administration to have more time to propose and pass an “adequate” budget. For nearly a decade, however, budgets have not been “final” until November, December, January, April or perhaps even never.
When administration and congressional budget and program priorities are dramatically different, government managers are left to reanalyze and redevelop a great number of “what-if” scenarios against a continually evolving political landscape — often with no clear mandate to execute anything at all, despite authorizing legislation. Meanwhile, today’s contract managers spend more time developing a variety of reports and analyses for departmental higher-ups as to what the effects of these “what-if” scenarios would be, along with all the new administration reporting needs — as the new administration learns what it is each agency they manage is doing.
Regardless of the final outcome, all this extra energy is not being spent on getting RFPs out or awarding or executing long-lasting and programmatically/fiscally-sound contract awards for products and services to benefit the taxpayers. In a similar vein, industry is becoming far more reluctant to plan, invest in, or hire for government customers that simply don’t know what they are doing yet.
Thus comes the rise of solutions, such as the old “modular” contracting and project approach. Also known as “agile” (often in an IT acquisition strategy context), this strategy is one solution being applied more widely to government contracts. To accommodate the variety of scenarios that may or may not occur, or to facilitate a diversity of program directions (based on which way the wind may blow in the future), federal contracts structured with multiple, tiered “options” seems to be one of a few viable plans.
Nevertheless, the true “price” of all this uncertainty is that contract and program costs will continue to rise. In today’s starkly polarized country, as reflected in its government, baking different choices into contracts is a way to pre-position contractual direction to execute relatively quickly once short-term requirements are known. However, such extensive program and acquisition plans, pre-requirements definition, and alternative pricing methods will only serve to further increase the workload for everyone, since many (if not most) developed contract options may never be “exercised.” On the other hand, such contractual options can be designed to permit orderly continuation of services or additional product buys once government requirements and resources are known … whenever that may be.
With so many “unknowns” in so many significant areas of government policy today, the business of meeting even routine program obligations is extremely problematic. Today’s contracting process and its professionals are thus under a substantial level of stress as never before. Congratulations are due to these professionals and their ability to persevere in such a chaotic environment.
Without adopting new norms of contracting and project management, long-term structural damage to the very institutions that operate today will indeed occur. Let’s all look to positive solutions that will assist in achieving success in today’s contracting climate.
Michael P. Fischetti is the executive director of the National Contract Management Association.