And we ask ourselves, how will the present change of administration combined with the economic crisis affect us?  Whether we are consultants or employees, what will our business picture look like during the next 6 months?  

 

            This article is based primarily on the following sources:

 

  1. A recent presentation by Professional Services Council (PSC) president Stan Soloway in Falls Church, Virginia at a meeting of the APMP
  2. A presentation at the same meeting by Al Matera, an acquisition executive at the GSA
  3. Our experience as a proposal services company going through several changes in administration and recessions during the past 23 years.

 

How Long will the Slowdown Last?

 

            A career hazard for proposal professionals is the work slow down that takes place when there is a change of presidents.  Here at OCI, we have seen a 25% drop in activity starting in November, and competitors report similar results.  On marketing calls to large proposal shops, we typically find slow activity. 

 

            This hiatus in proposal work is largely caused by the need for the president to get onboard about 5,000 new super grade civil servants.  These are the deputy under assistant secretaries who must approve the new programs before the RFPs can be released.  It is a rule of thumb that 6 months is required to get these officials onboard and active.  So under usual circumstances, one could expect to see proposal activity returning to normal in the spring to summer timeframe. 

 

            However, the economic slowdown puts a wild card into the deck.  The recession could be expected to contribute to a slowdown in proposal activity lasting for more than a year.  But counterbalancing the economic slowdown is the federal stimulus spending.  Starting in the spring, stimulus spending will begin to cause a surge in proposal work for consultants as well as for employees of those businesses providing services and products procured by stimulus spending.

 

            PSC president Stan Soloway believes the effect of the Stimulus on proposal activity will be profound.  He said, “If you folks are in the proposal business, cancel your vacations.”   Soloway points out that $350 billion of the stimulus will primarily flow into:

 

  1. State & local government programs
  2. Infrastructure – such as roads
  3. Construction
  4. Homeland Security projects
  5. Green upgrades
  6. Health systems
  7. Project and program management

 

            After making a close study of the $350 billion stimulus package recently released, a large telecommunications equipment provider has concluded that:

 

  1. This stimulus spending includes about 20% IT content

2.      Much of this spending will take place at the state and local level and

3.      Spending will begin to reach the RFP stage in late March or April

 

This is pretty much like the speed of light for federal procurement.

           

            Let’s assume that the new $800 billion Obama stimulus passes congress soon and that funding from this bill also makes fast track progress to the RFP stage.  Current plans are to spend about $107 Billion in 2009 and $236 billion in 2010.  Programs to expend these funds may lead to a surge in RFP activity in or about mid summer.  If this sequence of events transpires as expected, then at least the consultants and those employees serving affected industries may indeed have to cancel their vacations.  The net of this situation is that, the slowdown in proposal activity accompanying this presidential transition may be the shortest ever.  However, what could be white hot proposal activity will be somewhat tempered by the intrinsic limitation of the Government machinery to process any more than so much procurement activity at a given time.

 

Predictions for Normal Agency Trends / Activity

 

            The urgent public interest in the stimulus packages has obscured the picture of normal appropriated spending            for federal agencies and military services.  The key questions here include:

 

  1. Which agencies will be the winners and which will be the losers in the competition for funds?
  2. What impact will President Obama’s priorities and promises have on proposal activity?

 

Predicted Trends in Spending

 

            The consensus is that growth in federal spending and hence proposal activity is almost certain.  However, growth in proposal activity will not be as fast as might be nominally expected because of side effects of the recession.  For example, the propensity of companies to bid will be reduced because of side effects such as companies having to curtail activities in their Government divisions to counterbalance losses in their commercial divisions.

 

            Although President Obama plans to shift priorities from military to civilian programs, we believe this will not happen quickly.  Certainly, it won’t happen this year; there might be some movement in this direction during 2010; and there could be more shift in the civilian direction in 2011.   

 

            For the near term, the key is to forget campaign rhetoric about getting out of Iraq in 16 months, because achieving this goal will likely take longer.  And even if the goal is achievable, then the forces will just be shifted to Afghanistan as they are removed from Iraq.  The net result will be continued DoD spending at a higher level than many Americans would like, and a consequent inability to make a quick or radical shift of spending to civilian areas.

 

            When a new president enters office, a critical challenge for industry analysts is to predict which agencies and which industrial sectors will be the winners and which will be the losers in the competition for funds.  In the ensuing paragraphs, please see the predictions of Professional Services Council (PSC) president Stan Soloway.  The PSC is the trade association / lobbyist group for leading federal contractors such as Lockheed, Northrop, Boeing, and others.

 

Industrial areas expecting to see increases in funding include the following:

 

1.      Financial

2.      Cyber security

3.      Health IT

4.      Engineering

5.      Others

 

Agencies expecting an increase in funding include:

 

1.  Homeland Security

2.  Defense

3.  GSA

 

Agencies expecting a decrease in funding include:

 

1.      Agriculture

2.      Interior

 

New Initiatives Effecting Proposal Work

 

            Several of President Obama’s initiatives will likely have a significant effect on proposal work.  In our discussion of these initiatives we are indebted to GSA executive Al Matera.  Following below is a discussion of those initiatives that may have the greatest impact on proposal work:

 

  1. Set-Aside Contracts – Currently, 23% of federal contracts are set aside for small business.  The target for small business set asides will increase to 30%.

 

  1. Competition – More competitive and less sole source contracts.  One way this will be achieved is through more competition on Task Orders under government wide acquisition contracts (GWACs) – with a goal of mandating at least 3 bids on all task orders, and possibly opening some task order bids to the entire contract holder pool. 

 

3.  Contingency Contracting Corps – This is the approach of more often using a reserve corps of contracts specialists that can operate interagency to prepare solicitations and evaluate proposals as needed to handle urgent procurements.

 

  1. Performance – It is predicted that the government will attempt to improve contract performance through means such as the increased use of incentives and award fees and more inspections from groups such as the Defense Contract Audit Service (DCAS).

 

  1. Accountability — In the past requirements for a contractor to have a certified accounting system were often overlooked.  Now this is mandatory, and companies not meeting the requirements will be disqualified.  Some of these requirements, such as the growing emphasis on having an Earned Value Management System (EVMS) for program accounting, can be painful and costly for contractors to implement.

 

  1. RFPs on the Web – As a part of the movement toward greater transparency in contracting, there is an increased emphasis on having more solicitations published on the web

 

  1. Tiering – The Government will attempt to improve performance and get better prices by putting limits on tiering, or the number of levels in contractors between the prime and the lowest subcontractor.

 

            Whether these predictions are 100% accurate or nearer the opposite, it is certain that proposal personnel everywhere are facing a period of uncertainty.  There has not been an economic challenge such as this during the career of any proposal professional now working.  We all must shoulder our responsibility to do our best work ever for the preservation of our companies and the restoration of our nation.  We know that, even if the stimulus causes a spike in activity, there will still be challenges, as companies with weak commercial divisions are forced to lay off personnel in their Government service divisions.  However, the greatest strength we have going for us is our flexibility and resilience.  Because of always having to do so many new and different things so quickly, most of us have had flexibility become our second nature.  And that helps endow us with the skill and strength to survive, come what come may.