During a holiday reception I met a Chief Technology Officer (CTO) who mentioned how disappointed he was about Congress.

“With all of the mess that congress has created, I am ashamed of my country. We have become a laughing stock before the whole world. Rather than solving the problems, our congressmen are acting like a bunch of preteens having a food fight,” he said.

At least, some recompetes and previously approved procurements will be done during the next 60 days. However, the general volume of business is likely to be at a speed between first and second gear. It could be similar to the situation in 2011 when the final procurements did not pass Congress until April, so we experienced a slow winter and a slow early spring.

The Next 60 Days

Unlike 2011, now there is this new fundamental question: What will Congress do about the 10% sequestration of discretionary spending in the next 60 days? The options are as follows:

  1. Keep the reduction in spending where it is now – 10%
  2. Make some reductions in entitlement spending (Social Security and Medicare) and lower the excessive 10% reduction now slated for discretionary spending to a number less likely to precipitate another recession (like 5%, 4%, or 3%)
  3. Postpone the start of the sequestration in discretionary spending for a year or some other period of time

While writing this article, I sought advice from one of the most knowledgeable people on procurement in the United States, Alan Chvotkin, EVP and General Counsel of the Professional Services Council (PSC). The PSC is the lobbying arm of the government services contractor industry and includes members such as Lockheed Martin and Northrop Grumman. I asked Alan one question: “Will they be able to reduce the 10% currently set to be sequestered by making some reductions in Entitlements? And if so, how much will they be able to reduce the 10%”? Alan said he couldn’t answer the question, because the situation is too convoluted. I rephrased the question to get him to at least make a guestimate or throw a dart at the wall. And he continued to beg off, due to the extremely confused picture we see at present. So here you have one of the most experienced and insightful people on federal procurement not even able to make a guess as to what Congress will do.

Even if we experience the full 10% sequestration, business will begin to pick up in March because there will at least be some clarity as to what is going to happen. The agencies can sort out which of their alternate plans best fit the situation and the procurement civil servants can do something without fear of getting fired for making a mistake. There are some knowledgeable observers such as Kevin Plexico, Vice President of Government Market Research firm GovWin, who believe that the proposal business could be quite brisk in 2013 because of the larger number of procurements expected this year. The average size of the procurements in 2013 will be smaller than those in 2012. However, the level of effort to prepare a $70 million proposal is just as much as it is to prepare a $100 million proposal.

The key question that remains is what will congress do about the catastrophic 10% reduction in discretionary spending? This is the spending that the agencies use to pay civil servants and contractor firms. The 10% will almost certainly have to be lowered to a more manageable amount. Depending on whose calculations you use, the 10% reduction translates into layoffs of civil servants and contractors in the Washington, D.C. area numbering in the low hundreds of thousands. This would make Washington, D.C. look worse than Detroit at the start of the Great Recession. My guess, and the emphasis is on the word “guess”, is that the 10% sequestration will be lowered to a figure in the 3 – 4% range, if not postponed again.