And more importantly for this article, what will happen to the proposal industry served by the corporate employees and independent consultants who read the Proposal Service Monthly?

Fiscal Cliff Really Started in October

First of all, it is obvious that the drastic effects of the current fiscal cliff crisis started in October 2012 and not last week. Because of the uncertainty facing the procurement process, the release of solicitations slowed down to first gear. Without certainty around the available appropriations and a stable outlook, agency procurement groups didn’t know what to do. Should they act as if they would ultimately experience the full sequestration? Would they be faced with only a partial sequestration of funds? Or would it be something else?

Although the federal government actually spent slightly more during the fall of 2012 (first quarter fiscal year) than they did in the previous fall, the effect on the proposal industry was still extreme. Much of the spending was done through simple contract vehicles that didn’t require a lot in the way of proposal submissions beyond a price on a sheet of paper. A large number of companies were laying off proposal and other business development employees because of what they feared was coming. And work was slow for most independent proposal consultants.

Survey of Proposal Consultant Companies

In order to make a spot assessment of proposal activity, I conducted a survey in late February of 10 proposal consultant companies. These companies ranged from single owner operations to moderate-sized companies to the industry leaders. The one question asked was this: How did your revenue during January 2013 compare to your revenue in January 2012?

The answers ranged all over the map. That most strongly affected company experienced January 2013 business that was down by 95% — their business was 5% of what they had experienced the previous January. Other businesses had revenue that was down by 80%, 60%, 50%, 40% and 25%. The fastest business reported was down by 25% compared to last January. According to rumor, business was slow at both SM&A and Goyak. And the president of a major national proposal consultant firm said, “It is really scary.”

What is the Next Step?

As this article goes to press, the proposal to have a continuing resolution (CR) that would include the whole $85 billion sequestration for the remainder of the fiscal year appears to be gaining traction. As recently as a month ago, there was a widespread expectation that there would be a compromise that would lower the amount of sequestered funds affecting both contractors and government employees. The issue in most people’s minds was, will the compromise be done in March, April, or May. This was excepting the more conservative members of the tea party, who were prepared to embrace the full sequester.

A Probable Solution

Things changed dramatically the first week of March when the president decided he would not fight the sequestration and would accept the entire $85 Billion sequestration for the rest of the fiscal year. Not many people expected this outcome. It was thought that, given the president’s high popularity and the disarray of the GOP, the president would be able to prevail in getting a compromise on the sequestration favorable to the Democrats. Apparently, the president has decided he would abandon the fight over sequestration for 2013. And instead he would work for a grand bargain during the summer that would spread some of the sequestration pain beyond the contractors and the civil servants during 2014 and succeeding years.

Now it is possible that the politicians will pass a CR in March that provides definitive appropriations for the rest of the current fiscal year. It is for sure not a done deal because of the continuing lack of trust between the Dems and the GOP. For example, the Senate might amend the House-passed appropriations bill in ways unacceptable to the House. Further, if there is too much pain as a result of the sequestration, the congress might be forced to backtrack and lessen the effect on the contractors and civil servants at a later date.

Let’s hope that the politicians will do whatever it is they will do sooner rather than later. Even with the full sequestration, it would be better for proposal activity if this course of treatment is sustained. The main problem holding procurement activity back is not the sequestration of funds itself but the lack of clarity as to what will be the final outcome to the appropriations for 2013.

What Happens After the Procurement Decision?

If the government can pass a definitive CR appropriation in March, even including the entire sequestration, this will be better for the proposal industry than a compromise lessening the amount of the sequestration in May. This is because the procurement personnel will have the clarity they need to begin the year’s business in earnest and start releasing more RFPs.

Just for argument’s sake, let’s assume the politicians can make a decision by March 22, the last day before the beginning of their Easter Recess. Then the likely outcome is that agencies will need 30 – 45 days to get the plans finalized that will let the season of high proposal activity begin. So proposal activity should start being somewhat normal for the season by the end of April or early May. AND this will leave 5 months – May, June, July, August and September – for the procurement personnel to get their 2013 business through the funnel. Business should be much faster for proposal professionals those 5 months than it has been during the past 5 months. Contrast this with the situation if there were a compromise in May, leaving only 3 months to get most of the year’s procurement business done.

Proposal personnel of all political persuasions can thank their lucky stars that the president has apparently decided to save his political ammunition for another battle. From our business perspective, the amount of the appropriations matters much less than the time when the appropriations are passed. Some lucky years this has happened in the fall. This year is more like 2011, when the final appropriations were not passed until April 7. Like 2011, our appropriations are abnormally late, but mercifully not nearly as bad as having the appropriations passed in May. With March appropriations and the sequestration, the year will be a little slower than usual. But it should not be a disaster on the scale of an earthquake or a typhoon. More like a stretch of road with some serious bumps.