As we enter 2021, the Government Contracting industry is benefiting from a 10-year high of discretionary procurement spending. The Pulse examined the last decade of spending data and found the following:
- Between Fiscal Year (FY) 2017 and today, discretionary appropriations have increased 30% – not including the additional $1.76T spent in FY20 for COVID-19 requirements
- Defense spending has grown more than 17%, while non-defense has grown more than 15%
- Federal spending is expected to total 21% of Gross Domestic Product (GDP) in FY20, while revenue is projected at ~16.4% – meaning the Government Contracting Industrial Base is 25% of the USA’s economic welfare
Change is all but certain with a new Administration and a party flip, especially for an industry that is so heavily impacted by the ebb and flow of the federal landscape. Government Contractors have already seen a flurry of impactful agency and regulation updates, as well as Executive Orders during the Presidential transition:
National Defense Authorization Act (NDAA)
- Small Business Administration (SBA) issued final rule for a one-year extension for 8(a) program participants.
- Pentagon’s Chief Management Officer (CMO) role officially disestablished by Congress.
- The new Corporate Transparency Act (CTA) will impose beneficial ownership reporting requirements on many companies, particularly small businesses (SBs).
- The final rule issued, implementing FY16 NDAA provision, clarifying the types of assets that individual sureties must pledge as security for bonds used with a Government Contractor.
Executive Orders
- Protecting the Federal Workforce and Requiring Mask-Wearing: requires federal agencies to coordinate with each other and creates a new “Safer Federal Workforce Task Force.” This also eliminates Schedule F, restores collective bargaining rights, and begins the framework for a $15 minimum wage (including contractors).
- Advancing Racial Equity and Support for Underserved Communities Through the Federal Government: ends restrictions on diversity training, and removes contractor requirements to flow down the diversity training restrictions to their subcontractors.
Other
- OMB Bulletin No. 21-03 – Release of Civilian Agency Funds from January 14, 2021, Rescission Package: releases civilian agency funds that were frozen as part of a rescission package President Trump sent to Congress on January 14, 2021.
- New Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) Update for Low-Price Technically Acceptable (LPTA) Source Selection Process: basic structure now is that agencies can only use LPTA after analysis and justification that responds to new criteria. However, these are not self-implementing rules, agencies plan to monitor adherence to criteria but won’t be tracking that at the agency level.
- Rule of Two Before Using Multiple Award IDIQ Contract Vehicle: agencies now have to conduct a SB “Rule of Two” analysis before it can use an existing multiple award IDIQ contract vehicle to procure services.
- Veterans Affairs (VA) Service-Disabled Veteran-Owned Small Business (SDVOSB) “Rule of Two”: the fact that an SDVOSB’s prices have been accepted by the General Services Administration (GSA) under the Federal Supply Schedule (FSS) program does not require the VA to accept those prices as fair and reasonable in a rule of two analysis.
The industry has also started to see a massive change in leadership, which will most certainly impact the federal workforce and agency and department initiatives. However, not too much will change in this FY’s spending as budget caps have been previously set, and since the FY21 Omnibus and the FY21 NDAA were passed into law just a few weeks ago.
