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Blog: A fourth quarter surge in spending? Not exactly

posted Washington Business Journal, 11 Sep 2013


By Ray Bjorklund, President, BirchGrove Consulting


Well, here we are in home stretch of the fourth quarter. A time and place to get well? No. Even though the measurable procurement activity is ramping up-gradually-for the big finale, there are a couple of big differences this year.


A daily count of new opportunities introduced in FedBizOpps postings for the period of July through August illustrates one of those differences.


New daily postings during this period in 2012 ranged from approximately 150 to 3,100, with a median of about 1,800. This year, the overall posting activity is starkly lower: ranging from approximately 30 to 1,200, with a daily median of 620 opportunities. Some market segments, like commodity IT, are running at about the same magnitude as last year. Overall though, activity is way down.


Will September be any better?


When you plot out the historical FedBizOpps activity through the month of September, new opportunities taper off during the month (commodity IT again an exception). In order to meet timelines for obligating funds by the end of the fiscal year, fewer new opportunities are introduced in September.


Now, here's the zinger and the second big difference. The federal government had planned to spend less money on contracts this year anyway; then the sequester came along and further reduced the budget authority.


To illustrate, I plotted out the spending pattern on a couple of large operations and maintenance accounts. On a quarterly basis, the obligation rate varies little from year to year. By the end of third quarter during fiscal 2012, one $48 billion plus account had spent 77 percent of its budget authority on contracts and other things.


By the end of third quarter this year, the same account had spent 80 percent of the $41 billion plus in budget authority and is on track to finish spending nearly all of it by September 30. That's nearly $3 billion dollars less to spend in the fourth quarter, in one account.


Yes, September of the federal fiscal year is the get-well month for sales, or at least that's what many in the federal market like to believe. But the reality this year is quite different: while agencies are on track to finish spending their funds, the totals they will spend will be substantially less.


©2013 Washington Business Journal. Used by permission.