Blog: Show me the Money: How the federal budget will impact business development

posted The Coalition for Government Procurement FAR and Beyond Blog, 21 Feb 2014

By Ray Bjorklund, President, BirchGrove Consulting

As a business developer, you follow the money. You trek toward the customers that spend money and the customers that spend the most. Discretionary spending authority, appropriated by Congress, is your bellwether.

As an experienced business developer, you follow that portion of the budget authority intended to be spent on contracts for what your company offers. Discretionary spending does not necessarily correlate to contract spending; about 40% of discretionary spend goes to compensation of government employees and not to contracts; that percentage is slowly rising, as agencies are told to buy less of everything.

Your objective should be to become a savvy business developer. Savvy business developers, look beyond planned contract spending for any trends that will shift your prospects in the federal market segment you are pursuing, either in specific customer agencies, in the types of services or products purchased, or both.

Using the federal budget, how does the savvy business developer develop the situational awareness to find opportunity? The President's Budget is an annual political statement, which the Executive Branch begins preparing approximately 18 months before the fiscal year starts. When you add up the documents prepared by the Office of Management and Budget and all the congressional justification materials prepared by the agencies, the page count is well north of 20,000. There are many messages, some bold and some mysterious, residing in those pages. In the 2014 budget it is clear that spending on infrastructure, education for jobs, and veterans assistance are again important messages.

But consider that federal contracts for "infrastructure" will decline by $700M to $11.1B in 2014. Spending on workforce development contracts will rise 10% to $6.1B. Federal contract spend on veterans programs will increase from $33.5B to $35.7B, or 7%. You may have to decide between growth and revenue. Do you want to pursue growth, perhaps with smaller revenues? Or do you want to do business where the government spends a lot, even though spending is declining in those areas?

And then there are more specific, exciting growth areas like big data and cyber security. Looking beyond the hype, however, we see subtle shifts among the categories of contract spending and a few initiatives that propose new or at least different levels of contract spending.

The Air Force plans to ramp up cyber superiority spending to more than $4.1B, 8% over 2013. Are there cyber contract opportunities? No and yes. There are increases in spending on military personnel and civil service that will suppress spending on services contracts. But one of the largest components of the net increase is $85M in new construction at Fort Meade, the first increment in a new $358M operations center for about 1,400 cyber people. The new facility will eventually require another $64M in equipment and IT and over $6M in furniture. Watch it unfold over the next couple of years.

Worried about another sequester? The lateness of the 2013 decision to sequester budget authority inhibited many spending initiatives and compounded uncertainty about any requirement for a 2014 sequester. Program planning and rationalization suffered.

Then the partial government shutdown in Oct 2013 overrode the Administration's intent to systematically plan for a 2014 sequester. The bipartisan, bicameral budget deal provided a little stability. But not enough stability to completely overcome the risk aversion that persists. The good news is that a 2014 sequester is extremely unlikely. The bad news is that it's going to get a little worse, before it gets better.

Still struggling to find new opportunities? Since there will be little overall change in the level of contract spending, a business developer has to peer deeper into the budget to see if the contract spending is really new or is merely going to entrenched incumbents, with little opportunity to get a foot in the door.

To meet your shareholders' expectations of revenue, you must "up your game" in following the money and become the savvy business developer. Somewhere in those 20,000 pages of nooks and crannies, you'll find fresh opportunities.

©2014 The Coalition for Government Procurement. Used by permission.