Bouncing back from the shutdown – Ready to contract?

The government did more than furlough 800,000 federal employees, it also caused industries to furlough thousands. Take Lockheed Martin for example, they furloughed about 2,400 workers and unlike their federal counterparts their contractors won’t be receiving backpay.

What’s worse, during the shutdown contracts were halted and no new RFP’s were issued. So what are the lasting impacts of the shutdown on contractors?

Shawn McCarthy is the Research Director at IDC Government Insights. He told Chris Dorobek on the DorobekINSIDER program that had the shutdown continuted to November 1st, it would have been a real problem because then you have the possibility of late payments. Military payroll, social security checks postponed etc.

The budget debate isn’t over. Congress passed a Continuing Resolution to fund the government until January. But then we have the budget debate all over again. What gives?

“I think the biggest complaint you can make about Congress right now is the failure to address things in the long-term. Too often they think how is this going to affect me in the next election, rather than how is this going to affect all of my constituents. One way to look at the shutdown, is you had a small group of Congressman held the budget hostage to get their way. On the flip side you could also see that the entire congressional process is set up so that minority issues can be raised and debated,” said McCarthy.

• Even though the shutdown was a pain and probably unnecessary the Congressional process was followed and a minority of people were given an opportunity to raise issues and talk about them. The problem we ran into is that all these decisions are short term, which keeps bringing up the pinpoints that are affecting the contractor community who can’t really say we are going to build this at a certain price.
• Sequestration isn’t having quite as big of an impact on the IT community as we thought. When you are talking about IT projects they always spill over into other things, so obviously when you are talking about some big military system or a large system for monitoring. When you are talking about more than just IT spending the IT is affected by sequestration.
• However some of the IT contracts are multi-year and the spending has already been approved. Surprisingly we actually saw spending for fiscal 2013 go up slightly. There are a lot of contractors don’t believe it. But that’s because IT spending went in a lot of different directions and the more traditional contractors might not have seen those contracts. I am talking about cloud computing, data analytics, big data – things like that. Things that traditional contractors hadn’t been involved in.

Can’t make budget priorities without a full year budget bill?

“It is a painful budget process that is unnecessary. What needs to happen is a conversation in Congress. Either they need to raise taxes to cover spending or they need to cut spending down to a reasonable level. But what happens is we can’t do this because we don’t want to borrow more and the compromise is let’s just do it for a short term. It is painful. A real long-term conversation that needs to take place. When you are having people elected every two years it is easier for them to kick the can down the road to deal with it after the next election. The trouble is it never get’s dealt with because there is always another election,” said McCarthy.

What’s next?

“It is kinda interesting that you are seeing a shift in capital investment to more of a service type of investment. When you are talking about cloud solutions you are talking about things existing in a whole hosted environment. In some ways that is easier because it is tough to get those capital investments approved long term. The risk to this is something treated as a service and you lose your budget you can also lose your service,” said McCarthy.

To see all of GovLoop’s shutdown coverage click here.