If you sell to the government, there are extensive changes taking place that may impact your corporate strategy.
The mid-term elections have created a more complicated environment than ever before. Congress is now in a lame-duck session and changes to committees will not take place until January when the Republicans take over the Senate. It is anticipated that Senator John McCain (AZ) will chair the Senate Armed Services Committee and Senator Thad Cochran (MS) will chair the Senate Appropriations Committee. The shift in leadership has broad implications and a general shift in the tone on Defense issues. This includes a harder line on Afghanistan, Iraq, and Syria.
House Approves National Defense Authorization Act
Earlier this week, both the House and the Senate agreed to a version of the 2015 National Defense Authorization Act (NDAA). This is the policy bill that sets guidelines for operating policy within DoD. Additionally, the House plan for funding the federal government in FY2015 is an omnibus bill that will fund the government through September 2015 - except for Homeland Security due to the immigration dispute. The Senate is anticipated to support the House's plan in January.
Other provisions that came out of conference include additional requirements for increased competition, continuing to limit and decrease sole-source contracts. The House has also taken military base closures off the agenda for F Y2015 but DoD is expected to fight this in an attempt to decrease their spending.
The Good News
There is actually quite a bit of good news in the above updates. Unlike last year, it looks like a federal budget will be passed for FY2015 and a government shutdown is not anticipated. This is good news for small and mid-tier companies. Additionally, with a Republican House and Senate, the harder line on terrorism and hotspots in the middle east will likely facilitate increased spending above the funding outlined in the National Defense Authorization Act. A pending budget, a more Defense friendly Congress, and taking base closures off the agenda, I anticipate a more advantageous environment for defense contractors in FY2015.
The Not So Good News
You should also be aware of several other items. First, if you are not familiar with the Federal Strategic Sourcing Initiative (FSSI), I recommend you keep your eyes on it because the government plans to use it to cut $40 billion a year. FSSI is a GSA program that has been sold to Congress, the Pentagon, and the White House as a means to achieve greater discounts and best practices. However, FSSI is decimating small businesses for the industries it touches. Today, FSSI includes print management, wireless, office supplies, janitorial, and maintenance, repair, and operations (MRO) supplies. To give you an example, before strategic sourcing was applied to office supplies, there were hundreds of companies with GSA Schedules. These companies, many small businesses, had to compete to be on the FSSI contract. For the hundreds of companies that didn't make it onto the FSSI contract, their GSA Schedules are no longer valid and these companies have left the government space. They've started talking about moving information technology (IT-70) onto FSSI but I don't see that happening for several years, if at all.
You should also continue to expect increased focus on Low Price Technically Acceptable (LTPA) contracts in FY2015. Yes, this is unfortunate as quality and the nuances of delivery are being minimized.
New GSA Schedule - Professional Services Schedule (PSS)
Finally, GSA is executing a major shift in the GSA Schedule program. But first, I want to reiterate what you have heard me say a dozen times: "You don't necessarily need a schedule to sell to the government. It depends on what you sell and how you sell it." For our clients and members who have a schedule or are planning to obtain a schedule, in March 2015, GSA is releasing a new schedule called the Professional Services Schedule (PSS). It will replace the Consolidated Schedule (00CORP) and the following schedules will be discontinued and migrated to the new Professional Services Schedule: MOBIS (874), PES (871), FABS (520), AIMS (541), LOGWORLD (874V), Environmental (899) and Language (738II). If you're planning to submit a schedule application on any of these, I recommend you wait until March 2015 to see how the program launches.
Government Accountability Office Finds Problems With 8(a) Subcontracting
Finally, the Government Accountability Office (GAO) released a report in September 2014 that outlines the need for regulatory change for monitoring 8(a) subcontracting. Be federal regulation, when an 8(a) company primes a contract, personnel costs for subcontractors can not exceed 50 percent of the total work under service contracts. However, the GAO found that some contracting officers are not monitoring this requirement. Anticipate increased scrutiny on not only 8(a) acquisitions but all small business acquisitions in 2015.
As always, if you have any questions, don't hesitate to contact me.
Joshua Frank is a Principal of RSM Federal, a federal consulting and business-acceleration strategy firm that helps businesses in accelerating the education and processes necessary to winning government contracts. For more information, videos, and contact information, please visit www.rsmfederal.com