Government Contracts Monitor
Sequestration Part II – As Contracting Gets Harder, Don’t Forget That Feds Are People Too
November 29, 2012
By: Eric Whytsell
In all the recent hand-wringing about what sequestration is, whether it will happen and what it will mean for federal procurement if it does (see, e.g., our previous article ), one group has too often been overlooked in the discussion: the federal procurement professionals who will play a central role in how the sequestration plays out.
There is no doubt that, if implemented, sequestration will impose large – and largely indiscriminate – budget cuts that result in great hardship for government contractors and their employees. But rest assured that government contractors will not have a corner on the market for misery. Sequestration will also cause huge headaches for everyone working in government agency contract shops. These are the people responsible for ensuring the success of their agency’s mission. And sequestration will mean that they will have significantly less of the most important (or at least most impactful) resource supporting their efforts: money. Less money means that the job of federal purchasing personnel will get much harder. They will be forced to get creative.
Government contractors should expect to see government agencies making hard choices about downsizing existing contracts, including whether and how to terminate or restructure programs and contracts to avoid unnecessary spending. Depending on the type of contract involved, we are likely to see widespread reductions in quantities ordered, extensions of delivery schedules; and bundling/transferring of requirements. There also promises to be a reduction in the use of termination for convenience in favor of termination for default or early recompetition of “new” requirements.
Sequestration-related budgetary restrictions will also most likely mean delayed award decisions and more problematic debriefings as government procurement professionals are forced to focus their efforts on other aspects of their job. With respect to new contracts, there will almost certainly be more sole source awards and greater use of low-cost technically acceptable awards and firm fixed price contracts in more – and more arguably inappropriate – situations. In addition to relying more heavily on GWAC and larger contract vehicles, agencies will seek to shift costs to contractors through cost-sharing arrangements. Contractors will probably also face tougher award fee standards, as procurement professionals look to free up funds, and more push-back on requests for equitable adjustment, as they try to avoid paying for changes.
From one perspective, these looming “changes” are really nothing new. Contractors have encountered these approaches more and more as federal budgets have tightened over the past few years. But if sequestration turns chronic budgetary woes into an acute “lack of money” problem, we will see much more widespread and sustained use of these strategies by government agencies.
As government contractors confront the impact of sequestration, they should to think of the choices being made by their counterparts in federal contracting shops as the inevitable result of government procurement personnel being forced to try to achieve the same mission success with fewer resources. Maintaining this attitude should help contractors as they work with their government customers to find workable solutions.
Next: How sequestration will make contracts harder to perform.
Eric Whytsell is the attorney responsible for the content of this article.