Page 27 - FCW, June 2017
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ond, as a result of this, in many cases, the incumbent work related to those awards has been extended. The com- bination of these has resulted in exten- sions to our current work, and these are generally shorter in duration and lower in magnitude than new awards and have decreased backlog from what we expected.”
Krone noted that the Defense Department in particular did not have any confirmed Trump appointments other than Secretary Jim Mattis, and a NASA administrator has yet to be named.
“And so the civil servants — these are really great individuals — are doing the best they can to operate the gov- ernment with the authorities that they have,” he said.
A matter of perspective
The view of the federal market depends on where you sit, said Alan Chvotkin, executive vice president and counsel at the Professional Services Council, an organization that represents govern- ment contractors.
“What this reflects is proof that the market is very diversified, not mono- lithic. It varies by activity, program and agency,” Chvotkin told FCW. There are some programs where contracting is “business as usual until told to do oth- erwise. Other agencies are not going forward for fear of making a mistake.”
He added that “some companies think they’re in a strong position vis- à-vis their customers and their mar- ketplace and see no diminution of business opportunities. Others who are more heavily engaged in \[the Envi- ronmental Protection Agency and other agencies slated for cuts\] are under- standably more nervous, both on the programmatic side and the contract- ing side.”
Chvotkin said the pace of presiden- tial appointments is starting to pick up, and “that period of transition ambiguity is shrinking, for better or for worse, for individual programs and companies.”
On the “for worse” side, companies that work extensively with agencies
whose budgets are expected to be slashed are starting to warn investors about the potential impact.
Officials at Maximus, which provides support for social services and health care IT systems in the U.S. and United Kingdom, have deep concerns about the future of the Affordable Care Act.
In a May 6 call, Maximus CEO Rich Montoni told investors: “Whether or not our U.S. health care program, the Affordable Care Act measure, is pushed down to the states, whether
about their company’s exposure, even on civilian-side programs. “We don’t see even in the skinny budget signifi- cant cuts to the agencies that are our primary customers or the departments in those agencies that are our primary customers,” Krone said.
The company also received 38 awards on indefinite-delivery, indef- inite-quantity contracts in the most recent fiscal quarter, which could yield more than $1 billion in revenue.
Budget uncertainty
As for political appointments, Trey Hodgkins, a senior vice president at the IT Alliance for Public Sector, said the current pace “is nothing out of the ordinary for a presidential transition, particularly one between parties.” In his view, the real problem facing con- tractors is budgeting under a continu- ing resolution.
“There’s going to be a mad rush to obligate dollars over the next five months \[before the current funding bill expires\] so agencies do not have to return a bunch of money to the trea- sury,” he said. “Sadly, that’s become the norm.”
In his comments to analysts, Krone tried to put a positive spin on the fund- ing situation. “Despite coming seven months into the fiscal year, we are optimistic that the passage of these \[appropriations\] bills should enable an increased level of decision-making from the acquisition organizations,” he said. “This backdrop bodes well for the market areas we are most exposed to and also bodes well, in our view, for what we can expect in fiscal 2018.”
Krone also said he expects Congress to pass a continuing resolution at 2017 levels for the start of fiscal 2018.
Signals from the White House, how- ever, suggest that a “good shutdown” could be in the offing if the Trump administration’s budget priorities are not embraced on a bipartisan basis. As Sept. 30 approaches, that could well become another topic of dis- cussion among companies and their investors. n
“There’s going tobeamad rush to obligate dollars over
the next five months \[before the current funding bill expires\] so agencies do not have to return
a bunch of money to the treasury.”
TREY HODGKINS, IT ALLIANCE FOR PUBLIC SECTOR
they become more state-based and states move forward with rate waiv- ers is a very important aspect of the health care program here in the United States, upon which we are basically sitting here, \[with\] bated breath and preparing ourselves.”
In areas where spending is set to contract, Chvotkin believes incum- bents will retain an advantage. “It’s tough to be a new entrant into some of these already crowded markets,” he said, adding that he expects some increase in mergers and acquisitions among contractors.
Leidos officials are less concerned
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