It’s the most wonderful time of the year in Washington — if you’re a federal contractor.
The annual “Christmas in September” spending season is well under way, with billions of dollars that that need to be allocated before the government’s fiscal year ends Sept 30.
And if fiscal 2022 is anything like previous years, the final three months will account for about a third of total obligations. Large government contractors get most of that payout, with small businesses following behind, according to analysis from The Pulse of GovCon, a woman-owned business intelligence advisory firm focused on government contracting.
The need to spend may be especially acute this year as supply chain issues and Congress’ habit of passing continuing resolutions instead of new budgets, a practice borne of political gridlock, ties the hands of agency procurement officials, leaving them with a backlog of requests and less time left to fill them.
“I would attribute at least some of this to the fact that we haven’t had a budget passed at the start of the fiscal year for who knows how many years,” said Amanda Swanson Goff, the director of research and analysis at The Pulse.
Though agencies tend to spend most of their discretionary dollars before July 1, data shows that the largest splurges in contract awards in any one month of the year have happened in September. What’s the rush? Any unused funds will be returned to the Department of the Treasury as of Oct. 1, and the “use-it-or-lose-it” bonanza of buying has become an annual autumn tradition in Washington.
Fourth quarter spending for this year on procurement could exceed $200 billion, an analysis by Bloomberg Government estimated.
The September effect is well documented and annually draws criticism from critics who say it encourages waste.
A study of government spending by nonprofit watchdog OpenTheBooks found that the federal government spent $97 billion in the final month of fiscal 2018, with more than $61 billion attributed the Pentagon. Purchases included guns and ammo, but also batteries and books — and $2.3 million on lobster tail. Federal agencies also spent $293,245 on steak, to include rib eye, top sirloin and flank steak that month
As agencies look for ways to disburse their coffers, 70 out of 73 agencies examined by The Pulse make a purchase in the final quarter of the fiscal year.
Where priorities stand, and how they might change
“When you think about these continuing resolutions that are taking up most of the first quarter, sometimes extending into the second quarter, you have a complete freeze on any new starts,” Goff said in an interview. “So the government really is handcuffed in terms of spending money.”
Lawmakers are working on a continuing resolution that would extend government funding levels through Dec. 16, as current funding for fiscal 2022.
Agencies that deal with public health emergencies or frequently changing national security demands may also intentionally reserve part of their budget for the end of the year as a cushion.
Yet as the COVID-19 pandemic showed, even unforeseen circumstances can redirect priorities for the future, as it did with the transition to remote work.
Experts at The Pulse predict a government-wide commitment to modernization, whether that’s further building out telework infrastructure or getting in front of rapidly evolving cybersecurity threats.
The Department of Defense in particular makes up half of discretionary spending, so its budget priorities can reflect what’s happening within the Pentagon.
Lately, such clues have been withdrawing from Afghanistan, funneling aid to Ukraine and restructuring internally to shape peacetime functions and address burgeoning threats.
Outlook for contractors
In the last quarter, sole-source awards and single-bid competitions also tend to increase because the government can move quickly on them.
Though what agencies spend their sprint money on has come under fire for being frivolous or wasteful, the most popular spending category is professional and administrative services.
The least popular spending category at this stage is for physical science programs, which play a larger role for agencies like the National Institutes of Health.
More broadly, the federal government spends large chunks of its budget on Medicare, social security and defense needs, although funding for income security rocketed at the start of the COVID-19 pandemic.
In total, 2022 discretionary appropriations are 8% more than last year’s.
Still, past years’ last-minute purchases have led members of Congress and unions to scrutinize the final transactions of the fiscal year.
“This ‘use-it-or-lose-it’ feature of time-limited budget authority has the potential to result in low-value spending, since the opportunity cost to organizations of spending about-to-expire funds is effectively zero,” said a report by Harvard University’s Kennedy School of Government. “Exacerbating this problem is the incentive to build up a rainy day fund over the front end of the budget cycle.”
Members of Congress have proposed legislation to limit an agency’s discretionary spending in the last two months of the fiscal year, but no progress has been made.
Molly Weisner is a staff reporter for Federal Times where she covers labor, policy and contracting pertaining to the government workforce. She made previous stops at USA Today and McClatchy as a digital producer, and worked at The New York Times as a copy editor. Molly majored in journalism at the University of North Carolina at Chapel Hill.
