Why the Government Is Probably About to Go on a Spending Spree
Agencies usually buy 39 percent of their IT in the fourth quarter of the fiscal year.
Agencies didn’t always save the bulk of their spending for September, but that’s how it has worked out recently – and this year, the pattern is especially pronounced, according to an analysis by Deltek.
Agencies will make 35.4 percent of their 2014 purchases between this month and the end of the fiscal year on Sept. 30, with most of that activity occurring in September, Deltek predicted. In a typical recent year, 32.4 percent of all spending took place in the fourth quarter, and 18 percent occurred in September alone, Deltek found.
The numbers are even higher for specific procurement types and at certain agencies. For instance, in the last five years, 39 percent of government information technology purchases were made in the fourth quarter.
“Agencies can hold off on software and IT equipment upgrades,” Carey Webster, Deltek’s director of federal information solutions, explained in a webinar. “At the same time, it’s very easy to procure these types of services quickly when there is money to burn.”
Large aerospace and defense acquisitions that take years to procure are less likely to take place quickly at the end of the year, which is why the Energy and Defense departments and NASA are the agencies least prone to balloon spending in the final quarter, as a percentage of their overall spending.
The State Department, meanwhile, makes more than half of its purchases -- 56 percent -- in the fourth quarter. Researchers didn’t know why this was the case; they checked for an anomalous year that may have thrown off the average, but larger fourth-quarter spending has been the norm at the department for the last five years, at least, Webster said.
The departments of Interior and Health and Human Service and the U.S. Agency for International Development were the next most likely to save their purchases for the last quarter, spending an average of 47 percent, 46 percent and 44 percent of their contracting budgets at the yearend, respectively.
Deltek based its analysis on this year’s enacted discretionary budget of $1,127 billion. In recent years, about 43 percent of the discretionary budget is contracted, the analysis found. Assuming the pattern holds this year, about $489.5 billion will have gone to contractors by the end of September.
Because the year started off slow -- only about 17 percent of estimated expenditures were contracted out in the first quarter -- Deltek expects federal outlays of about $168.2 billion this quarter, or 35.4 percent.
Probably owing to the nature of their offerings, small businesses are more vulnerable to the fourth-quarter bias, Webster said, which is a shame because they are often more in need of a steady cash flow than larger companies.
“It’s a reality that small businesses are going to have to grapple with in their planning and expectations setting,” Webster said, adding that contractors should be aware of the trends for their industry and at the agencies they deal with most.
The yearend buying spree wasn’t always the norm. Ten years ago, the first and second quarters tended to have the largest percentage of spending, and spending was more evenly spread out across quarters, Webster said.
“With increasingly contentious budgets and appropriations cycles, there’s just more threat to government shutdown and continuing resolution is definitely much more commonplace,” Webster noted. “This has caused a shift to an increase in spending toward the end of the fiscal year, as opposed to the beginning.”
(Image via Andy Dean Photography/Shutterstock.com)
NEXT STORY: How I Celebrated July 4 in 1965