$114 billion still available for federal contractors before Sept. 30

Agencies are likely to spend the remaining money on lower-cost items like computers and IT equipment, observer says.

The federal government still has $114 billion in play for contract spending before the end of the fiscal year on Sept. 30, an industry analyst has concluded.

According to a report McLean, Va.-based consulting firm FedSources is set to release in the coming days, fourth quarter contracting activity will pick up significantly compared to the previous three quarters of fiscal 2010, particularly for smaller purchases. The government's fiscal 2010 budget included $756 billion for contracts.

Ray Bjorklund, senior vice president and chief knowledge officer at FedSources and the report's author, said fourth quarter spending is very important for the information technology community, especially for resellers whose sales are commodity-based. The jump in spending represents demand for lower-cost purchases for which agencies might not have expected to have sufficient funds, he added.

For example, government spent $776 million on computing equipment in the first quarter of fiscal 2009; that jumped to $2.5 billion in the final quarter. According to Bjorklund, there also is an uptick in spending in the last fiscal quarter on studies and analyses for technology projects and plans, as well as IT services.

"There's a pent-up demand for IT services that can be contracted for toward the end of the fiscal year with the premise that additional money will come in next year's appropriations," he said. "A lot of planning [for larger and more complex requirements] starts back in March and April, and contractors have to be well-positioned to take advantage of year-end spending by working with customer requirements early in the year."

Bjorklund stressed that it was imperative for contractors to understand government's financial management processes and to be aware of agencies' lead time on orders to prevent errors during the rush to spend remaining funds.

"It's really important for industry as well as government to know what the lead times are because we have an understaffed acquisition workforce in government," he said. "If they can work in synchronization then industry won't try to cram something down the throat of government at the last minute, raising the potential for mistakes."