Contract Trends & Updates for 2017 and Beyond
The US government is estimated to collect $3.64 trillion in tax revenues during this fiscal year and spend a total of $4.15 trillion in its 2017 budget, which results in a deficit of $503 billion. That difference has to be made up through additional debts. In order to have a balanced budget, a budget’s receipts must equal or exceed its outlays. But most forecast spending analysis show the US continuing to spend more than it brings in for the foreseeable future.
Government spending is broken into two parts; mandatory spending and discretionary spending. Mandatory spending is federal spending that is spent based on existing laws rather than the budgeting process. Discretionary spending, on the other hand, is the portion of the budget that the president requests and Congress appropriates every year through legislation. In regard to spending, discretionary funds are shrinking in relations to mandatory funds. In other words, the government is obligated to fund entitlement programs and, therefore, has less money to use on other resources.
And where do government contractors get funded? From discretionary spending. Which puts a lot of stress on the government, agencies and contractors, to make the most with what little they have. Margins are already small for most contractors, but they will need to be tighter moving forward. Fortunately, the GWACs, MACs, IDIQs and others, are funded and all intentions are to keep those fully funded.
While Federal spending is up, budgets for contracting are flat or shrinking leaving government agencies to consolidate procurements in an effort to ease its administrative burden. In the end, there is too much supply chasing too little demand, producing higher competitive stakes. And that lead to the pricing becoming a more important factor than technical proficiency.
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