Resolution #10: We Will Prepare for the Inevitable Government Contracting Economic Crisis

January 15th, 2010 | Posted by Lexy Kessler

By 2013 it is projected that the percent of the Federal budget available for discretionary funding will drop to 31% .  That means out of the entire Federal budget only 31% of the dollars will be available to fund homeland security, the new proposed health care plan and everything else. This combined with an ever growing Federal deficit, highlights that it is a only matter of time before the dollars available to contractors will shrink substantially.

To give some perspective into what this precipitous drop in discretionary funding means, in 1984 45% of the Federal budget was available for discretionary dollars. The Federal budget is a pool of dollars that is broken into two buckets. Mandatory spending which is comprised of social security, Medicare and interest costs and discretionary spending which contains the pool of dollars that is available for everything else including dollars to be awarded to contractors that do business with the federal government. If the pool shrinks, what does that mean to our industry?

What this means to our industry is we will experience our own economic crisis.  A crisis that will not garner the front headlines of the national news, but a crisis that will threaten the livelihood of businesses in which only the fundamently strong will survive. It is critical that you start to develop a contingency plan now as very few areas will be immune from the shrinking pool of money.

Some areas to incorporate in your contingency plan:

• Increased competition. Contractors can expect to see a significant increase in the amount of competition. It’s more important than ever to develop the plan to differentiate yourself in the market place. Identify why you stand out from your competition and start the education process with your customers now.
• Diversification. Are there other areas you should expand into now, so that when the spending tightens, you have a foundation to pull you through when there are fewer dollars?
• Strategic relationships. Should you be aligned with others in your industry? You never know what a relationship may bring one day when you need it.
• Key employees. Do you have the right talent to make an impact with your customer?
• Start now! It will take a few years to create that safety net for what will undoubtedly be bumpy roads ahead. The more focus you have, the better chance you will persevere and be successful on the back end.

Tags: contingency, crisis, discretionary spending, economic, entitlement, freeze, Medicaid, shrink, Social Security

This entry was posted on Friday, January 15th, 2010 at 12:00 pm and is filed under Federal Agency Spending, New Year's Resolutions. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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