How Bad Does the COVID-19 Affect the Federal Market?

  |  March 24, 2020

This year started with expectation that we would see the fastest market for Federal contractors in 10 years.  Higher addressable spend.  No shutdown. And widely shared optimism.

Then came the Coronavirus and its fellow traveler, the recession.  Does this double whammy doom us to a retrograde year?  Or is the market more like Mark Twain, who said, “The reports of my death are greatly exaggerated.”

Short-Term Effect of the Virus on Federal Procurement

In an interview, Federal market SME Allen Chvotkin said the following:  In the short term, there will be a slowdown as Federal procurement personnel change their rhythms due to beginning to work off-site.  In-person Industry Days will be cancelled.  Companies may ask for extensions if the inability to collocate proposal personnel causes delays.

Chvotkin is optimistic that the federal agencies can work effectively off-site.  And that they will succeed in making the procurement engine run up to speed, once they adapt to the change in rhythms.

Long-Term Effect of the Coronavirus

The longer the pandemic continues, however, the more significant the impact on procurement is likely to become.  Here are some possible impacts:

  1. Cancellation of new work. If facilities are closed, there may be a need to cancel less needed new projects and substitute telecommuting capabilities.
  2. Reprogramming of funds. The administration is moving funding to support the virus response from a wide range of accounts.
  3. Contracting Officers (CO) access. If a lot of COs get sick, “access” may be significantly restricted and their ability to work remotely curtailed.

Effect of a Recession

A recession has not strongly affected the Federal workforce, the federal contracting community, or the efficiency of Federal work in the past and is often a trailing sector. Depending on the length and depth of any downturn, the effect on federal contracting may not be seen for months, particularly as the Federal Government takes extraordinary measures to support the economy and recover from the virus.

Net Net

It is easy to see that the number of possible effects from the virus could be huge.  However, we believe that the net effect leaves us with a year that is nearly as prosperous as expected.  For example, if there is reprogramming of funds, it is likely that we can still reach year’s end with a level of committed funds approaching that which was planned.

Note:  Allen Chvotkin is EVP and Counsel of the Professional Services Council (PSC).

 

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