2023 Survey in Review

Much has changed since PSC published its last Acquisition Policy Survey in December 2020. That edition rightly focused on ways in which the COVID-19 pandemic created “major stress factors” for both public and private sector operations. It highlighted government and industry adjustments, as necessitated by the global health emergency, that helped to support federal missions and workforce retention during a period of rampant uncertainty. It underscored the need to leverage COVID-19 innovations in managing workforces, communications, budget, and data.

The 2023 Acquisition Policy Survey builds on that work with the understanding that key elements of the federal marketplace—and the broader U.S. economy—are still emerging from many COVID-19-related constraints and that the federal acquisition landscape continues to evolve. In general, government officials’ responses to the 2023 survey indicate that acquisition processes have been functioning well. And of course, survey data also show confidence in the momentum of government processes. Agencies continue to award contracts for much-needed solutions.

That said, systems as large as the U.S. Government acquisition enterprise take time to evolve, especially when workforce culture and practices have changed so markedly over the last three years. In that period, the nation has also experienced dual challenges of higherthan-expected inflation and supply chain delays, both of which have impacted government contractors’ business operations. This has all occurred at a time when on-time annual federal appropriations continue to be elusive.

FOUR MAIN THEMES EMERGED FROM THE 2023 SURVEY:

Budget Challenges

With a few exceptions in the last 25 years, agencies have begun each fiscal year under a Continuing Resolution, which generally keeps an agency’s appropriations flat until Congress passes—and the President signs—an annual appropriations law for that agency. Sometimes, enactment occurs when half of the fiscal year is over, resulting in lower and slower contract obligations that present challenges to current mission accomplishment and out-year planning. With the highest inflation rates since the 1980’s, the last two years have seen significant challenges in budget execution, both for government and industry officials.

Trends in agencies’ acquisition strategies (e.g., Best-in-Class vehicles, contract consolidation, multi-award contracts) have driven companies to pursue new or differing teaming arrangements and/ or to be more selective in the opportunities they pursue. In addition, survey respondents discussed how small business goals can conflict with Category Management goals; how the government’s teaming requirements can be inconsistent across agencies and vehicles; and how “graduation” out of a small business size standard can present new challenges vis-à-vis bids and teaming.

The acquisition workforce has remained resilient throughout workplace shifts and a so-called “Great Resignation.” Will professionals—whether government or industry—return to the workplace at pre-pandemic levels? What requirements might be levied on contractors for on-site work versus remote work? Understanding that workforce cultures are among the slowest to change, how is the government thinking about hiring, retention, and training of a skilled workforce?

Communication and Collaboration with Industry 4

The government seeks partnership with industry, where each partner communicates questions, problems, and potential solutions on a regular basis. What should this communication look like? Survey respondents recommend doing homework in understanding how capabilities fit needs instead of pitching products and services broadly.

We’re the tortoise, not the hare. We don’t have bandwidth to do everything all at once: outreach, reverse industry days, new policies or updates, updating the Federal Acquisition Regulation… Reorganizing resources and how the Heads of Contracting Authority will operate…. At the end of the day, all of this is well and good, but it’s the tail of the dog. This will require cultural change.

Budget Challenges

Responses to this year’s survey indicated pessimism regarding budget challenges with 63 percent of respondents indicating that those challenges have worsened in the last 2 years and only 25 percent expressing the belief that those challenges will improve in the years to come. Some more pessimistic respondents highlighted that their budgets have been, and are expected to remain, relatively flat.

One respondent whose agency received additional appropriations in fiscal year 2022 (FY22), said that increase was:

Episodic and not a long-term increase. It is hard to win the lottery, then live the next day. Once that money is gone, you have to go back to pre-lottery days in operations. We have seen that time and time again in other programs; a project gets lots of funding but needs to be sustained without the massive funding. We have had to learn to manage to this.

A Need for Appropriations Normalization

Most respondents indicated normalization in the annual Congressional appropriations process would best allow them to properly budget for execution of agency missions.

Yearly federal budget and appropriations processes are unpredictable, adding risk to programs across the government. Respondents noted that Continuing Resolutions, which allow only straight-line appropriations often based on the last-passed fullyear appropriations bill and which prohibit (with few exceptions, known as “anomalies”) new program starts or program ends, fail to enable management of and planning for mission priorities.

This leads to an inability for the government to accept long-term challenges; instead officials create a patchwork of solutions to carry programs to the next available tranche of funding. Respondents also noted that they seek to add more structure, recruiting, and training to accomplish current missions but cannot achieve budget consistency and predictability. Worse, expenses— whether from inflation or typical program growth—often outpace programs. Agencies have operating plans for ongoing operations but scramble to find funding for increasing costs:

We are getting killed by inflation in IT costs and labor. We are very happy with the cloud and services, but over the last three years, the cost of cloud infrastructure and licenses has gone up 9 percent per year. Other companies have also increased their charges for services and labor. That is an increase of 27 percent over the last three years… with a flat budget which severely limits new work and modernization.

Even when full-year appropriations are enacted, respondents expressed frustration that the late arrival of funding constrains what their agencies can do with that funding. One respondent said the FY22 Consolidated Appropriations Act did not pass until mid-March 2022, when the window for major investments was almost closed. Another respondent noted in June 2022:

The appropriations process is slow. The FY22 appropriation was not provided until mid-March 2022. And even then, a FY22 Spend Plan was not sent to the Congress until yesterday [note: June]. The Department still doesn’t have full spend authority over its FY22 money until the Spend Plan is formally approved by the Congress.

Respondents broadly agreed with the statement: “I wish budget and planning could be done better by law makers and agency comptrollers to drive some stability and predictability into programs acquisition planning.” This includes the fact that once an appropriations bill is passed, it can take the Office of Management and Budget several weeks to “apportion” (i.e., distribute) funds to agencies. Numerous respondents said that agencies prioritize responsiveness to bureaucratic processes to use apportioned funds most effectively.

Budget Challenges: Decision Points for Federal Leadership

Rising economic pressures may squeeze funds that arrive too late in a fiscal year to allow agencies to plan and implement mission priorities in a deliberate manner. Agency respondents stated plainly the need for normalization of appropriations. Respondents say that both industry and the government have roles in pushing for a return to normal appropriations process:

Industry must be more active in advocating, forcefully, for a return to a normal budgeting process. It will benefit all constituencies.

We need a budget process to achieve a more agile procurement process.

There must be a reset to normal budget cycle.

We should never have shutdowns. Budgets should be passed timely as soon as possible. Vote for consistency to stabilize government, and it will trickle down to better industry receipt in contracts.