There is a great deal of uncertainty about the 2018 federal budget and many government contractors are very cautious about what may happen in 2018 and beyond with federal IT spending. One thing we do know for certain is that the debates will be fierce and the topics debated regarding the budgets are very politically polarizing. From Obamacare to tax cuts, to entitlements and the debt ceiling, not to mention the yet unfunded Presidential priorities. The only certainty is that we have no shortage of major items to work through.
What do we know? The first thing we do know is very positive. The Presidential Budget Office (PBO) is very bullish on economic growth and Gross Domestic Product (GDP) growth specifically. As depicted below, the PBO’s forecast for GDP is much more aggressive then the Federal Reserve or the Congressional Budget Office (CBO).
This GDP projected forecast from the PBO makes growth projections of the overall budget very realistic. This is a very positive element and basis for what the budget should be overall and how the Trump administration is viewing our overall economic outlook as a country.
What does this mean for federal IT spending? We have seen forecasts ranging from 1.1% to 3.3% year over year growth in IT spending. Behind those growth numbers, almost all projections are for the Department of Defense (DoD) getting a disproportionate amount of the growing budget year over year. Pockets of Department of Homeland Security (DHS) also look favorable year over year in almost all projections. Below are the PBO numbers for 2018, which show a forecasted growth of slightly over 2.0%.
What scares us? We are hearing that if key elements of the 2018 budget are not put in place or debated through in short order that we may see a new “flavor” of continuing resolution (CR). This would make it much more difficult for agencies to spend money outside of “bare bones” necessity. We have also seen zero ability for consensus legislation and policy to be negotiated under this Administration/Congress and the budget is most certainly the most contentious piece of legislation that must be negotiated.
When will these debates be settled and when will an actual budget be finalized? These two questions and their respective outcomes will be our indicators for how the 2018 IT budget will flush out. There is also a lot less confidence in the IT Modernization Act being passed out of the Senate without major amendments and changes that could drastically impact upside for the industry in 2018.
What do we do? Don’t panic!! We are all unfortunately very used to CR-type of conditions and budgets. We will most likely operate on those terms through December. DoD, VA, and pockets of DHS most likely will have more favorable CR terms than other agencies, so focus your sales efforts there to start the year.
At some point, investment in IT infrastructure will get funding and hopefully during the first part of calendar 2018 we will have an actual budget and spending will be quick and decisive. Over communicate with your customer base, be visible, help them through their budget challenges, and when they are ready to spend be ready to EXECUTE!!
To learn more about federal budgets, click here.