FY 21 Budget and Expectations in Federal Spending

Earlier this month we participated in the TBK Bank GovCon Summit and spoke on the Federal Spending Outlook.  As 2020 and the 2nd quarter of the government year come to a close, here are our expectations for federal contracting.

The federal budget is comprised of three elements:

  • Mandatory Spending - which includes programs such as Medicare, Social Security & Unemployment
  • Discretionary Spending - which is appropriated based on the President's budget
  • Interest on National Debt

While the FY 20 Budget was projected to be $4.829 trillion with a deficit of $966B, with the pandemic the actual FY 20 spend was more than $6.5 trillion with a deficit in excess of $3 trillion.  

The FY 21 budget was released in February 2020, pre-pandemic, and placed emphasis on R&D, AI and quantum information science and looked at investments in education and job training.  Most agencies saw a decrease in their spend over the previous years, however highlights included:

  • Funding for HBCUs
  • NIST funding to advance innovation
  • Elimination of unnecessary grants to FEMA
  • Transfer of the Secret Service to the Dept. of Treasury
  • Emphasis on Border security
  • Elimination of the Economic Development Administration
  • Return American Astronauts to the moon

In terms of the DoD spend, the budget request was for $705B with the focus on implementing the National Defense Strategy.  This request included $49.5B for Information Technology/Cyberspace Activities Budget which was an overall increase of less than 2% over FY 20.

With the pandemic and the new administration we do expect changes in the budget.  The Biden administration forecasted elements include:

  • Biotech to see an increase in spending
  • Clean Energy spend will increase
  • Innovation R&D - $300B in new investment over 4 years
  • Defense spend to remain steady
  • Education spending to increase
  • Infrastructure outlays to increase
  • Housing assistance will increase 
  • Taxes will change

New funding related to the pandemic will be a top priority to return the country to normalcy.

Within the federal contracting realm we also expect to see increased efforts to promote the small businesses.  Expect to see changes, including:

  • Increase in the use of the 8(a) program
  • Expansion of the WOSB program
  • Increased opportunities for Native-Owned businesses
  • Emphasis on subcontracting, specifically for disadvantaged businesses
  • Support Veteran entrepreneurship
  • Buy American commitment
  • Priority funding for grants and contracts, including subcontracts for HBCU

In addition to the above changes that we expect to see in federal contracting, we also expect to see:

  • Increased use of strategic sourcing and the use of of government wide acquisition vehicles to increase
  • OTA (other transaction authority) contracts, SBIR contracts and grants to be used increasingly
  • Subcontracting and teaming and joint ventures to increase

What should small businesses do to prepare for these changes? In our opinion, federal business intelligence is key to understanding the trends that enable small businesses to prepare and plan for the future. This includes creating the right relationships within the agencies and with other companies to ensure they are able to compete in the federal contracting industry, which has unfortunately seen a decline in the number of small businesses winning awards over the years!

To see our complete presentation click here.

As always, if you have any questions or have any topics for us to blog, do reach out to me.

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Archisha Mehan

Written by Archisha Mehan