The federal equivalent of Black Friday isn't what it used to be. Conventional wisdom has it that agencies rush to spend their budgets in the final quarter of the fiscal year, but a new analysis of federal contracting data shows that Q4 spending is declining after years of elevated levels, with more agencies obligating a larger share of funds in the first quarter of the fiscal year.
The analyst report by Arlington, Va.-based big data and analytics firm Govini, “Positioning for 2017: Competitive Outlook in Defense and Civilian Agencies,” attributes the shift in part to greater budget certainty. Govini has a data sharing partnership with Government Executive Media Group.
According to the report: “Nearly 40 percent of all cabinet-level agencies had a decrease in Q4 share of FY15 spending compared to FY14, and many are on-track to do so again in FY16. Both Defense and civilian agencies are contributing to the softening of the year-end spending spike.”
The Justice Department had the largest drop in Q4 spending, declining by 8 percentage points from 2014.
With the 2017 fiscal year set to begin Oct. 1 and lawmakers scrambling to cobble together a continuing resolution to keep the government operating through the election, the analysis sheds light on how agencies will likely prioritize spending over the next several months.
“The agencies that rush to spend at the end of the fiscal year are distinct from those that start the year strong,” the report notes. Among Defense agencies, the Army and Navy are the biggest fourth quarter spenders, while the Air Force and other Defense agencies do most of their purchasing in the first quarter. Army Q4 spending centered on information technology, communications equipment and technical services, while Navy Q4 spending centered on aircraft and supporting technical services.
Among civilian agencies, the Health and Human Services and State departments are the big fourth quarter spenders, while the Veterans Affairs, Energy, Treasury and Justice departments lead in Q1 spending. “Pharmaceuticals, medical equipment and health IT are popular Q4 purchases for HHS and VA,” the report said.
“Q1 is when agencies obligate funds for core mission needs, including healthcare for [the Defense Health Agency], aircraft maintenance for Air Force, research labs for DOE, and prisons for DOJ. This contrasts with Q4, when a surge of spending occurs for IT and professional services as agencies scramble to expend their remaining funds,” the report said.
Despite the trend away from end-of-year spending, agencies still obligated an average of 31.1 percent of funds in the final three months of fiscal 2015, analysts noted.
Govini’s data shows that 79,600 contracts or task orders worth $87.4 billion are set to expire during the first quarter of fiscal 2017.