Three Lessons for Government Contractors from the 2019 Trump Budget

On Monday, the Trump Administration released its budget plan for the 2019 Government fiscal year. In its introduction, the President writes, “the Budget reflects our commitment to the safety, prosperity, and security of the American people.” (Efficient, Effective, Accountable: An American Budget, Office of Management and Budget, US Government Publishing Office, 2018; 2)

As any Washington insider will tell you, the President’s budget is usually no more than a pipe dream. Congress controls the actual spending of the Government. However, we can discern the priorities and plans of the administration through what it releases in its budgetary approach. So, what can we learn about the priorities of the current administration? What is the impact of those priorities on the Government contracting community?

A Slight Investment in IT Modernization

The budget requests $45.6 billion in civilian federal IT spending. This is a 2% increase over the amount allocated in 2017. Included in this number is $210 million for the Technology Modernization Fund (TMF), authorized by the Modernizing Government Technology Act last year. According to the budget document, “Modern information technology will function as the backbone of how Government serves the public in ways that meet their expectations and keep sensitive data and systems secure.” (8) The Departments of Justice, Homeland Security, and the Census Bureau all see increases in their IT budgets.

For Government contractors, this means there should be ample opportunities to bring new solutions and offerings to agencies across the Government. The passing of a 2-year Federal budget allows the funding of new programs. In addition, the TMF is specifically set up to provide funding for alternative, modern solutions like cloud and shared services. Providers who can focus on these offerings, and new ways of thinking, will find themselves well-positioned for new work.

The Focus on Defense and Border Security

Anyone who has followed the Trump Administration should not be surprised by the requests for the Departments of Defense (DOD) and Homeland Security (DHS). DOD sees a 13% increase in requested funding, or $80 billion, while DHS sees an 8% ($3.4 billion) increase. This request demonstrates the continued focus on “Peace through Strength” and securing America’s borders.

For hardware contractors, the Trump budget represents a massive opportunity for growth. The budget specifically calls out the need for investments in new hardware for all branches of the military, including the procurement of 10 ships and 258 Air Force F-35 fighters during FY 2019. The budget request specifically allocates $1.6 billion for the construction of the much-talked-about border wall, including high-tech solutions. However, the increased funding for DHS includes a $1 billion request for increased cybersecurity efforts across Federal agencies and increased coordination with State, local, and tribal governments. The increased funding for cybersecurity priorities provides another way for IT-focused contractors to gain new work. This could be critical to the survival of mid-sized firms who, continually, face pressures on their very survival.

Decreased Emphasis on International Relations, but Options Remain

As easy as it was to foresee increased funding for DOD and DHS, it was perhaps even easier to predict the hit on American diplomacy. The 26% reduction in the budget for the Department of State (DoS) and US Agency for International Development (USAID) is, rightly, concerning for firms well-connected with those agencies.

Despite the bleak prognosis of this proposed budget, it is important to note two key things. First, it is highly unlikely there is any chance of such draconian cuts to either DoS as a whole or to USAID in particular. There are too many Congressional allies of international aid and diplomacy who will protect those budgets. Secondly, even in the face of such changed priorities, there will continue to be opportunities at both agencies. Both DoS and USAID need continued IT modernization to better meet their modern missions and their reduced overall budget. The budget also continues robust funding of key global health needs. Contractors can find funding and projects if they know where to look.

Conclusion

A Presidential budget is not meant to be the end of the conversation. Instead, it serves as the starting point for negotiations and prioritization of funding. No matter what happens in Congress, it is clear that the Trump Administration continues to change what the Federal Government funds and how the Government Contractor community will react.