sequestration briefing 3.21.13
DESCRIPTION
Marketing Intelligence Briefing from 3/21/2013. Talks about sequestration, and includes the impact of the debt ceiling, the continuing resolution, and FY14 budgets.TRANSCRIPT
Market Intelligence Briefing: Sequestration
Impact of the Debt Ceiling, Sequestration, CR, and FY14 Budgets
Presented by: Tim Larkins March 21, 2013 #fy14budget
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© 2013 immixGroup, Inc.
Company Overview
immixGroup helps technology companies do business with the government
Founded in 1997 270+ Employees Metro DC/Northern Virginia HQ Hold 30+ Contract Vehicles $1.2B Annual Sales Audited Financials ISO 9001: 2008 Certified Processes
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FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 (Plan)
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immixGroup Program Revenue Growth
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Marketing Lead Generation
Channel Development
Government Business
Infrastructure
What We Do
Provide a platform of services to technology companies
to grow their public sector business
Market Intelligence
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Agenda Continuing Resolution
– Budget Process – Four Year Recap – Update – Looking Ahead
Debt Ceiling – Budget Deficit – Outlays – National Debt – Budget Control Act
Sequestration – Macro View
Impact on Debt Impact on Spending
– Micro View Furloughs Implementation
Next Steps Conclusion
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Continuing Resolution and FY14 Budget
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Continuing Resolution – Budget Process
Agencies request funding
President submits budget request in February
House passes 12 appropriations bills followed by the Senate to fund agencies for the year, then the President gives final approval
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Continuing Resolution – Five Year Recap 2009
2010
2011
2012
10/1/08
10/1/09
10/1/10
10/1/11
9/30/09
9/30/10
9/30/11
9/30/12
3/6/09
CR OMNIBUS Appropriation
10/31/09 12/18/09
CR CR CR + Defense Appropriation
12/3/10 12/19/10 12/23/10 3/5/11 3/19/11 4/9/11 4/16/11
CR CR CR CR CR CR CR CR
11/18/11 12/16/11
CR + MINIBUS CR MEGABUS
2013
10/1/12 9/30/13 3/27/13
CR CR
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Continuing Resolution – Update
The CR will fund agencies through 9/30/13 roughly at FY12 levels or $1.04 trillion
After sequestration, agencies would have roughly $982 billion in discretionary funds for the year
After the President’s signature, the CR will give more leeway to DOD in dealing with sequestration
The CR also adds appropriations bills for civilian agencies
$546
$501
$518
$464
Defense Non-Defense
FY13 Budgets Levels Under BCA Caps ($B) CR Proposals After Sequestration ($B)
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Continuing Resolution – Looking Ahead
House and Senate have released FY14 budget proposals
– No FY14 appropriations bills have been started in the House
Net discretionary spending for FY14 is expected to total $1.05 trillion
– IT budget will shrink to $72 billion
Another CR is likely to begin FY14, but an OMNIBUS may be a possibility due to the No Budget No Pay Act
– If no budget is passed by April 15, pay will be withheld from Congress until the last day of their term
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Debt Ceiling
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Debt Ceiling – Budget Deficit
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Debt Ceiling – Due to Outlays
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Debt Ceiling – National Debt
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Gross National Debt ($T)
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Debt Ceiling – National Debt
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Debt Ceiling – Budget Control Act April 4, 2011: Treasury Secretary Timothy Geithner announces that the present debt
ceiling will soon be reached
July 31, 2011: After much infighting, President Obama and Congressional leaders of both parties pass the Budget Control Act of 2011 (BCA) raising the debt ceiling with the caveat that if a deficit reduction plan was not agreed upon, draconian cuts to spending would be implemented (which is what we call sequestration)
August 5, 2011: Credit rating agency Standard & Poor's (S&P) downgrade the US from AAA (outstanding) to AA+ (excellent), citing political brinkmanship
December 31, 2012: US again reaches the debt ceiling
January 1, 2013: American Taxpayer Relief Act of 2012 (Fiscal Cliff Deal) passes, raising taxes and delaying sequestration
Feb 4, 2013: No Budget, No Pay Act passes, allowing the Treasury to borrow what it needs
until May 19th March 1, 2013: Congress reaches no agreement on deficit reduction, sequestration
officially takes effect
Early August 2013 – Debt ceiling will again be reached unless Congress and the President can come to an agreement
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Debt Ceiling – Budget Control Act
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Sequestration
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Sequestration - Macro View
The sequestration portion of the Budget Control Act stipulated that Congress must collaborate to produce a bill yielding $1.2 trillion in deficit reduction Sequestration would draw from
all unobligated funds in both defense and non-defense discretionary accounts Sequestration will make
sweeping, across the board cuts to all eligible accounts
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Sequestration – Impact on Debt
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Projected Annual Debt Before and After Sequestration
Projected Debt ($T) Debt After Sequestration ($T)
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Sequestration – Impact on Spending
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2012 2013 2014 2015
2016 2017
2018 2019
2020 2021
Projected Federal Expenditures
Discretionary ($T) Mandatory ($T) Total After Sequestration ($T) Total Before Sequestration ($T)
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Sequestration – Impact on Spending
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2012 - 2021
Total Federal Expenditures vs. Sequestration
Total Federal Expenditures ($T) Sequestration ($T)
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Sequestration – Micro View
In FY13, sequestration will cut $85.4 billion from the budget (an equal $42.7 billion from both Defense and Non-Defense)
Because Non-Defense budgets
fund more mandatory programs, the cuts are unbalanced
Cuts will come at the “Program-Project-Activity” (PPA) level
Defense cuts equal 7.8%; executed over 7 months will feel like a 13% cut
Non-Defense cuts equal 5%; executed over 7 months will feel like a 9% cut
Defense Discretionary,
$42.7 Non-Defense Discretionary,
$26.4
Medicare, $11.1
Other Mandatory, $5.2
FY13 Cuts from Sequestration in $B
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Sequestration - Furloughs Hiring freezes will be nearly
standard government wide
Agencies may fill one position for every two openings
Significant portions of the federal workforce will be furloughed one day a week
Nearly 800,000 Civilian employees in DOD will face 22 furlough days over the remainder of the year
CR give DOD, DOC, USDA, DOJ, and DHS flexibility to reduce furloughs, and DOD will delay furlough notices 2 weeks
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Sequestration - Furloughs Agency Employees Furloughed DOD 780,000 DHS 60,000 DOT 47,000 USDA 34,000 HUD 9,000 DOL 4,700 DOC 2,600 DOJ 2,300 GAO 1,000
Total 940,600
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Sequestration - Implementation
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Sequestration - Implementation DOD Budget Account Total Budget ($M) Budget After Sequestration ($M) Total Cut ($M)
Army, O&M 59,420 54,785 4,635 Air Force, O&M 44,443 40,796 3,467 Navy, O&M 44,289 40,834 3,455 DOD Wide, O&M 39,205 36,147 3,058 Defense Health Program 36,002 33,194 2,808 Air Force, RDT&E 28,422 26,205 2,217 Air Force, Aircraft Procurement 22,803 21,024 1,779 Navy, Shipbuilding & Conversion 22,469 20,716 1,753 Navy, Aircraft Procurement 20,785 19,164 1,621 Air Force, Other Procurement 20,713 19,097 1,616 DOD Wide, RDT&E 20,356 18,754 1,602 Navy, RDT&E 18,862 17,391 1,471 Army, Other Procurement 13,066 12,047 1,019 Marine Corps, O&M 9,643 8,891 752 Army RDT&E 9,607 8,858 749
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Sequestration - Implementation
Likely cuts in the Army: – Apache – Javelin Missile – Chinook – Grey Eagle
Likely cuts in the Air Force:
– Joint Strike Fighter
Likely cuts in the Navy: – Ship Building
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Sequestration - Implementation Agency Total Budget ($M) Budget After Sequestration ($M) Total Cut ($M)
HHS 658,682 642,807 15,875
DHS 62,639 59,450 3,189
DOL 61,928 58,778 3,150
HUD 60,254 57,241 3,013
EDU 49,487 47,085 2,393
USDA 38,614 36,671 1,943
DOTrans 38,427 36,493 1,934
DOE 28,030 26,133 1,897
DOJ 30,565 28,894 1,671
DOS 31,748 30,170 1,578
DOTreas 23,470 22,286 1,184
NASA 17,896 17,000 896
DOI 17,539 16,656 883
DOC 11,310 10,737 573
EPA 9,418 8,496 472
SSA 5,727 5,441 286
GSA 267 253 14
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Sequestration - Implementation
Likely cuts in civilian agencies: – DHS
CIO Office - $16 million Infrastructure Protection & Information Security
Component of NPPD - $90 million
– Treasury IRS business systems - $17 million FINCEN - $6 million TIGTA - $8 million
– DOE Half of cuts will come from NNSA
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Sequestration - Implementation
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Next Steps
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Next Steps – Contracts
Terms will be modified
Awards will be delayed
Major contracts will see de-scope
Option years and re-competes may not be awarded
Very few new contracts will be introduced
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Next Steps – Listen to the Customer
Cuts focus on excessive & duplicative service contracts
Mission objectives still need to be met
Accelerating existing cost-saving measures
Potential increase in COTS spending
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Next Steps – Listen to the Customer
DOD – Tactical communication – Interoperability – Consolidation
Civilian – Mission critical
applications and systems
– Consolidation
Continued demand for cybersecurity, big data, and infrastructure from both sides
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Sequestration – Shield Yourself
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Sequestration – Shield Yourself Stay close to your customer and get answers to your
questions: – What account is going to fund this deal? – What percent of the available activity will be sequestered? – Who is working the deal with the controller’s office?
Only perfect paperwork is going to be awarded; ensure that:
– Market survey is complete – Brand specific justification is complete – Requirements are clearly defined and locked down
If you don’t have answers to these questions, your deal is at risk
Focus on deals that are priorities for the customer, that are most likely to be funded, and that have perfect paperwork
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Conclusions A new CR has been passed, funding the government for the remainder of the fiscal year,
and will offer flexibility to some agencies on how to implement sequestration
Default is unlikely but debt ceiling agreement will likely come with deficit reduction package that may include additional cuts to discretionary spending – but mandatory spending will most likely be unaltered
FY14 may see an OMNIBUS, but could begin with another CR
The budget deficit will drop below $1 trillion for the first time in four years, but national debt will rise to over $17 trillion
The Budget Control Act and Sequestration were passed to limit spending, cut debt, and reduce the deficit over the next 9 years
Sequestration will do little to reduce debt or rein in spending over the long term, but will have near term implications
Defense programs will be cut by 13% and Non-Defense programs will be cut by 9% for the remainder of FY13
Stay close to your customer, listen to their needs – they have money and will spend it
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© 2013 immixGroup, Inc.
Resources for You
Government IT Dashboard - www.itdashboard.gov immixGroup blog - www.blog.immixgroup.com
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Contributors: Tomas O’Keefe Market Intelligence Senior Analyst [email protected] Lloyd McCoy Market Intelligence Senior Analyst [email protected]
Market Intelligence Briefing: Sequestration
Impact of the Debt Ceiling, Sequestration, CR, and FY14 Budgets
Chris Wiedemann Market Intelligence Analyst [email protected] Mohamad Elbarasse Market Intelligence Analyst [email protected]
Presented by: Tim Larkins March 21, 2013
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