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The Perfect Storm: Why This Fiscal Year-End Is Different for Government Contractors

This year’s fiscal year-end (FYE) landscape is hitting federal contracting shops and financial management offices with a complexity unlike any in recent memory. While contracting officers routinely work late trying to obligate funds before the September 30th deadline, 2023 presents a unique “perfect storm” of challenges, policy shifts, and mounting uncertainty.

The Great FYE Squeeze

For many contracting personnel, this FYE has been exceptionally compressed. The full-year Continuing Resolution (CR) wasn’t signed until March 15th, meaning agencies had only about six months to accomplish a full year’s worth of work.

Adding to this time crunch is a dramatic increase in oversight and process. Agency heads are becoming significantly more involved in reviewing acquisitions. We are seeing mandates like the Department of Homeland Security Secretary reviewing everything over $100,000, along with increased political review of contract decisions. Furthermore, contracting officers are dealing with a reduction in the reuse of purchase cards, adding more process steps to already tight deadlines.

Compounding the pressure is a philosophical shift within the government. Historically, the goal was to allocate every dime of entrusted money before midnight. Now, there is internal chatter suggesting that perhaps not spending all the money—or having funds lapse—is viewed as money “saved.” This puts acquisition personnel in a difficult position, balancing the need to serve program offices and obligate funds as instructed against following new, often stricter, rules imposed by leadership.

Uncertainty Plagues Contractors

If you are a prime contractor or a small business, the level of uncertainty is high. Contractors are nervous about whether routine work—such as having an option exercised or an award made—will actually happen, given the strained workforce capacity and lack of time remaining.

The looming threat of a government shutdown adds an acute layer of fear. With a shutdown looking probable as we head into October, securing contract funding now is imperative, as many contractors face the prospect of being unable to function at the beginning of the new fiscal year. Contractors are already struggling with being behind on receiving outstanding payments, and many have recently been asked to make substantial discounts in exchange for guaranteed future payments.

Streamlining Ahead: FAR Thresholds Jump

Despite the current difficulties, there is movement toward streamlining processes that will take effect on October 1st. Required inflation adjustments to the Federal Acquisition Regulation (FAR) thresholds are going into place, offering contracting officials much more flexibility and speed:

Micro-purchase Threshold: Jumps from $10,000 to $15,000 (a 50% increase).
Simplified Acquisition Threshold (SAT): Increases from $250,000 to $350,000.
Simplified Acquisition Procedure Threshold: Rises from $7.5 million to $9 million.

Crucially, the SAT increase to $350,000 means that the small business reserve expands to cover everything under $350,000 (unless awarded via a multiple award contract), potentially funneling a substantial amount of work to small businesses.

The FAR Overhaul: The BIC Contract Mystery

The revolutionary FAR overhaul continues its slow rollout, though a significant policy change surrounding Part 8 (Priority for Use of Government Sources) has created confusion.

Previously, the draft FAR elevated “Best-in-Class” (BIC) contracts as preferred government vehicles. Now, that reference to BIC has been removed and replaced with the concept that the Office of Federal Recruitment Policy (OFP) will designate specific “mandatory contracts.”

This shift carries major implications. Under the old BIC rules, an agency wishing not to use a BIC contract had to get sign-off from the Head of the Agency. Under the new OFP structure, the sign-off requirement for declining a designated contract drops down to the Head of Contract Activity. Many observers speculate this change is a move to promote the use of “One Gov” contracts and leverage government demand signals to secure the best possible pricing. We are now eagerly waiting for OFP to provide clarity on what standards will designate these new mandatory contracts.

Looking Ahead

As we turn the page into the new fiscal year, government acquisition professionals and contractors must monitor several major developments. We are still awaiting updates on Parts 15, 16, and 19 of the FAR. Furthermore, new Cost Accounting Standards (CAS) regulations released by OFP signal a serious focus on commercialization.

Keep an eye on GSA’s new Office of Centralized Acquisition Solutions (OCAS), which is building out its team and plans to deliver acquisition services. The launch and subsequent performance of OCAS in the first quarter of the new fiscal year will be critical to watch.

Federal Contracting, Fiscal Year End, FAR Changes, GSA, Best-in-Class, Government Shutdown, Small Business, Acquisition Policy, OFP, Micro-purchase, Simplified Acquisition, MarketUS