The President’s budget, it giveth and taketh away!

Posted by:Whitridge in Financial Services - IT
08 May 2014 0

The President’s budget for the government’s fiscal year 2015 is now out and there are many things you’ll like about it if you’re in the Federal space and there are some things that will cause you to pause.
Much of the relief being felt by government contractors is the lack of “Sequestration” hanging over everyone’s planning and decision making. Hopefully this will cause RFP’s to be moved along quicker and awards occurring without a torrent of appeals and protests. This has been the modus operendi for the past 18 months to 2 years and we can only hope that this budget will reduce the bickering and there will be enough opportunity for everyone (doubtful).
The total Federal budget has a 3% increase compared to FY 2014 which suffered cuts of 6.4 Billion dollars. The increase in dollars is $34 billion from FY 2014. $55 Billion of the budget which results in the increase is an investment in the “ Opportunity, Growth, and Security Initiative” which is primarily focused on job creation, more effective government (what?), while sharing the investment between defense and non-defense funding. An example is providing 9500 new National Institute of Health grants to assist in identifying fundamental causes and mechanisms of disease.
Some of the major departments that came out smelling like a rose are possibly surprising whereas others that suffered the axe may also turn some heads. Let’s start with the victors and show you their spoils:
Veteran Affairs  $1.9 Billion
Education  $1.3 Billion
Energy   $700 Million
Commerce  $500 Million
NNSA    $500Million (National Nuclear Safety Administration)

The VA may be a surprise but one shouldn’t forget it is the largest healthcare system in the world.  The spend is focused on improving claims processing and increased use of telemedicine. The VA is attempting to narrow the disparity in treatment between certain geographies by implementing an increase use of telemedicine technology. Virtual visits and Skype like consultations have proven to be very effective and presents an opportunity to narrow the treatment gap while lowering costs. The IT spend at VA is a 24% increase over FY 2012.
We’ve looked at the champs now a brief glance at the chumps:
USACE     $1 billion (U.S. Corp of Engineers)
Homeland Security   $1.1Billion
General Services Administration  $1.6Billion
Health and Human Services  $6.1Billion
Justice Department   $10.5Billion

These numbers look painful but much of the spending reduction is purely a result of funding reclassification to “mandatory spending” which results in an across the board flat reduction.
HHS is more a function of the winding down of the implementation of health reform legislation so it’s not a real cut” per Deltek’s VP. Kevin Plexico.

The increased investment in Energy and the National Nuclear Safety Administration will be spent on increased R&D to develop cleaner alternative energy sources and improving safety protocols for nuclear power.
In addition to the departments specific IT budgets will get an additional boost of funding some of the more impactful ones are:
Treasury  $468M  IRS for ACA implementation
Air Force  $253M   Integrated personnel pay system
Corp of Engineers $180M  Infrastructure repairs and improvement

So those are the departments that are getting the funding and should pose the greatest opportunity for federal contractors and integrators to have the most impact and we in consulting solutions will follow their lead.
Needless to say this should be a brighter and more comfortable year for the federal vertical and one that will present opportunity to those that are willing to do the work and deliver the goods.

Note: Thanks to Mark Hoover of Washington Technology for the data used here.