Tuesday, May 12, 2009

Trimming the Fat – Proposed 2010 Budget Cuts

By now, everyone has thrown in their two cents on President Obama’s proposed budget for the 2010 fiscal year. Most brought up the point that while he plans to cut out $17 billion next year, the $3.2 trillion he spends this year will still hurt the country overall. Many of the articles available don’t dig deep enough to see what exactly President Obama removed from the budget for next year.

Upon opening the Termination, Reductions, and Savings report that the White House recently published online, I went straight to the government contracting section. I was interested to see how President Obama planned to reduce the contracting costs for the government for next year while increasing the opportunities for small businesses this year. The method that was chosen is decreasing the Department of Defense (DoD) budget by $0.9 billion.

While $0.9 billion may not sound like a lot considering the $787 billion Recovery Act recently passed, it will be next year. Unlike this year, the US won’t need another bill to help stimulate the economy. The money allocated from the Recovery act will still exist until August 2010, when the White House predicts that roughly 75% of the money will have been contracted out.

One of the reasons that the Obama administration selected budget cuts for the DoD and not another federal agency is that they are the largest part of the government that hires contractors. According to the Government Accountability Office (GAO), the DoD’s contract obligation spending increased 83% between the years 1998 and 2007. One government solution involves hiring 33,500 Federal civilian employees by 2015 to help complete jobs that the DoD outsourced. It is projected to save the US about 40% on contracting dollars per year.

Not all small business owners offer products that the DoD requires, so many won’t be affected by their decrease in contracts. However, if the efforts to redo the DoD contracting arena are successful, many agencies might follow suit and hire Federal civilians rather than outside contractors. An advantage of gaining work now means that once August 2010 has gone and Uncle Sam’s agencies start to reform their policies, those contractors who already have their foot in the door will be favored over others who joined the cause too late.

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