January 15, 2015

Five Contracting Trends for 2015

Oh, government contracts. You make our fair city go round. Today, we offer five big trends for contractors in 2015, courtesy of Kelley Drye government contracts senior adviser Michael Williams, government contracts partner David Hickey, and government relations and public policy senior adviser Joe Corrigan.

1) Sequestration and funding levels:

Fiscal year 2015 is done. What are they going to do in FY '16? The administration is expected to submit a budget that's about $50B over the sequestration amount, so Congress is going to have to significantly cut it or negotiate another budget deal.

(Michael, Joe and David are in David's office, sitting in front of fragments of the Berlin Wall he picked up while in the Army. The three joined Kelley Drye in the fall from Barnes & Thornburg, before which they spent time at Greenberg Traurig.)

2) Acquisition reform:

We're going to see more movement in reform in the next two years than we've seen in a long time. With new leadership at the Department of Defense and the House and Senate Armed Services Committees, each with their own ideas of acquisition reform, changes could include attempts to consolidate decision-making, regulatory changes, requirements reform and bid protest reform.

3) Second- and third-order effects from budget issues:

For instance, the Army will go from last year's authorized strength of 490,000 to 450,000 active duty to 420,000. That basically means the debate on base realignment or closure is ongoing, though there hasn't been a Base Closure and Realignment Commission (BRAC) authorized by Congress.

(Joe went to West Point and spent 23 years in the Army, including as Legislative Assistant to the Secretary of the Army. He showed us this counterfeit money they found in Saddam Hussein's palace.)

4) Uncertainty in the Middle East:

What we are doing overseas really depends on the head count of the military across the services. Our clients are wondering, are they back to buying body armor? Trying to upgrade helicopters for high altitude? For the defense industry, a big question is, "What's going to happen in the Middle East?"

(David is sixth of seven brothers, photographed here with then-Gov. Reagan. His father worked for Reagan when he was governor, and later in the White House as Director of the White House Military Office. A VMI grad, David is a former Army infantry officer, Hill staffer and General Dynamics in-house counsel.)

5) Personnel shifts: As the force draws down, there are going to be significant resources committed to that shift in personnel. Issues around veterans, head count and health costs will come into play. A lot of people who served in the last decade-plus will be coming into the veteran's system, which has well-publicized problems. The strain on that system will increase. How the government deals with that, and how contractors who support the healthcare and veteran systems deal with that, is going to be significant.

(Michael has 25 years of experience on the Hill. This year, he, Joe and David hope to grow the government contracts group, headed by Holly Roth.)

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