The Mulvaney OMB and federal contracting: an EZGovOpps analysis
Procurement planners squinting into the Trump transition’s crystal ball don’t quite know what to think.
On one hand, president-elect Donald Trump campaigned on a “trillion-dollar rebuilding plan” for the nation’s infrastructure and called for boosting defense spending by an estimated $250 billion over the next four years – And of course, the cost of Trump’s campaign promise, the U.S.-Mexico border wall, has been estimated at $25 billion.
On the other hand, Trump in recent days has used Twitter to pressure Boeing into limiting the cost of its work on Air Force One, and slammed Lockheed Martin’s F-35 program for its “tremendous cost and cost overruns.” Then in December Trump named fiscal hawk Rep. Mick Mulvaney (R-S.C.) to lead the Office of Management and Budget (OMB).
Mulvaney, a founding member of the conservative Freedom Caucus, is widely seen as a hero of fiscal conservatives and budget hawks. The senator has made it clear that his priority is shrinking the federal deficit. In 2011 Mulvaney voted “no” on raising the debt ceiling, and praised the 2013 government shutdown for starting a national dialogue about spending cuts.
Even more remarkably for a House Republican, Mulvaney has pushed adamantly for defense spending cuts. He has criticized the Overseas Contingency Budget in particular, calling it a “slush fund to get around budget limits.” When defense hawks and fiscal hawks go to battle, Mulvaney almost always comes down on the side of budget cuts.
If confirmed by the Senate, Mulvaney, who will be responsible for drafting the President’s budget, is likely to push for deep spending cuts. Trump, in comparison, wants expensive programs that he insists will be paid for by cutting “waste, fraud, and abuse.”
Thanks to this back-and-forth, government contractors planning for the future might be asking: Who will win out? What will the federal budget look like in the next four years?
Though the President and Congress ultimately have control over the budget, the OMB director is an influential figure. As director of OMB, Mulvaney would be in charge of working out the details of federal spending: what gets raised, what gets cut, where money comes from and where it goes. As a contractor, these details are paramount: You need to know where to target your bids, what cuts to prepare for… and above all, you need to understand the priorities of your customer, the government.
To help sort through these questions, EZGovOpps analysts looked through Mulvaney’s legislative history to identify key questions and hints as to what the budget will look like. Here’s what we found:
As OMB director, Mulvaney may prioritize contractors over direct federal hires
The contracting universe has been buzzing with news of Trump’s plans for a hiring freeze. The logic is that with 60 percent of the federal workforce eligible to retire within the next five years, the unchanging needs of the government must eventually be met by contractors.
Mulvaney has, in fact, expressed a preference for contractors over federal hires. In 2015 he co-sponsored a bill, the “Freedom from Government Competition Act,” requiring that the government obtain all goods and services from the private sector, unless the federal workforce is deemed to provide better value under a competitive sourcing analysis. In other words, if passed, the bill would make contracting the default choice.
Some might conclude that under Mulvaney’s OMB, contractors will see a boost in earnings. But it might not be that simple. Mulvaney has in fact sponsored a bill advocating a federal hiring cut: Under his plan, the government would hire one federal worker for every three retirees. However, this bill would at the same time institute an equivalent reduction in the contractor workforce. If the budget were left up to Mulvaney, contracting dollars would shrink as much as direct federal hiring.
Of course, the ultimate decision maker will be the president. And if Mulvaney has to compromise, he will likely cut spending for federal hires before he cuts funding for contractors.
Mulvaney and Trump want to audit the government
In February, Rep. Mulvaney co-sponsored a bill requiring agencies to be audited by an independent auditor, or face a 0.5 percent funding cut; the bill was dubbed the “Audit the Pentagon Act.”
Streamlining government spending is one area where Mulvaney and Trump agree. On his campaign website, Trump outlines his vision to “rebuild our depleted military,” paying for it by “conducting a full audit of the Pentagon, eliminating incorrect payments, reducing duplicative bureaucracy, collecting unpaid taxes, and ending unwanted and unauthorized federal programs.
The president-elect’s support for auditing government spending might mean that programs aren’t cut, but rather made less expensive. That might take place through Trump’s deal-making with companies like Boeing, but more likely it will result in a push for more private sector competition. As the Trump administration works to curb the costs that behemoth contractors like Lockheed Martin charge, innovative small businesses might find opportunities to offer more bang for the government’s buck.
Contractors should keep a close eye on re-competes in the next few years – President Trump and OMB director Mulvaney might be inclined to push out cumbersome incumbents in favor of companies that are more efficient or cost-effective. Consider using a market intelligence platform like EZGovOpps to identify contracts where your firm can provide better value, and to be notified in advance of the re-competes within your company’s capabilities.
Under Mulvaney’s OMB, contractors might see fewer regulations
OMB doesn’t just draft the President’s Budget; It also houses the Office of Federal Procurement Policy. That gives Mulvaney a say in the Federal Acquisition Regulations – and he may want less of them.
Mulvaney’s nomination is seen partially as Trump reaching a hand out to the ultra-conservative Freedom Caucus, of which Mulvaney was a leader and founding member. On December 10th the Freedom Caucus submitted a report to the Trump administration recommending more than 200 rules and regulations to revoke in his first 100 days in office. The wish list includes:
- Waiving the Davis Bacon Act, which requires that contractors and subcontractors working on federal construction projects pay workers the local prevailing wages
- Eliminating the paid sick leave requirement for federal contractors
- Revoking the Small Business Administration expansion of the Mentor-Protégé program to cover all small businesses
Though Mulvaney may lean towards reducing regulations, he favors them when they are likely to save the government money. The senator sponsored a bill in 2012 that would have limited subcontracting to 50 percent of contracting dollars for businesses contracted under set-asides like 8(a) and women-owned disadvantaged businesses, as well as mandated more stringent subcontracting reporting requirements.
Contractors might, therefore, expect to see fewer regulations in areas like worker benefits, but more regulations aimed at ensuring they are offering the government the lowest price possible.
Streamlined spending with an emphasis on competition
As OMB director, Mulvaney’s top priority will be reducing the federal deficit. But even the most strong-willed director has to compromise. The struggle between Mulvaney’s fiscal hawkishness and Trump’s grand spending inclinations will most likely result in:
- A government-wide movement to cut out “bureaucratic waste” by cutting duplicative programs and encouraging competition
- Pressure on contractors to offer lower prices and more efficient services
- A shift of government capabilities from in-house federal employees to competitive acquisition processes
As the government’s demand for competition increases, your business should see new opportunities; but you’ll need a competitive edge. Small businesses have the advantage of being more nimble and flexible, and can provide value when large incumbents are pressured to cut costs. However, to take advantage of upcoming opportunities you have to know about them. To find out how EZGovOpps market intelligence can help your company stay ahead of the curve (and the competition), sign up for a free trial today.
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