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End-of-Year Funding Explained, Part Three: How the Federal Budget Cycle Hurts Innovation

End-of-Year Funding Explained, Part Three: How the Federal Budget Cycle Hurts Innovation

In the last two weeks, we have discovered why the government hoards a large portion of its budget until the last week of the fiscal year and strategized on how to win a portion for your company. This week, we are going to discuss how this practice affects small businesses. To put it plainly, year-end spending hurts small businesses generally and non-traditional vendors particularly. Here is why:

They don’t have the staff to handle a year-end work influx: Small businesses don’t have extra staff. In fact, it is often the case that the CEO is the proposal/capture team, the project lead on current work, the COO, the CFO, and the CMO.

Small businesses owners determine staff size based on the volume of work they have during the first 11 months of the year. But when year-end funding becomes available, they don’t have the staff capacity to prepare white papers, market them to the relevant contracting and program officers, or manage proposals and contracting if an RFP is set.

Extra complexity in contracting: End of year funding benefits companies that already have contract vehicles in place. One of the hardest parts of capturing end of year funds is structuring the mechanism to get paid. Large businesses have a variety of indefinite delivery/indefinite quantity contracts (IDIQs) that they can use to get paid under while small businesses have to win the work and find a prime to work with, which adds difficulty to an already complex process.

Non-traditional vendors: Year-end funding provides a unique opportunity to fund move innovative, non-traditional procurements — specifically those tailored to a company whose products was designed for commercial use, but also cleared for government applications. These companies don’t think like traditional contractors in terms of timing. They aren’t preparing white papers in June to submit in July for funding in September. So, when it comes times to compete for year-end funding, they aren’t prepared.

The government has set up dozens of programs to support small businesses, yet they continue a budgeting practice that negates much of what those programs do. More seriously, this practice hurts non-traditional vendors — the very vendors that we want working the the government. They are the innovative force that devises new solutions to old problems. And in our government, we have a lot of old problems that could benefit from new ideas.

geoff_circle Geoff Orazem is co-founder and managing partner of Eastern Foundry.