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Continuing Resolutions Often a Headache for Contractors

United_States_Capitol_-_west_frontThe recent showdown over Senate approval of defense appropriations highlights the reliance on continuing resolutions to keep government agencies, as well as the companies they do business with afloat.

But it’s often a bumpy ride, experts say.

A continuing resolution is the legal authority approved by Congress if an appropriations bill has failed to pass by the end of the fiscal year (Sept. 30).  But the funding usually only lasts a few months and is set at about 90 percent of the previous year’s funding.

Shiv Krishnan, chairman and CEO of Indus Corp., an IT firm that contracts with the feds, has identified continuing resolutions as a particularly thorny issue.

In an interview with ExecutiveGov, Krishnan said, “Government procurements are inevitably delayed because of increasingly complex requirements and lack of available resources. CRs add another layer of delays into this process.”

And the current appropriations bill is full of such projects for aircraft, ammunition, weapons and missiles for the Pentagon and the military services: more than $20 billion for the Army, $34 billion for the Navy and Marine Corps, and $39 billion for the Air Force.

Because “national security is paramount,” Krishnan said, these budget items will usually be funded at full capacity, even under the limited spending of continuing resolutions.

But for anything not deemed “a top priority,” he said, “the government may put the squeeze on.”

The lack of an official budget and the disjointed funding process can “put a lot of restrictions on and damper the industry,” Krishnan said.

After passing an official bill, it could take months for the money to trickle down to the specific projects, even if Congress ultimately votes for an increase in funding.

This is particularly bad news for publicly traded companies, which are answerable to their shareholders and expected to make progress every quarter.

Aside from continuing resolutions, the Lexington Institute’s Loren Thompson, also sees “bureaucratic dawdling” from the Pentagon side, as it attempts to streamline the acquisition process.

The main issue Thompson sees is the decision-making process the Pentagon uses to review its programs. This review process eats up costly time and acts as a major stumbling block, he said. Often because of the delays, Congress will cut additional funding.

“It’s good to know that policymakers are taking the time to make sure programs have met key objectives before moving on to the next step in development,” Thompson writes, “but at some point the deliberations themselves start to become a source of inefficiency.”

So when can we count on an official appropriations bill?

Krishnan predicts Congress may be able to approve an official bill after the November elections, when legislators have finally stopped politicking.

But he notes that following the 2008 presidential election, Congress didn’t finalize a bill until well after President Barack Obama was inaugurated.

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