FEDERAL
SECTOR REPORT
February 2002
(c) P2C2 Group,
Inc.
IN THIS ISSUE
Bush Frames the Budget for FY 2003
Federal Discretionary Spending
Who Will Have the New Discretionary Dollars?
Spending for Homeland Security
Growth of Federal IT Spending
Link of the Month
BUSH FRAMES THE BUDGET
FOR FY 2003
With defense and homeland
security as
overarching themes, President George W. Bush proposed the most sweeping
redirection of federal budget priorities in nearly 20 years. Like the
Reagan Administration, the Bush budget makes the Department of Defense
a big winner, and domestic spending is filtered through a conservative
agenda. But times have changed, and the proposed federal outlays
acknowledge information technology (IT) as a driving force. George W.
has replaced old-line rhetoric with the language of corporate
management: performance and results.
The new budget priorities are
not yet
a "done deal," because Congress will have its say. Some will decry
deficit spending and the retreat from
the ideal of a balanced budget, while others will attempt to
resuscitate
programs that the administration would put on the chopping block. But,
have no doubts, the Bush Administration has successfully redefined the
playing field for the battle over budget priorities. The priorities of
defense, security, and IT will prevail.
The greatest risk to
contractors and
grantees in the Federal Sector, however, is the potential for a
stalemate in the budget battles--where the White House and Congress
cannot arrive at a compromise. Agencies can't concentrate on
procurement awards when there is too much uncertainty over federal
money, and that's bad for business.
Overall, the proposed budget
merits
detailed analysis. Examples of highlights are:
- IRS would
gain about half a billion
dollars, with much of the money going to updated computer and phone
systems.
- Health care
for veterans would
receive a $1.5 billion boost at VA.
- NOAA would
gain $93 million to
improve storm forecasting.
- DoD would
expand intelligence
gathering, analysis, and consolidation capabilities.
- An added
$433 million would go
to the National Nuclear Security Administration (Department of Energy).
- The FBI
would gain $412 million for
IT, intelligence gathering,
and background investigations.
For my clients in educational
organizations, I will digress a moment: Education will walk a tightrope
between modest budget increases and ambitious goals for reform. The
proposed $50.3 billion Department of Education budget includes
increases in discretionary spending:
- $1 billion
more for Title I, which
is released to State and Local Education Agencies using a formula based
on the number of disadvantaged students;
- $1 billion
more for special
education;
- A $100
million boost in early
literacy programs;
- Funds for
school-choice
demonstration programs.
FEDERAL
DISCRETIONARY SPENDING
Vast amounts of the federal
budget are
locked in mandatory spending. The $489 billion budget request for HHS,
for example, includes about $429
billion for mandatory programs like Medicare and Medicaid, leaving some
$60 billion for discretionary spending.
The Bush budget would increase
discretionary spending by about 8.4% in FY 2003. Of the $746 billion
total, well over half of the discretionary spending will be committed
to defense and homeland security. There is
virtually no overall growth in other government discretionary spending:
|
Discretionary
Budget Totals, U.S. Budget by Fiscal Year
Dollars
in Billions (Source: OMB, February 2002)
|
|
|
2001
|
2002
|
2003
|
|
Discretionary Budget Authority
|
|
|
|
|
Homeland Security
|
10
|
12
|
25
|
|
Department of Defense
|
303
|
328
|
366
|
|
Other Operations of Government
|
330
|
348
|
355
|
|
TOTAL DISCRETIONARY
|
643
|
688
|
746
|
WHO
WILL HAVE THE NEW DISCRETIONARY DOLLARS?
If the Bush Budget is approved,
these
are the agencies that will have the extra dollars:
|
The
Top Ten Agencies for Discretionary Budgets
FY
2003 - Dollars in Billions (Adapted from OMB, February 2002)
|
|
Agency
|
2001
Actual
|
|
2002
Estimate
|
|
2003
Estimate
|
|
Change:
2002-2003
|
|
Defense-Military
|
305.6
|
|
330.8
|
|
369.3
|
|
38.4
|
|
Health and Human
Services
|
54.5
|
|
59.8
|
|
65.3
|
|
5.5
|
|
Federal Emergency
Management Agency
|
2.4
|
|
3.1
|
|
6.6
|
|
3.5
|
|
Transportation
|
18.0
|
|
16.6
|
|
19.8
|
|
3.2
|
|
Housing and Urban
Development
|
28.4
|
|
29.5
|
|
31.5
|
|
2.0
|
|
Veterans Affairs
|
23.2
|
|
24.7
|
|
26.4
|
|
1.8
|
|
Energy
|
20.2
|
|
21.0
|
|
21.9
|
|
1.0
|
|
Treasury
|
15.1
|
|
15.8
|
|
16.6
|
|
0.8
|
|
Education
|
40.1
|
|
49.8
|
1
|
50.3
|
|
0.5
|
|
State
|
7.8
|
|
8.9
|
|
9.2
|
|
0.4
|
|
1 Includes a $1.3 billion supplemental proposal for Pell
Grants. The baseline was $48.5 billion.
|
SPENDING
FOR HOMELAND SECURITY
The Bush Budget would almost
double the spending for homeland defense--an amalgam of outlays for
public safety (police and fire fighting), border patrols and security,
aviation security, bio-terrorism counter-measures, and other
initiatives. The Departments of Defense, Transportation, and Justice
will receive approximately three-fifths (61%) of the money. HHS will
take the lead on bio-terrorism. As a small agency, the Federal
Emergency Management Agency (FEMA) will see the most dramatic increase
in discretionary spending in FY 2003. A functional table of spending
priorities, condensed from OMB information, is below.
|
Spending
Priorities for Homeland Security
Dollars
in Billions (Source: OMB, February 2002)
|
|
|
2001
|
2002
|
2003
|
|
Total, Homeland Security
|
16.0
|
19.5
|
37.7
|
|
Supporting
first responders
|
0.3
|
0.3
|
3.5
|
|
Defending
against biological terrorism
|
1.4
|
1.4
|
5.9
|
|
Securing
our borders
|
7.6
|
8.8
|
10.6
|
|
Sharing
information and using information technology to secure the homeland
|
0.1
|
0.2
|
0.7
|
|
Aviation
security
|
0.4
|
1.5
|
4.8
|
|
Other
homeland security
|
6.3
|
7.4
|
12.2
|
GROWTH
OF FEDERAL IT SPENDING
President Bush's budget
proposal would
more than double the growth of federal technology spending, providing
major opportunities for government contractors. Total federal spending
for IT in FY 2003 would top $52 billion, compared to $48 billion in FY
2002.
Contractors however should not
expect
"fat city." Federal IT managers are under considerable pressure to
improve results, accountability, cost efficiency, and better service to
the public.
Contractors would do well to
demonstrate how their products and services fit into the President's
agenda for management reform. This is more than a matter of claiming to
save $10 per product or $1 per labor hour. Your solution should make
strategic sense, fit into the big-picture capital investment
plan, and support the enterprise-wide management of IT. Other tips:
- Small IT
companies should
strengthen their strategic alliances with the big contractors who are
likely to benefit the most from budget increases.
- Niche
players need to figure out
how to become bundled into broad solutions for cyber-security,
e-Government, and infrastructure improvements.
An agency-by-agency budget for
Fiscal
Years 2001, 2002, and 2003 follows:
|
Report on Information Technology
(IT) Spending for the Federal Government
|
|
Fiscal Years 2001, 2002,
and 2003 - Dollars in Millions (Source: OMB; February 2002)
|
|
Agency
|
Final Total FY01
|
Final Total FY02
|
Final Total FY03
|
|
Department
of the Army
|
$5,150.9
|
$4,814.1
|
$5,147.9
|
|
Department
of the Air Force
|
$5,835.4
|
$5,640.4
|
$6,345.0
|
|
Corps
of Engineers
|
$238.0
|
$247.0
|
$240.0
|
|
Defense
Agencies
|
$7,661.3
|
$8,353.9
|
$9,226.5
|
|
Department
of Commerce
|
$918.2
|
$947.0
|
$1,051.0
|
|
Department
of Energy
|
$1,088.0
|
$1,159.0
|
$1,142.0
|
|
Department
of Interior
|
$582.0
|
$627.6
|
$671.6
|
|
Department
of Justice
|
$1,872.8
|
$2,093.3
|
$2,050.6
|
|
Department
of Labor
|
$365.0
|
$393.0
|
$497.1
|
|
Department
of State
|
$713.2
|
$896.7
|
$891.0
|
|
Department
of Transportation
|
$2,448.1
|
$2,513.8
|
$2,660.9
|
|
Department
of Education
|
$581.1
|
$574.7
|
$580.3
|
|
Environmental
Protection Agency
|
$338.9
|
$360.9
|
$374.9
|
|
Department
of Health and Human Services
|
$3,920.6
|
$4,237.0
|
$4,481.4
|
|
Department
of Housing and Urban
Development
|
$328.7
|
$376.1
|
$354.1
|
|
Federal
Communications Commission
|
$51.7
|
$48.1
|
$56.9
|
|
Federal
Emergency Management Agency
|
$140.1
|
$165.5
|
$175.6
|
|
General
Services Administration
|
$387.0
|
$455.0
|
$460.0
|
|
National
Archives and Record
Administration
|
$42.6
|
$57.4
|
$62.2
|
|
National
Aeronautics and Space
Administration
|
$2,327.0
|
$2,558.0
|
$2,511.0
|
|
Department
of the Navy
|
$4,110.0
|
$4,588.0
|
$5,311.7
|
|
National
Gallery of Art
|
$2.4
|
$2.8
|
$4.0
|
|
National
Labor Relations Board
|
$11.0
|
$13.5
|
$14.8
|
|
Nuclear
Regulatory Commission
|
$59.5
|
$64.0
|
$68.5
|
|
National
Science Foundation
|
$29.3
|
$29.9
|
$40.7
|
|
Office
of Personnel Management
|
$82.0
|
$92.0
|
$120.0
|
|
Patent
and Trademark Office
|
$240.3
|
$231.2
|
$318.1
|
|
Social
Security Administration
|
$691.0
|
$742.0
|
$737.0
|
|
Small
Business
Administration
|
$46.0
|
$39.0
|
$56.0
|
|
Smithsonian
Institution
|
$39.7
|
$48.2
|
$66.0
|
|
Department
of Treasury
|
$2,876.0
|
$3,098.2
|
$3,241.2
|
|
US
Agency for International
Development
|
$89.6
|
$76.1
|
$83.0
|
|
US
Department of Agriculture
|
$1,318.5
|
$1,491.5
|
$1,692.0
|
|
Department
of Veterans
Affairs
|
$1,155.5
|
$1,181.2
|
$1,357.3
|
|
Total
IT Investments for the Federal
Government
|
$45,741.6
|
$48,216.1
|
$52,090.3
|
LINK
OF THE MONTH
We will propose our own web
site as
link of the month. A detailed spreadsheet of the federal IT budget is
at our web site. Go to http://www.fedprojects.com/s-news.html.
The spreadsheet is OMB's roll-up of Agency Form 53s, which identify
specific projects to be funded by the proposed budget.
Back issues of this newsletter
are at http://www.fedprojects.com.
Many of our subscribers have discovered us through search engines that
point to
one or more of the newsletters we have posted to the P2C2 Group's
Proposals & Projects Web Site. The first issue was published in the
summer of 1996, and we offer many, many tips, thought-starters, and
how-to articles.
