Selling to the Government: The Government Budget Process

In our previous articles, we talked about the steps you need to take to realize if you have the capability to sell to the government. We then talked about figuring out if the government is buying what you are selling. One huge factor that will determine if the government will buy what you are selling is if they are actually buying anything and that leads us to our next topic: the government budgetary process. If you are planning on selling to the government, you should have a clear understanding of this process and what it entails.

Completely unlike a traditional corporate budget process, the government’s budgetary process has a number of key factors that differentiates it. Unlike most U.S. companies, the government does not spend on a fiscal calendar and has a budget year that starts on October 1st, running until September 30th of the following year.

There are five key steps in the federal budget process and these steps determine what will happen in terms of spending in the following year(s). First, the President drafts and then submits a budget request to Congress. The House and Senate then pass the budget resolutions. The House and Senate Appropriations subcommittees markup the appropriations bills. There are 12 appropriations bills represented in our annual federal budget. An appropriations bill is one that sets aside money for specific federal agencies, departments and programs, providing funding for everything that the government needs to run smoothly. The House and Senate then vote on the appropriations bills and the President signs each so the budget becomes law.

In some instances, Congress and the President fail to agree, which causes a stall to the process and a Continuing Resolution (CR) is then passed instead. In this instance, the pre-existing appropriations are then continued with minor modifications, providing the funding at a rate (or lower) based on the previous year. These CRs can be short-term (i.e., 1-2 months in duration) or cover many months of spending. For folks that sell regularly (and a lot) to the government, this type of funding environment is significantly less attractive than an annual budget and unfortunately, it happens more than most would believe. In fact, between 1976 and 2017, there were only four years where Congress passed all twelve regular appropriations bills on time.

To go even further, if Congress and the President can’t agree on a set of CRs, the government will just shut down and this has happened 19 times in the same 39-year period. At this point in 2017 (GFY 2017), we have a CR in place until April 28th, 2017, even though the majority in Congress and the President  are of the same political party. Typically when this occurs there are fewer and longer-duration CRs or there may even be a real budget. As of this writing, however, we are in our 2nd CR of the government fiscal and it is very difficult to read the tea leaves for the rest of the year’s spending.

While all of this may sound like a brief lesson in economics and history, it is important to understand the budget climate when you are selling to the government. You can reasonably assess the expectations for government spending based on what is happening with the Federal budget. If the government isn’t buying, you won’t be selling.

Short-term CRs create budgetary uncertainty for the government agencies around their spending, which can dramatically reduce buying activity. Our current budget environment is uncertain and it may spill over to GFY 2018. . The traditional deadline for a President to submit a budget proposal is February 7th, and the current administration has yet to do so. This could put pressure on end of year spending in September as well as next year.