With the U.S. government’s fiscal year ending in September, there is an annual spike in contracts and spending. This increased funding interval represents a unique opportunity for organizations looking for new contracts.
“Prime Day”
Amazon thinks it’s got Prime Day on lock, but those who work on government contracts know that they don’t hold a candle to the kind of “Prime Day” that happens every year on September 30th. Obviously, this is a bit tongue-in-cheek, but there is no doubt that August and September demonstrate the biggest spike in government spending by a significant margin. Large portions of this funding are executed on the final day of the government’s fiscal contract year—September 30th.
A few weeks ago, I posted on LinkedIn that we are in the midst of the peak number of RFQs released for the GFY22 buying season, with just under 1,000 new SEWP V opportunities posted that week alone:
I wanted to follow this up with a longer blog post that goes into more detail about why this is happening and how companies can take advantage of it. This glut in funding availability represents a unique opportunity for companies working with government contracts to broker new contracts or increase contract budgets. We’ll get into that more later, though. First, let’s set the table.
What is a “Prime”?
In reality, no one actually refers to September 30th as Prime Day, but the terminology is still relevant. In government contracts, a “prime contractor” works directly with the government and manages subcontractors. They are responsible for overseeing the subcontractor’s work as defined in the contract. Prime contractors hold key positions in their relationship with the government and are the ones held accountable for the delivery of goods and/or services, regardless if they provide them alone or use subcontractors.
There are a lot of hoops to jump through to become a prime contractor, which makes it prohibitive for many companies, especially small-and-mid-sized businesses. The working relationship between a prime company and subcontractors is symbiotic. The prime contractor gets to have control and leverage over the contracts. The subcontractors don’t have to go through the rigorous process of becoming a prime contractor while still having access to government contracts.
The best kept secret in Washington
So, that covers prime contractors. Next, let’s take a look at why there’s such a significant spike in government contracts starting in August and really heating up in September. Something a lot of people probably don’t know is that the U.S. government has a fiscal year that runs from October 1st of one calendar year through September 30th of the next.
Like the government, many large business entities run their fiscal year off the standard calendar year January 1st to December 31st because they can plan out budgets in a way that allows them to choose the start and end dates that better align with their revenue and expenses. This means a fiscal year can help present a more accurate picture of a company's financial performance. So, the federal government's fiscal year runs from October 1 of one calendar year through September 30 of the next.
Now, that doesn’t specifically explain why spending suddenly increases so dramatically in the last two months of the government’s fiscal year. For that, we’ll need to take a deeper dive into the parameters around government spending. Any government agency that doesn’t spend all its funds over the course of the fiscal year ends the year with a surplus. From an economics perspective, that should be perceived as a good thing, right? Any company that spends less that it “makes” or is allocated will be seen as efficient, effective, and valuable in the market. However, this is different with the government.
If a government agency doesn't spend its allocated budget funds over the course of the fiscal year, they no longer have access to those funds in the next year. They cannot spend that money past September 30th because it gets reabsorbed back into the national purse. This causes the “use-it-or-lose-it” mentality that drives such an increase in spending in the final two months of the fiscal year. Additionally, agencies are under pressure to spend their full budget because they run the risk of having their budgets cut by Congress the following year. At some level, this is a logical outcome. If an agency was granted a budget of $10, but only spent $8, then it stands to reason that they only needed $8 and will only need $8 moving forward into the next fiscal year.
The loss of their surplus funds, combined with the threat of a decline in future funding, is a recipe for serious fear amongst government agencies. Hence why they hit the panic button in August and September to spend.
While the iron is hot
As I mentioned in my LinkedIn post, there were just under 1,000 new SEWP V opportunities posted that week alone. The peak of opportunity posting happens sometime between the end of August and the middle of September, though there are still thousands of opportunities that get posted all the way to the last few days of the fiscal year that will still be reviewed and awarded before the ‘clock strikes 12’ on September 30th. (This obviously doesn’t include opportunities that are posted with due dates after 9/30 that anticipate using the following year's budgets). At Govly, we’ve worked with our customers to help them land and finalize major contracts right up until 11:59pm on the very last day. There are many companies whose entire yearly revenue goals are hit and exceeded just in September.
To give you a peek behind the curtain into the process of how Govly helps our customers, I’ve invited Kevin Sieve, VP of Sales Operations at ThunderCat Technology, to speak to the “Prime Day” phenomenon from his perspective.
“September is the busiest time of the year for our sales team. The number of opportunities posted each hour of each day is truly astonishing. This influx of opportunities represents a substantial business opportunity for contractors whose internal systems are set up to handle the volume and are capable of ensuring opportunities aren’t missed. A key component of our sales process is Govly. Govly automates our deal identification process while simultaneously making it easier for the sales team to collaborate internally and with partners.
There’s no doubt in my mind that ThunderCat is poised to take advantage of the government buying season now and into the future. Govly is a big part of how we plan to stay ahead of the competition.”
Talk to us. We can help.
If you are a technology company that’s interested in selling to the U.S. Government, or a technology company that’s already selling to the government, the Govly application and leadership team are prepared to help you accelerate your business. Govly surfaces multiple government contract sources on one platform, so you can stay up to date on RFQs you want to bid on, and discover new opportunities all on one intuitive platform. We help businesses that want to sell to the U.S. Government by providing the insights and access to partnerships needed to do so and assist businesses that already sell to the government by centralizing and filtering public and private opportunities into a single location that fosters B2B collaboration across the supply chain.
If you’d like to learn more, shoot me a note at Mike@govly.com.
About the author
Mike Weiland is CEO and Co-founder of Govly. Prior to Govly, Mike held multiple leadership positions within the government contracting space including roles at Sierra Nevada Corporation, Alvarez, and Blazar Technology Solutions (founder).
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