To put it into perspective, this is only slightly less than the estimated $765 billion spent on the Iraq war in FY2008.
Reston, VA (Vocus) October 16, 2008
The federal government's $700 billion financial bailout plan has the potential to significantly alter the landscape for government contractors. According to a report released today by INPUT, the authority on government business, the priorities of the next administration will have to adapt, and significant reductions may be needed in other areas to pay for the bailout. However, new opportunities may be created through the new bureaucracy needed to manage and oversee the government's actions.
The Troubled Asset Relief Program (TARP) authorizes the Treasury Department to purchase up to $700 billion in troubled financial assets in an attempt to shore up the nation's credit market. TARP's price tag represents a monumental level of spending within a short time frame. "This is not your typical government expenditure," stated Deniece Peterson, principal analyst at INPUT. "To put it into perspective, this is only slightly less than the estimated $765 billion spent on the Iraq war in FY2008." Although the expenditure would eventually be offset by the sale of these assets, the impact on the federal budget is certain, and there will be both positive and negative implications for the federal contracting community.
With existing budget constrictions exacerbated by increased spending on the bailout package, agency decision-makers may be forced to limit new spending and cut programs. In fact, both Presidential candidates promise to enforce both by performing line-by-line budget reviews (Senator Obama) and freezing discretionary spending to perform top-to-bottom reviews (Senator McCain). This puts a hamper on agency spending, but may free up funding for the policy areas that both candidates are committed to addressing - healthcare, energy independence, and tax reform.
"The economy is clearly the top priority for either administration, but neither wants to put their other high priority agenda items on the back burner," said Peterson. "Their solution is to clamp down on agency spending on underperforming or costly programs to find the money they need to make good on their campaign promises."
Despite the dire budgetary picture, there could be opportunities for some government contractors. TARP authorizes the establishment of new Office of Financial Stability and an Office of the Special Inspector General for the Troubled Asset Relief Program. The resources required to handle the volume of work involved in implementing TARP could represent an opportunity for some contractors. The Treasury Department is just ramping up, so contractors should continue to monitor Treasury procurement offices to determine the types of support that the new offices will need.
These findings and others were released in an INPUT Industry Insight Report, "Financial Crisis: Insights and Implications for Federal Contractors." More details are available at http://www.input.com/corp/library/detail.cfm?ItemID=7647&cmp=OTC-mrfinancialcrisis1008.
INPUT's FedFocus 2009 will be held Tuesday, October 21, from 7:00am-4:00pm EST. INPUT executives will present new information in light of recent events, including how the economic bailout will affect Federal spending and perspectives on how programs and budgets will fare under an Obama and McCain administration.. For more information or to register, please go to: http://www.input.com/corp/events_conference/FedFocus09_MainPage.cfm?cmp=OTC-mrfedfocus2009.
EDITOR'S NOTE: To speak with the report author regarding this release, please contact Helena Brito at hbrito @ input.comor 703-707-4161.
INPUT is the authority on government business. Established in 1974, INPUT helps companies develop federal, state, and local government business and helps public sector organizations achieve their objectives. Over 1,500 member organizations, including small specialized companies, new entrants to the public sector, and the largest government contractors and agencies, rely on INPUT for the latest and most comprehensive procurement and market information, consulting, powerful sales management tools, and educational & networking events. For more information about INPUT, visit http://www.input.com or call 703-707-3500.
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Media Contact: Helena Brito
hbrito @ input.com