Understanding the September Buying Frenzy
No matter what the federal budgeteers are doing, a lot of money will be spent in the next 90 days. In fact, almost 20% of federal spendng will occur in 1 month – September. That is nearly $100 Billion – all in a single month.
Why does this happen?
The federal budget is allocated and implemented (theoretically) each October 1st. I say theoretically because it is often several months after October 1 when congress actually approves the budget for the current fiscal year. This causes continuing resolutions (CR) as they work through the politics of spending. That being said, the nearly $500 Billion dollar budget eventually is approved. All of that money must be spent within the federal fiscal year which ends on September 30th. Now, 3-4 months of the year the agencies are running on CR so they are generally spending on existing contractual obligations and even then the money slows because they are not sure when money will be allocated. Once the budget is approved, the agencies now know they can spend money again but it is often February or March before the money is allocated and new contracts are funded.
The next several months they are working at a relatively normal pace. In June they start planning for the next fiscal year and by July, they are working through the details of what major expenditures they will have for the next year. In August they are submitting their requests. At the same time, the agency CFO’s are reviewing existing spending and finding areas where they have not spent the allocated money for the current fiscal year.
Memos go out to all department heads and everyone begins to scramble to find money that has not been spent. Money may exist from a current obligation, or for a contract that was suspended, revoked or cancelled. Maybe there was an initiative that was funded but challenged politically and the funds were held in limbo. Whatever the case, the agency MUST find a way to spend that money this year or it will lose those funds. Moreover, those unspent funds will also automatically reduce the budgetary allocations for that agency for the following year- before any budget cuts are imposed.
Result: The agency loses the money twice.
This is compounded because power in Washington is tied to budget. The more budget you have, the more powerful you are.
Result: Nobody wants to lose power so they spend every dime.
This is why September is a frenzy. Everybody is trying to spend every dime. In order to get some of those dollars, you MUST be in front of decision makers before August 15th. Why? Because they start to become un-reachable as the deadline approaches. By September 15th, they are almost completely buried by the events of the day and procurement is working 60-80 hours per week.