Federal obligations for the month of March in response to the spread of COVID-19 could top $100 billion if current trends hold, an analyst said Monday on a webcast hosted by George Mason University’s Center for Government Contracting.
The figure is not an exact measure and could very much be more, given how the contracting spend is tabulated in the Federal Procurement Data System that tracks those obligations and the standard 90-day lag in reporting unclassified Defense Department activity.
Research-and-development obligations of around $748.5 million by the Health and Human Services Department is taking the lion’s share of non-defense contracting activity, according to an accompanying presentation.
A majority of that is also going toward so-called “Other Transaction” contracts, said Eric Lofgren, a research fellow at the center. Those procurements are designed for speed and quick fielding of capabilities as they fall outside of traditional federal acquisition regulations.
Then there are the orders placed and also being solicited via sources sought notices for protection equipment to give health care workers, prototypes for treatments, ventilators and other machines, and other services such as testing and cleaning.
“These obligations have been growing fast… so if the current continues, potentially in a couple weeks, we’ll be north of $100 billion in obligations for COVID given the growth rates that have been going on,” Lofgren said.
Overall contract obligations by non-defense agencies have totaled $15 billion through March 27, which is on par with that of last year.
That was Ross Wilker writing in Washington Technology, “Coronavirus spending heating up as March comes to a close.” Here’s the presentation.
Wilker focused a bit there on my off-hand comment that contract obligations could rise to $100 billion cumulative in a couple weeks. That was a cursory analysis of contract obligations (non-defense) vs. time. I simply regressed the natural log of cumulative contract obligations against time. If I do that for the time period March 1st through 27th, then the trend predicts to surpass $100 billion on April 14. If I regress back to the first Covid-19 obligation on February 4th, then the modeled growth is slower and $100 billion won’t be reached until May 1st.
(By the way, federal obligations are not a good signal of government response to Covid-19. For example, mobilizing the national guard does not show up as contract obligations.)
Of course, this is all following a trend that’s based on multiple factors and nuances in the data, but there it is. In retrospect, I should not have offered an opinion, federal obligations may never reach $100 billion. Indeed, the fact that much of the growth in contract spending went to R&D through Other Transactions puts downward pressure on the growth of Covid response obligations. Total OT contract dollars for the largest spender, the DoD, were just $4.2 billion in 2018, and even with the large growth 2019 and 2020, they probably do not tally more than $10 billion annually.
OTs are for research and prototyping, not ventilators and medical services. So if the government can surge on OT contracts, which can be executed quickly with a minimum of regulation, it bodes well perhaps for getting new tests, antivirals, vaccines, etc., faster, but perhaps not distributing the medical equipment and services.
That will proceed through Simplified Acquisition FAR Part 13 and Commercial Items FAR Part 12. The problem with the first is a relatively low cap, and while that can be lifted from $150,000 to $750,000 for emergencies, may still prove a limit. Commercial Items requires (1) a commercial item determination; (2) use of Fixed Price and Time & Materials only contracts; and (2) a preference for competitive big processes. More generally, the same issue facing the growth of OT contracts is the same for innovations within the FAR — the cultural norm of risk-aversion identified with a deference to check-the-box processes.
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