In the final week and last day of fiscal 2014, the federal government’s “Use-It-or-Lose-It” budget rules kick in especially hard. Agencies hurry to obligate their allocated funds before the funding expires on Sept. 30. The final quarter of the fiscal year already is known to be the busiest quarter of the year for contracting, and August and September generally are the busiest months, according to research by Deltek and others.

Complementing those trends, the latest research published in the National Bureau of Economic Research shows there is likely to be a last-minute surge in acquisition spending in the last seven days of the fiscal year from Sept. 23 to Sept. 30.

The national bureau study, authored by Jeffrey Liebman and Neale Mahoney, found that federal agencies generally spend nearly five times more on procurements in the last week of the fiscal year than in an average week during the rest of the year.  Liebman and Mahoney examined 14.6 million federal procurement contracts between 2004 and 2009. They found that 8.7% of the agencies’ procurement spending, on average, occured in the last week of the budget year, nearly five times the weekly average of 1.9%.

Similar trends also are in effect for small business federal contract awards, according to exclusive research by Set-Aside Alert. We examined small business award notices published on the Federal Business Opportunities website as a broad indicator of small business procurements.

The number of small business award notices published in the final week of the fiscal year was 9% to 11% of all such award notices for the year, in the last five fiscal years, according to data obtained in September 2014 from the FBO.gov website.

Each year, the final week averaged about five times more small business awards than in the typical week, Set-Aside Alert found.  For example, in the final week of fiscal 2013, there were 1,609 small business award notices on FBO.gov. That was 10.2% of all such award notices for that year. And it was 5.3 times higher than the number of such notices in the average week.

The largest small business award surge in the five years was in the final week of fiscal 2012, with 1,768 such notices in the final week. That was 10.9% of the year’s total and 5.7 times greater than in the typical week.

The second-highest surge during the period was in fiscal 2009.  Set-Aside Alert also examined small business award notices for the final day of the fiscal year, from fiscal 2009 to fiscal 2013. For example, on Sept. 30, 2013, there were 415 small business award notices published on FBO.gov. That was 6.8 times more than the daily average of 61 such awards.

The largest last-day small business awards total was on Sept. 30, 2012, in which there were 518 such award notices. that was 8 times more than the daily averate.  The second highest total of such awards was on Sept. 30, 2009. 

Set-Aside Alert looked at small business award notices on FBO.gov, including awards to 8(a), HUBZone, “WOSB,” “EDWOSB” and “SDVOSB” small firms and other small businesses. Only a portion of federal contract awards to small businesses are published on FBO.gov, suggesting a general trend.

The Liebman-Mahoney study also examined whether the rush to spend might result in wasteful and lower-quality information technology projects.

The authors looked at 686 major federal IT projects worth $130 billion. They found that IT projects that were procured in the last week of the fiscal year were between two and six times more likely to have a lower quality rating than projects that were funded at other times during the year.

More information: Liebman-Mahoney study: http://www.nber.org/digest/mar14/w19481.html
Also see Set-Aside Alert issues of June 13, July 11 and Aug. 22, 2014