Report: Pandemic Likely to Dominate Federal Contracting in Fiscal 2021

The novel coronavirus pandemic is likely to dominate federal agencies’ contract spending in fiscal 2021, according to a recent report. 

Bloomberg Government published a report earlier this month about the landscape for federal contracts as the new year begins and the new Biden administration prepares to take over. This comes after civilian agencies’ contract spending hit a record high of $228 billion in fiscal 2020––an increase of 17% ($33.5 billion) from 2019––mainly due to the pandemic.

“Continued efforts to combat the COVID-19 pandemic are likely to drive increases in agency contract spending throughout fiscal 2021,” said the report. “While much of the current spending is related to vaccine development, fiscal 2021 could play out as a transition to production and deployment activities resulting from a potential vaccine,” the report continued. “In addition, legislators are considering future economic stimulus spending that could replenish disbursement to select agencies such as the Small Business Administration.”

In fiscal 2020, agencies that spent the most on the coronavirus were the Health and Human Services, Defense and Veterans Affairs departments. 

Bloomberg Government expects agencies’ spending on telework to remain “high” in fiscal 2021 due to the ongoing nature of the pandemic and the fact that they have now made the infrastructure and logistical shift to make it feasible. The analysis also predicts agencies will increase their spending on public services online as they “will invest close to $5.8 billion in fiscal 2020 and $6.2 billion in fiscal 2021.” 

Similarly, the Professional Services Council, a trade association that represents over 400 companies that contract with the federal government, found that “COVID-19 has catalyzed a new paradigm for business operations,” in its recently published biennial survey of acquisition trends. “Procurement offices across the government transitioned to telework with few interruptions in business-as-usual,” PSC said. 

Another economic stimulus package could affect agencies’ spending, according to Bloomberg. Since the report was published, Congress approved a $900 billion coronavirus relief bill combined with a $1.4 trillion omnibus spending package for fiscal 2021. In the relief package, Section 3610 from the $2.2 trillion CARES Act, which allows federal agencies to use their funds to give contractors sick or paid leave during the pandemic if they are not able to access their worksites or telework, was extended until March 31, 2021. 

After signaling in a video last week that he might veto the legislation because in the relief package the stimulus checks aren’t large enough and there are many provisions not related to the pandemic, Trump signed the deal on Sunday night. However, he said he will send a Congress a redlined version "accompanied by the formal rescission request to Congress insisting that those funds be removed from the bill.”

Besides the pandemic, another major trend Bloomberg predicted is an increase in agency spending on artificial intelligence initiatives in fiscal 2021. 

“The GSA’s AI Center of Excellence and the Pentagon’s Joint AI Center are aimed at speeding the adoption of AI technologies by civilian and defense agencies, respectively, while the departments of Energy and Veterans Affairs have opened AI research offices,” said the report. “Meanwhile, federal contract spending on AI is on pace to grow by almost 50%, according to BGOV projections, reaching $3 billion in fiscal 2021.”