As a government contractor, it is important to have a yearly plan that will maximize your chances to win more business. The Federal Government works by the fiscal year (FY), which is separated into the four quarters listed below.
- The First Quarter (Q1): October 1 – December 31
- The Second Quarter (Q2): January 1 – March 31
- The Third Quarter (Q3): April 1 – June 30
- The Fourth Quarter (Q4): July 1 – September 30
Understanding the quarterly spending habits of the Federal Government can improve your ability to plan for the coming fiscal year. Contractors often pay special attention to Q4 because it is historically known for its surge in agency spending. This is because they often have a budget for the entire fiscal year and if they do not use it, they lose it. Take a look at the historical spending patterns below to find out more.
Quarterly Spending Data
Almost one-third of all federal dollars are awarded during Q4 every year. The graph above shows quarterly spending data within the Federal Government from the last five completed fiscal years. It is evident, based on the data, that Q4 spending has been significantly higher than that of Q1, Q2 and Q3.
On average between fiscal years 2012 through 2016:
- Q1 has accounted for 21.4% of total fiscal year spending
- Q2 has accounted for 24.2% of total fiscal year spending
- Q3 has accounted for 22.4% of total fiscal year spending
- Q4 has accounted for 32% of total fiscal year spending
While Q1, Q2 and Q3 remain at percentages within the 20-25% range, Q4 jumps significantly higher, reaching 8-10 percentage points greater than all other quarters!
Fourth Quarter Monthly Spending Data
Generally, the Q4 period is known for its surge in agency spending, but when we look at the monthly breakdown of Q4 spending, it is clear that there is another pattern. While the months of July and August stay at fairly consistent spending rates, September spending skyrockets in comparison. On average between fiscal years 2012 and 2016, July comprises 22.6% of total Q4 spending, August comprises 24.5%, and September comprises 52.9% of total Q4 spending. This is a 28-30% jump in spending from July and August to September.
Why Agencies Spend More during Q4
There are a few reasons that agency spending tends to increase the most during Q4. Throughout Q1, Q2 and Q3 of the fiscal year, agencies take more time to award new contracts because they are searching for the best product or service for the best price. Technically, agencies are required to search for the best – valued product/service as to not waste American taxpayer dollars. Additionally, contractors are expected to be open for price negotiations. This process takes time.
The Government also distributes agency budgets earlier or later in the fiscal year depending on how quickly the Congress can finalize the federal budget. Budgets take a particularly long time to pass if there is a new administration in office or if there is delayed action from the prior year’s budget. The budget should technically be finalized by the beginning of the fiscal year, but a lot of the time, necessary appropriations bills will not pass by October 1. This ultimately delays the new FY budgets for certain agencies.
The slower nature of government processes, as well as the constant push for cheaper and better products/services, creates a spending frenzy during Q4, because at that point, agencies are trying to utilize their unused funds before they expire.
How to get the most out of Q4
If you want to take advantage of the Q4 boost in agency spending, the most important step is to start early. Research expiring contracts and start reaching out to those agencies ahead of time, to build that relationship and influence the award if it is a re-compete. In the last quarter, reaching out to agencies that you have already built relationships with is a great way to remind them what you can offer and may prompt them to allocate some of that Q4 budget to your company.
In addition, ensure that everything with your GSA Schedule and other contracts is in place. Make modifications and check that your prices, products and services are up to date prior to the spending rush. Scope out opportunities ahead of time and make sure that your team is prepared for the extra work that comes along with Q4!
It is extremely important for federal contractors to take advantage of the fourth quarter of the fiscal year. Q4 of FY 2017 is expected to reach the normal Q4 average at around $150 Billion – an amount that you do not want to miss out on. Don’t let opportunity pass you by just because you weren’t aware of the spending season!
Ready to take advantage of the upcoming Q4? Take one of our free courses to see what’s next!Like