sequestration briefing 3.21.13

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Marketing Intelligence Briefing from 3/21/2013. Talks about sequestration, and includes the impact of the debt ceiling, the continuing resolution, and FY14 budgets.

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  • 1. Market Intelligence Briefing:SequestrationImpact of the Debt Ceiling, Sequestration, CR, and FY14 BudgetsPresented by: Tim LarkinsMarch 21, 2013 #fy14budget

2. 2 2013 immixGroup, Inc.Company OverviewimmixGroup helps technology companies dobusiness with the government Founded in 1997 270+ Employees Metro DC/Northern Virginia HQ Hold 30+ Contract Vehicles $1.2B Annual Sales Audited Financials ISO 9001: 2008 Certified Processes$0$200$400$600$800$1,000$1,200$1,400FY2008 FY2009 FY2010 FY2011 FY2012 FY2013(Plan)MillionsimmixGroup Program Revenue Growth#fy14budget 3. 3 2013 immixGroup, Inc.MarketingLeadGenerationChannelDevelopmentGovernmentBusinessInfrastructureWhat We DoProvide a platform of services to technologycompaniesto grow their public sector businessMarketIntelligence#fy14budget 4. 4 2013 immixGroup, Inc.Agenda Continuing Resolution Budget Process Four Year Recap Update Looking Ahead Debt Ceiling Budget Deficit Outlays National Debt Budget Control Act Sequestration Macro View Impact on Debt Impact on Spending Micro View Furloughs Implementation Next Steps Conclusion#fy14budget 5. Continuing Resolution andFY14 Budget 6. 6 2013 immixGroup, Inc.Continuing Resolution Budget Process Agencies request funding President submits budget request inFebruary House passes 12 appropriations billsfollowed by the Senate to fundagencies for the year, then thePresident gives final approval#fy14budget 7. 7 2013 immixGroup, Inc.Continuing Resolution Five Year Recap200920102011201210/1/0810/1/0910/1/1010/1/119/30/099/30/109/30/119/30/123/6/09CR OMNIBUS Appropriation10/31/09 12/18/09CR CR CR + Defense Appropriation12/3/10 12/19/10 12/23/10 3/5/11 3/19/11 4/9/11 4/16/11CR CR CR CR CR CR CR CR11/18/11 12/16/11CR + MINIBUSCR MEGABUS201310/1/12 9/30/133/27/13CR CR#fy14budget 8. 8 2013 immixGroup, Inc.Continuing Resolution Update The CR will fund agenciesthrough 9/30/13 roughly atFY12 levels or $1.04 trillion After sequestration, agencieswould have roughly $982 billionin discretionary funds for theyear After the Presidents signature,the CR will give more leeway toDOD in dealing withsequestration The CR also addsappropriations bills for civilianagencies$546$501$518$464Defense Non-DefenseFY13 BudgetsLevels Under BCA Caps ($B) CR Proposals After Sequestration ($B)#fy14budget 9. 9 2013 immixGroup, Inc.Continuing Resolution Looking Ahead House and Senate have released FY14 budget proposals No FY14 appropriations bills have been started in the House Net discretionary spending for FY14 is expected to total$1.05 trillion IT budget will shrink to $72 billion Another CR is likely to begin FY14, but an OMNIBUS maybe a possibility due to the No Budget No Pay Act If no budget is passed by April 15, pay will be withheld fromCongress until the last day of their term#fy14budget 10. Debt Ceiling 11. 11 2013 immixGroup, Inc.Debt Ceiling Budget Deficit#fy14budget 12. 12 2013 immixGroup, Inc.Debt Ceiling Due to Outlays#fy14budget 13. 13 2013 immixGroup, Inc.Debt Ceiling National Debt$-$2$4$6$8$10$12$14$16$18$20Gross National Debt ($T)#fy14budget 14. 14 2013 immixGroup, Inc.Debt Ceiling National Debt#fy14budget 15. 15 2013 immixGroup, Inc.Debt Ceiling Budget Control Act April 4, 2011: Treasury Secretary Timothy Geithner announces that the present debtceiling will soon be reached July 31, 2011: After much infighting, President Obama and Congressional leaders of bothparties pass the Budget Control Act of 2011 (BCA) raising the debt ceiling with the caveatthat if a deficit reduction plan was not agreed upon, draconian cuts to spending would beimplemented (which is what we call sequestration) August 5, 2011: Credit rating agency Standard & Poors (S&P) downgrade the US fromAAA (outstanding) to AA+ (excellent), citing political brinkmanship December 31, 2012: US again reaches the debt ceiling January 1, 2013: American Taxpayer Relief Act of 2012 (Fiscal Cliff Deal) passes, raisingtaxes and delaying sequestration Feb 4, 2013: No Budget, No Pay Act passes, allowing the Treasury to borrow what it needsuntil May 19th March 1, 2013: Congress reaches no agreement on deficit reduction, sequestrationofficially takes effect Early August 2013 Debt ceiling will again be reached unless Congress and the Presidentcan come to an agreement#fy14budget 16. 16 2013 immixGroup, Inc.Debt Ceiling Budget Control Act#fy14budget 17. Sequestration 18. 18 2013 immixGroup, Inc.Sequestration - Macro View The sequestration portion of theBudget Control Act stipulatedthat Congress must collaborateto produce a bill yielding $1.2trillion in deficit reduction Sequestration would draw fromall unobligated funds in bothdefense and non-defensediscretionary accounts Sequestration will makesweeping, across the board cutsto all eligible accounts#fy14budget 19. 19 2013 immixGroup, Inc.Sequestration Impact on Debt$-$5$10$15$20$252012 2013 2014 2015 2016 2017 2018 2019 2020 2021Projected Annual Debt Before and After SequestrationProjected Debt ($T) Debt After Sequestration ($T)#fy14budget 20. 20 2013 immixGroup, Inc.Sequestration Impact on Spending00.511.522.533.544.52012201320142015201620172018201920202021Projected Federal ExpendituresDiscretionary ($T) Mandatory ($T)Total After Sequestration ($T) Total Before Sequestration ($T)#fy14budget 21. 21 2013 immixGroup, Inc.Sequestration Impact on Spending$-$5$10$15$20$25$30$35$402012 - 2021Total Federal Expenditures vs. SequestrationTotal Federal Expenditures ($T) Sequestration ($T)#fy14budget 22. 22 2013 immixGroup, Inc.Sequestration Micro View In FY13, sequestration will cut$85.4 billion from the budget (anequal $42.7 billion from bothDefense and Non-Defense) Because Non-Defense budgetsfund more mandatory programs,the cuts are unbalanced Cuts will come at the Program-Project-Activity (PPA) level Defense cuts equal 7.8%;executed over 7 months will feellike a 13% cut Non-Defense cuts equal 5%;executed over 7 months will feellike a 9% cutDefenseDiscretionary,$42.7Non-DefenseDiscretionary,$26.4Medicare, $11.1Other Mandatory,$5.2FY13 Cuts from Sequestration in $B#fy14budget 23. 23 2013 immixGroup, Inc.Sequestration - Furloughs Hiring freezes will be nearlystandard government wide Agencies may fill one position forevery two openings Significant portions of the federalworkforce will be furloughed oneday a week Nearly 800,000 Civilian employeesin DOD will face 22 furlough daysover the remainder of the year CR give DOD, DOC, USDA, DOJ,and DHS flexibility to reducefurloughs, and DOD will delayfurlough notices 2 weeks#fy14budget 24. 24 2013 immixGroup, Inc.Sequestration - FurloughsAgency Employees FurloughedDOD 780,000DHS 60,000DOT 47,000USDA 34,000HUD 9,000DOL 4,700DOC 2,600DOJ 2,300GAO 1,000Total 940,600#fy14budget 25. 25 2013 immixGroup, Inc.Sequestration - Implementation#fy14budget 26. 26 2013 immixGroup, Inc.Sequestration - ImplementationDOD Budget Account Total Budget ($M) Budget After Sequestration ($M) Total Cut ($M)Army, O&M 59,420 54,785 4,635Air Force, O&M 44,443 40,796 3,467Navy, O&M 44,289 40,834 3,455DOD Wide, O&M 39,205 36,147 3,058Defense Health Program 36,002 33,194 2,808Air Force, RDT&E 28,422 26,205 2,217Air Force, Aircraft Procurement 22,803 21,024 1,779Navy, Shipbuilding & Conversion 22,469 20,716 1,753Navy, Aircraft Procurement 20,785 19,164 1,621Air Force, Other Procurement 20,713 19,097 1,616DOD Wide, RDT&E 20,356 18,754 1,602Navy, RDT&E 18,862 17,391 1,471Army, Other Procurement 13,066 12,047 1,019Marine Corps, O&M 9,643 8,891 752Army RDT&E 9,607 8,858 749#fy14budget 27. 27 2013 immixGroup, Inc.Sequestration - Implementation Likely cuts in the Army: Apache Javelin Missile Chinook Grey Eagle Likely cuts in the Air Force: Joint Strike Fighter Likely cuts in the Navy: Ship Building#fy14budget 28. 28 2013 immixGroup, Inc.Sequestration - ImplementationAgency Total Budget ($M) Budget After Sequestration ($M) Total Cut ($M)HHS 658,682 642,807 15,875DHS 62,639 59,450 3,189DOL 61,928 58,778 3,150HUD 60,254 57,241 3,013EDU 49,487 47,085 2,393USDA 38,614 36,671 1,943DOTrans 38,427 36,493 1,934DOE 28,030 26,133 1,897DOJ 30,565 28,894 1,671DOS 31,748 30,170 1,578DOTreas 23,470 22,286 1,184NASA 17,896 17,000 896DOI 17,539 16,656 883DOC 11,310 10,737 573EPA 9,418 8,496 472SSA 5,727 5,441 286GSA 267 253 14#fy14budget 29. 29 2013 immixGroup, Inc.Sequestration - Implementation Likely cuts in civilian agencies: DHS CIO Office - $16 million Infrastructure Protection & Information SecurityComponent of NPPD - $90 million Treasury IRS business systems - $17 million FINCEN - $6 million TIGTA - $8 million DOE Half of cuts will come from NNSA#fy14budget 30. 30 2013 immixGroup, Inc.Sequestration - Implementation#fy14budget 31. Next Steps 32. 32 2013 immixGroup, Inc.Next Steps Contracts Terms will be modified Awards will be delayed Major contracts will seede-scope Option years and re-competes may not beawarded Very few new contractswill be introduced#fy14budget 33. 33 2013 immixGroup, Inc.Next Steps Listen to the Customer Cuts focus on excessive &duplicative service contracts Mission objectives still needto be met Accelerating existing cost-saving measures Potential increase in COTSspending#fy14budget 34. 34 2013 immixGroup, Inc.Next Steps Listen to the Customer DOD Tactical communication Interoperability Consolidation Civilian Mission criticalapplications andsystems Consolidation Continued demand forcybersecurity, big data,and infrastructure fromboth sides#fy14budget 35. 35 2013 immixGroup, Inc.Sequestration Shield Yourself#fy14budget 36. 36 2013 immixGroup, Inc.Sequestration Shield Yourself Stay close to your customer and get answers to yourquestions: What account is going to fund this deal? What percent of the available activity will be sequestered? Who is working the deal with the controllers office? Only perfect paperwork is going to be awarded; ensurethat: Market survey is complete Brand specific

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