The Government’s Historic Spending Spree Continues

Driven largely by the Defense Department, the federal government’s discretionary spending spiked to a seven-year high in fiscal 2018, with agencies obligating more than $554 billion for products and services, up $100 billion from 2015.

According to official spending data from the Government Accountability Office, the Defense Department accounted for $358 billion in contract obligations while civilian agencies, like the Veterans Affairs and Homeland Security departments, obligated $195 billion.

The government closed the 2018 fiscal year on a massive spending spree—due in part to funding increases after a delayed budget agreement—and early fiscal 2019 spending data indicates the government isn’t slowing down its contract spending.

Spending data tabulated by the Professional Services Council illustrates the spending uptick.

During the largest fourth-quarter spending in recent memory, Defense and civilian agencies raced to spend almost $190 billion. Early receipts show the high-paced spending continued into fiscal 2019, especially at the Defense Department. Defense agencies obligated $111 billion in October, November and December—a 32% increase from the first quarter of fiscal 2018.

That’s a historic level of early spending for the Defense Department, according to David Berteau, president of the Professional Services Council. Over the previous five years, the Defense Department has spent in the $60 to $70 billion range over those same Q1 months, cautiously allocating money during sometimes tense budget negotiations in Congress. Fully appropriated this year with large acquisitions like ships and aircraft on the books, Berteau said the Defense Department hasn’t had to be as cautious.  

“The Defense Department obligated almost as many contract dollars in the first quarter of fiscal 2019 as in the fourth quarter of fiscal 2018,” Berteau told Nextgov. “Never in 40 years of following this—I’ve never seen a first quarter in Defense spending that looked like a fourth quarter.”

Civilian spending is up—though to a lesser degree—despite a 35-day government shutdown beginning the year. Through the first two quarters of fiscal 2019, civilian agencies have allocated about $78 billion, up from $67 billion at the same time last year.

It is unclear whether the government’s current spending trends will continue through fiscal 2019, as the government’s reported spend data lags behind by three to six months. In June, White House officials said they had "every intention" of avoiding a shutdown similar to the one that shuttered several agencies in December, floating a one-year stopgap measure to keep agencies next year at fiscal 2019 levels. However, Berteau said 2018’s uptick in contract spending “is fully expected” given the stable more stable fiscal conditions with which the fiscal year began. Berteau added that contract spending is not increasing at the same pace as overall government spending, so contractors aren’t getting “more than their fair share, but actually less.” 

“The reality is the growth we’re seeing in contracts in fiscal 2018 is fully expected, exactly in line with what Congress appropriated and President Trump signed,” Berteau said. 

Where did the money go?

According to the analysts at The Pulse of GovCon, the civilian agencies with the largest contract spend last year were the departments of Energy ($32 billion), Veterans Affairs ($31 billion), Health and Human Services ($25 billion), Homeland Security ($18 billion) and NASA ($18 billion).

Agencies across government spent approximately $225 billion on products—including pens, paper and hand grenades—and $340 billion on services, including research and development. 

The government’s top contractor, Lockheed Martin, captured $40 billion in revenue over fiscal 2018. Collectively, the government’s top ten contractors—Lockheed Martin, Boeing, Raytheon, General Dynamics, Northrop Grumman, McKesson Corporation, Huntington Ingalls Industries, BAE Systems, Leidos and United Technologies Corporation—captured almost 30% of Defense obligations and 17% of civilian obligations. 

Small businesses, according to The Pulse of GovCon, received about 22.5% of the government’s total contract dollars.