Civilian agencies guard their coffers as cuts loom

Civilian agencies won't see the dramatic spending cuts proposed by the Trump administration at least for a few months, with a continuing resolution expected to fund the government through Dec. 15.

But agencies are behaving as though cuts are coming, according to SAIC CEO Tony Moraco.

On a Sept. 7 earnings call with analysts, Moraco reported that "several of our civilian customers are reacting to proposed [2018] budget shifts."

"These customers are sustaining operations but are suspending enhancement activities such as technology upgrades and IT modernization," he said, noting that SAIC's lower quarterly profitability are in part due to these spending reductions. The company's revenues remained basically flat, with a one percent decrease.

The Trump fiscal year 2018 budget called for double-digit spending reductions at the Departments of Transportation, Education, Housing and Urban Development, Interior, Labor and State, and at the Environmental Protection Agency. At EPA, the administration proposed a 31 percent cut; State was given a 29 percent target.

While the appropriations bills grinding through Congress don't offer cuts quite this drastic, agencies appear to be reacting to the eventuality that civilian-side spending is going to drop to fund defense and homeland security boosts.

"The federal civilian customers have reacted to the rhetoric around reductions in that part of the federal government, as we've seen the promotion of spending in the defense and intelligence sector, given the national security interest," Moraco said. "So, we're seeing the program managers and contract administrators reacting to that and protecting their budget lines with an indication that they may be lower than they have been in the past."

Moraco said potential for growth remains on the IT side, however. "The demand is still high on cloud, cybersecurity and IT modernization," he said. "So as we look at it, whether it be through executive order or through government compliance, there is continual demand to upgrade legacy systems."

It remains to be seen whether the administration will go to the mat to protect its IT modernization goals. The White House issued a statement of support on Sept. 5 for a House appropriations package that covers most civilian-side spending. The statement noted that many IT priorities, including a $228 million modernization fund to be housed at the General Services Administration and funding for tech upgrades at the Office of Personnel Management and the Department of Housing and Urban Development, were not included in the bill. Nonetheless, the statement indicated that President Trump would sign the measure into law.