Michael Tinsley is the founder and CEO of NeoSystems Corp., a leading provider of strategic back office services to government contractors and other companies. Headquartered in Tyson Corner, the firm’s practice areas include Accounting & Finance, Human Capital Management and Information Technology.
Through years of experience and close working relationships with clients, Michael and NeoSystems know how government contractors are being impacted today by sequestration and other developments. A longtime ACG member, Michael recently addressed these issues for the National Capital Blog.
ACG: How have companies in the defense contracting industry been affected by the spending cuts brought upon by the federal budget deficit and sequestration?
Tinsley: Generally, the slowdown has been more noticeable among small- and mid-size businesses, both in the form of furloughs and a slow down in new awards. The bigger companies have not been impacted as much or have been able to make changes more easily, such as reassigning affected employees to other contracts. The upshot has been that contractors have been tightening their belts, quite significantly, reducing unnecessary expenditures.
There has been a great deal of resolve and determination among contractors. Many companies have been through challenging and difficult times before, such as when their businesses first started, and are determined to get through the present set of circumstances as well.
ACG: What impact has the budget situation had on corporate growth activities in the national capital region and the defense contracting industry?
Tinsley: Without established budgets there is a great deal of uncertainty which diminishes economic growth and vibrancy. The pattern of continuing resolutions was already troubling as this created planning uncertainty at many companies.
Now, with no one really knowing when, or even if, sequestration will end, these challenges have gotten worse. Simply put, contractors are not hiring people while also generally curtailing business expansion because of the current budget impasse.
ACG: What opportunities are there for companies that sell to the federal government today? Are there specific markets and industries that could see growth despite the budget deficit? Security? Cloud?
Tinsley: Cyber security and health care are two areas that should continue to see growth even in the current, tight budget environment. Some contractors have opportunities to serve state and city governments and are pursuing opportunities there, as well as in the commercial sector. Furthermore, government contracting is still going to be a very large marketplace even with cuts and sequestration, so a strategy of diversification, not cut and run, is the order of the day.
ACG: How do you see the budget situation changing in the near future? How will this impact the defense contracting industry?
Tinsley: The short answer is no one really knows, but given the fact that we are now experiencing the sequester, a condition thought to be so damaging to the government and the economy that it would be avoided at all costs, suggests that we should be prepared for the worst. Businesses have to focus on what they can control. This includes expenses; the quality of product and services they deliver to the government customer; and having contingency plans for an array of potential scenarios.
It is more critical than ever for contractors to document their outstanding performance and effectively communicate their successes when seeking contracts. Indeed, quality, hard work, astute management and commitment matter more than ever. There will continue to be intense competition for a reduced number of contract awards going forward. Improving your competitive position by decreasing costs and stressing the success of past performance, a strategy that may sound elementary, is of critical importance in today’s environment.