How contractors can prepare for a new Congress that may be interested in them

Eric White All right. So midterm results came in. Where did your mind first go thinking federal contracting community wise? Since I imagine at your role, that is the first place your mind always goes right?

Stephanie Kostro It is, but to be honest, and I’m dating myself here, I was a congressional staffer on a committee back when the Democrats took the House in 2006 with the election, and so my mind went immediately back to that time and what we saw on the contract front then. So just to orient your listeners, Eric, back in 2006, after those midterm elections, there were more than 100 oversight hearings involving government contractors. After that the house switched leadership back in that day. So that is where my mind went. It went to oversight and went to investigations and it went to the potential impact for government contractors.

Eric White Yeah, thanks for laying out my next question for me, which is what is the potential impact of a Congress that may be more focused on the investigatory side of things? Obviously, bill’s still got to get paid and work still has to be done. How is the acquisition and workforce agenda going to be affected heading into next year?

Stephanie Kostro That’s, again, it’s a great question. I’m so glad I led you there, Eric. So I want to visit just a few of the topics that the incoming leaders, both in the House and the Senate, we haven’t had a leadership elections yet so this is presumptive on my part, but what really their focus areas are going to be. And we came down to sort of four broad categories. One is there’s a bipartisan push to ban stock trading. That should be relatively non-controversial but the restoration of clean energy tax credits, the restoration of some of the cuts seen to to Medicaid, to restore Medicaid, and some COVID era Affordable Care Act or Obamacare subsidies. They want to talk also about the Iran War Powers Resolution, and they want to talk about tariffs, specifically, mostly related to Canada. With all that in mind, I think when you think through how they’re going to look at oversight and investigations, We have seen that several Incoming Democrats have warned the Trump administration, the family related businesses to quote unquote lawyer up. Now, what does that mean? It means that the focus will likely be on companies that provided donations to administration priorities, whether it is the White House ballroom or America 250, et cetera. It’s going to be the focus also on sole source or limited competition contracts and companies that negotiated federal equity, getting a federal stake in some of their businesses. And so I think, broadly speaking, that’s really where we’re going to see increased contract scrutiny, again, sole source, federal equity, states, and companies who supported administration priorities. I have boiled it down to a couple of areas where if your company has exposure, you should pay close attention. The high priority administration priorities, right? Immigration enforcement, deportation, et cetera, surveillance. And again, those sole source, especially no bidder limited competition. That said, there’s potential exposure in AI and data analytics, emerging tech, and areas related to transparency, data governance, and privacy. Those are all the areas that we’re highlighting to our member companies.

Eric White Yeah, there’s levels to this, though, right? I mean, the some of those priorities, their administrative priorities that come and go with every administration, but some of them of the more controversial nature, contractors could find themselves under the interrogation light or also aiding in an investigation. What should companies do to prepare for increased amount of scrutiny, not just of their activities, but their overall role in certain activities?

Stephanie Kostro Good question, Eric. I think, you know, when we look at the Professional Services Council, we’ve got 400 member companies. Many of them hold prime contracts with a range of federal agencies, whether it’s the Department of Defense or War, or it’s Veterans Affairs or Health and Human Services. Some of them are active in the subcontracting space. So they may not actually be the prime contractor, but they may be requested to provide information or documentation as a subcontractor in support of prime contracts for administration priorities. What we are advising companies to think through is, can they get their documentation in order? Can they get they’re pricing in order if they’re asked for that? If they’re asking for how the decisions were made by federal agencies, what insight did they have into that? I wouldn’t be surprised to see a lot of FOIA requests or Freedom of Information Act requests, or from the congressional side, I mentioned more than 100 oversight hearings. That doesn’t even count the briefings, right? Or, other requests for information, we are suggesting and advising our companies who are members of PSC to get ready to provide documentation. The worst case scenario from a time perspective is they prepare it and it’s never requested. That’s okay. At least you were prepared.

Eric White Talking here with President of the Professional Services Council, Stephanie Kostro. And we may have been getting a little bit ahead of ourselves as the new Congress hasn’t even been introduced yet. We still have a couple of months left with this Congress. And the term lame duck is being thrown around like crazy. But once again, there’s still work to be done. What does Congress need to get done on the appropriations front before the end of the year? The term Reconciliation also being thrown around out there. What are you hearing?

Stephanie Kostro So we are all very, very aware that the government is now being funded under a continuing resolution that expires on December 11th. A couple of key numbers to keep in mind, Eric, as of this week, there are eight weeks remaining until the 120th Congress is sworn in, so that’s eight weeks of work that it boils down to roughly 20 legislative days for the House and 22 legislative days, for the Senate, not a lot of days. And their list is fairly long. We’ve talked a lot about reconciliation and what that might mean. But let’s talk first about appropriations, that CR that expires in December. The appropriations committees have to get stuff together in order to pass another continuing resolution or full year appropriations. No one thinks that we’re going to get to full year appropriation here in December, so it will be another CR. Will that take us further into December? Will it take us into February or March? My guess is that it will take us well past the new seating of the Congress on January 3rd, so probably sometime in February. With a CR. On the reconciliation front, you know, the House Republicans passed a budget resolution for reconciliation 3.0 that was far short of what the administration requested. And they had requested $350 billion for defense. The House Republican passed reconciliation 3.o budget resolution included $60 billion, not $350. And so we are looking at what the Senate can do on a reconciliation front. My guess is that they are going to try very hard, but I’m not sure it’ll get across the finish line. The backup plan is to really look at that December 11th continuing resolution deadline and to look at the traditional funding bills into calendar 2027.

Eric White I chuckled a little bit when you said backup plan because it’s almost like a backup plan to the backup plan that’s already in motion, right?

Stephanie Kostro It is. And let’s think about a reconciliation, right? In terms of getting a reconciliation across the finish line and the Senate, it does require a simple majority, but they have to have a vote-a-rama, as we call it, right? And that means any senator can propose any amendment, and it gets some floor time, and they have to talk about it. That process takes a really, really long time. We’re talking days of debate. And so I don’t think they’re going to get a clean CR or rather a clean reconciliation bill. And so as we move forward, it’ll be interesting to see. I don’t think it’s likely that they’ll have a reconciliation vote, but I would love to be surprised and see Congress move forward with something, but I suspect they’re gonna keep powder dry until the new Congress is seated.