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Blog | 06.15.20

Will State and Local Government Budget Cuts Mean Fewer Opportunities for Suppliers?

As state and local governments prepare to start a new fiscal year on July 1, concerns are being raised about the impact of impending budget cuts on agencies and the communities they serve. Will services simply be reduced due to the financial strain imposed by COVID-19? Or will we see entire programs eliminated? And, in either case, how will government suppliers be impacted?

The co-dependency of the private and public sectors means that any disruption to funding or operations on one side directly affects the other. If the private sector supply chain can’t fulfill orders, then the public sector is left scrambling – or stuck. If the public sector scales back its operations or stops them all together, their private sector suppliers/contractors have no choice but to follow suit.

So, it’s no wonder that many of you reading this are eager to find out how your business might be affected by the financial challenges being experienced at all levels of government.

Though some agencies may ultimately have to renegotiate contract terms to fit within new budget parameters, and there may be some early contract terminations or non-renewals, it could be possible to save programs and services with a little bit of creativity.

(Funding) Creativity is King Right Now

Much like the retail sector, government services are being split into two categories right now: essential and non-essential. Though agencies responsible for essential services might find themselves with slightly more spending capacity in the coming months, no agency, program or service is fully protected from budget cuts. Therefore, IT modernization project leaders are working just as hard as school leaders and arts program directors right now to fulfill their mission with less money without compromising the quality of their deliverables.

Suppliers and service providers who can help agencies figure out how they can do what they need to do with fewer resources are in high demand right now. Legacy IT systems still need to be upgraded to support telework and allow for a permanent migration to online citizen service models. Schools must figure out a way to facilitate both remote and classroom learning for the foreseeable future given the highly fluid nature of the COVID-19 outbreak. Parks and recreation programs will have to enhance safety measures without being too disruptive or demanding too many additional resources.

The truth is that maintaining operational continuity requires continuous innovation across all agencies, regardless of mission, and within all agency functions.  At a fundamental level, the digitalization of paper-based processes must remain a top priority followed by the integration of more intelligent platforms such as chatbots, artificial intelligence (AI) and voice recognition tools that are proven to make government services more efficient. But even finance, procurement and HR must modernize the way they handle the “business” of government: how they buy, hire and manage their money. All of that requires the creativity and flexibility of both the public and private sectors right now.

The Takeaway

COVID-19-triggered budget cuts won’t automatically reduce across the board the number of upcoming opportunities for private sector companies to do business with the public sector. They could prompt more price-based competition among suppliers. Government agencies aren’t going to sacrifice quality for cost savings, though. They can’t afford to. Trying to maintain a steady operational level with fewer resources actually places a greater emphasis on quality.

Suppliers and service providers who can help public sector agencies figure out how to deliver high quality services and solutions to their workforce and citizens without the high price tag will be the most valued in the next 12-18 months.

We encourage you to approach your customers with creative funding ideas, alternative fulfillment strategies or more agile project plans. If there are non-essential components of current projects or services that you feel could be eliminated to allow for funds to be re-allocated to essential components, let your government customers (or prospective customers) know. If you think you can deliver the same quality service at a reduced frequency or staffing level, or you have the room to reduce your pricing a bit to avoid a complete contract termination and loss of service, speak up.

As we said a few weeks ago, and will stress again, the public sector needs your partnership – and your business – now more than ever.

(In fact, there are tens of thousands of open bids posted right now on If you haven’t logged into your dashboard lately or signed up for free daily email notifications about new solicitations, we recommend you do so right now. Agencies are looking for all sorts of goods and services right now, and there are likely several solicitations for the products and experience you offer.)

If you are just now starting to bid on contracts, remember to approach public sector sales opportunities with agility, compassion and flexibility in both pricing and solution/delivery models. This will go a long way in securing the relationships (and contracts) that your business needs to sustain any disruptive event, such as a global pandemic and subsequent recession. Teamwork makes the dream work (for everyone), right?!

Speaking of teamwork…

Check out these tips on how to successfully partner with other companies in order to expand your goods and service delivery capabilities or diversify your expertise to strengthen your bids for government contracts.