Shutdown Impact; Fuel, Physicians and Furloughs: BGOV Insight

Below are data and analyses from Bloomberg Government analysts about the business impact of the partial government shutdown.

Renewable Fuel Standard

The federal shutdown has put a number of forthcoming EPA rules on hold. The 2014 Renewable Fuel Standard requirements -- which are technically due by Nov. 30 -- are probably the most time-sensitive. EPA has promised to consider the “blend wall” and other constraints in its 2014 rulemaking, so industry is eagerly awaiting the agency’s proposal. Compliance in 2014 is uncertain unless the total target is significantly lowered.

Contracting Dynamics

The shutdown that froze the federal contracting market hit most multiple-award contracts (MACs) hard. Oct. 1 is often the second- busiest contracting day of the year; the shutdown resulted in huge year-over-year reductions on that date in nondefense funds put on contract through General Services Administration schedules and government-wide acquisition contracts (GWACs), including NASA’s SEWP IV.

There were a few exceptions. More money was spent this Oct. 1 than last on Transformation Twenty-One Total Technology, Patent Data Capture, and 8(a)STARS.

Orders on underperforming MACs should spike when the government reopens. That doesn’t mean federal contracting is becoming a seller’s market -- far from it, as lowest-price bidders rack up wins across the government. Yet contractors need to be ready for a quick spurt of buying.

Spreading the Pain at the VA

The Veterans Affairs Department furloughed 2,754 employees in its Office of Information & Technology (OI&T), effective Oct. 8. Contractors supervised by those furloughed employees probably can’t continue working.

The VA’s top IT contractors for fiscal 2012, the latest year available, were Systems Made Simple Inc., with $157.8 million in contract orders, and Harris Corp. (HRS), with $145.9 million in orders.

A Bloomberg Government Study found that the department’s IT contract spending was more fragmented than all other large departments. The VA also exceeded several small business goals in both fiscal 2012 and fiscal 2013. Due to the fragmentation and the use of small businesses, many small contractors will feel the shutdown pain, rather than just a handful of large ones.

OIRA Regulatory Lockdown

The Office of Information and Regulatory Affairs, an obscure but influential government agency that reviews the most ambitious regulations from executive-branch agencies, has essentially stopped operating since the shutdown began.

During the week preceding the shutdown, OIRA completed its review of five rules. On Sept. 30, the agency completed its review of 12 rules. Only one rule was reviewed on Oct. 1, and no rules have been reviewed since then.

OIRA Administrator Howard Shelanski recently told Congress that the shutdown would reduce his agency’s personnel from about 40 to two.

With Congress in constant gridlock over budget issues, regulatory agencies had played a leading role in shaping President Obama’s domestic policy. Now the busy slate of rulemakings awaiting OIRA approval will remain frozen until the shutdown ends.

Medicare Provider Payment Cuts

Updates to Medicare payment rates for home health providers, physicians, hospital outpatient departments and renal dialysis providers may be delayed.

Payments to home health providers are scheduled to be reduced by 2.4 percent in 2014 compared with 2013. Renal dialysis providers face a 9.3 percent reduction. Conversely, hospital outpatient departments await a 1.8 percent increase in payments and ambulatory surgery center providers a 1 percent hike.

The Medicare payment updates that have yet to be finalized by the Centers for Medicare and Medicaid Services (CMS) for 2014 have historically been published no later than early November each year to give providers sufficient time to finalize their billing and payment systems. The longer the shutdown lasts, the greater the chance that the publication of the final rules will be delayed, potentially affecting the ability of both CMS and providers to change their billing systems in time for the new rates in January.

To contact the analysts: Rob Barnett in Washington at rbarnett12@bloomberg.net; Kevin Brancato in Washington at kbrancato@bloomberg.net; Miguel Garrido in Washington at mgarrido8@bloomberg.net; Afzal Bari in Washington at abari1@bloomberg.net; Matthew Barry in Washington at mbarry24@bloomberg.net

To contact the director of research: Robert Litan at rlitan2@bloomberg.net

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