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Use It or Lose It: Federal Agencies Launch Annual Spending Sprees

Washington — This past week, the Department of Veterans Affairs bought $562,000 worth of artwork.

In a single day, the Agriculture Department spent $144,000 ontoner cartridges.

And, in a single purchase, the Coast Guard spent $178,000 on “Cubicle Furniture Rehab.”

This string of big-ticket purchases was an unmistakable sign: It was “use it or lose it” season again in Washington.

All week, while Congress fought over next year’s budget, federal workers were immersed in a separate frantic drama. They were trying to spend the rest of this year’s budget before it is too late.

The reason for their haste is a system set up by Congress that, in many cases, requires agencies to spend all their allotted funds by Sept. 30.

If they don’t, the money becomes worthless to them on Oct. 1. And — even worse — if they fail to spend the money now, Congress could dock their funding in future years. The incentive, as always, is to spend.

So they spent. It was the return of one of Washington’s oldest bad habits: a blitz of expensive decisions, made by agencies with little incentive to save.

Private contractors — worried that sequestration would result in a smaller spending rush this year — brought in food to keep salespeople at their desks. Federal workers quizzed harried colleagues in the hallways, asking if they had spent it all yet.

“The way we budget ⅛money⅜ sets it up,” said Sen. Tom Coburn, R-Okla. “Because instead of being praised for not spending all your money, you get cut for not spending all your money. And so we’ve got a perverse incentive in there.” But, Coburn said, “nobody’s talking about it but me and you.”

Coburn said he had meant to mention it in his floor speech Wednesday. Then, when he got to the podium, he forgot.

“Use it or lose it” season is not marked on any official government calendars. But in Washington, it is as real as Christmas. And as lucrative.

And — it appears — about as permanent.

“We cannot expect our employees to believe that cost reduction efforts are serious if they see evidence of opportunistic spending in the last days of the Fiscal Year,” President Lyndon B. Johnson wrote to underlings in May 1965. Even then, Johnson said an end-of-year binge was “an ancient practice — but that does not justify it or excuse it.”

Today, government spending on contracts still spikes at the end of the fiscal year on Sept. 30.

In 2012, for instance, the government spent $45 billion on contracts in the last week of September, according to calculations by the fiscal-conservative group Public Notice. That was more than any other week — 9 percent of the year’s contract spending money, spent in 2 percent of the year.

Much of it is spent smartly, on projects that had already gone through an extensive review.

But not all of it.

In 2010, for instance, the Internal Revenue Service had millions left over in an account to hire new personnel. The money would expire at year’s end. Its solution was not a smart one.

The IRS spent the money on a lavish conference. Which included a Star Trek parody video starring IRS managers. Which was filmed on a Star Trek set that the IRS paid to build. (Sample dialogue: “We’ve received a distress call from the planet NoTax.”)

“That is a major problem,” acting IRS commissioner Daniel Werfel told Congress in June, explaining the role of “use it or lose it” in that debacle.

Other end-of-year mistakes are less spectacular — but they still cause problems. One recent study, for instance, found that information technology contracts signed at year’s end often produced noticeably worse results than those signed in calmer times.

And late-September waste also weighs on its witnesses, federal workers. After President Barack Obama set up an online suggestion box for federal workers, many asked to get rid of the “use it or lose it” system. They suggested “rolling over” money for use in the next year. And they listed dumb things they had seen bought: three years’ worth of staples. Portable generators that never got used. One said the National Guard bought so much ammunition that firing it all became a chore.

“When you get BORED from shooting MACHINE GUNS, there is a problem,” an anonymous employee wrote.

“People want to do the right thing,” said Dean Sinclair, a former State Department employee who is crusading to change the system. “It’s not that the federal workforce is filled with bad people. The system sort of forces them to make bad decisions.”

He suggests giving bonuses to managers who return leftover money to the Treasury at year’s end. “It takes time and effort to waste money,” Sinclair said. “Remember that.”

Obama, like presidents before him, has exhorted agencies to plan better and avoid rushed decisions at year’s end. But the White House says Congress is making that job harder.

Instead of approving full-year spending bills, the gridlocked legislature has been handing out money with “continuing resolutions” that last only a few weeks or months. So nobody’s certain about their funding until later in the year. So the rush gets more rushed.

This year, finally, September came.

For contractors around Washington — battered by sequestration, budget cuts and the end of wars — this was the month they had been waiting for. “The flush,” one analyst called it. A flood of money had been backed up inside agencies hampered by furloughs.

“Twenty-five percent of my business, right, will happen in this month. Twenty-five percent of my year,” said Art Richer, the president of ImmixGroup, a contractor in Tysons Corner, Va. that helps software and computing companies seeking government business.

September in Washington used to be a time for selling face-to-face. Contractors visited the Pentagon. Small-town mayors queued up in the hallways at the Commerce Department, waiting to make a late-night pitch for grants.

But those buildings are off-limits now. So you sell from your desk. You sell with your voice. You sell with empathy, for the poor harried bureaucrat on the other end of the line. “Answer the phone smiling,” Richer tells his people.

Of course the feds were stressed.

“We see them in the hallway, and you go, ‘How much money are we going to lose?’e_SNbS” one Army officer said this week. That officer was involved in setting budgets for future years, and the meaning was clear: How much money are you not going to spend? Whatever that number was, it would be taken out of budgets for fiscal 2015, too.

This is not normal math. But this was not a normal time in Washington: You didn’t save money to spend it later. You spent now, to spend later. “They know they’re under the gun,” the officer said, who spoke anonymously to talk about internal budgeting discussions.

On Monday, Immix began bringing its sales team three catered meals a day. If workers walked to Subway, they might lose a sale. On that day, Immix handled $16 million in business. A normal Monday is about $2 million.

Across the government, agencies were making big-ticket purchases — buying things with this year’s money that could be used next year.

On Monday, VA paid $27,000 for an order of photographs showing sunsets, mountain peaks and country roads. They would go into a new center serving homeless veterans in Los Angeles; a spokeswoman described the art as “motivational and calming, professionally designed to enhance clinical operations.”

On Tuesday, the USDA bought $127,000 worth of toner cartridges (“end of year,” the order explained). VA spent another $220,000 on artwork for its hospitals.

On Wednesday, the Coast Guard paid $178,000 for cubicle furniture, replacing high-walled cubes with low-walled ones to improve the air flow in a large office area.

“Other higher-priority projects were not able to be executed, so they moved (money) to this lower-priority project” before the year’s end, said Coast Guard spokesman Carlos Diaz.

“The money was going to be spent anyway.”

On Thursday, VA was buying art again. It spent $216,000 on artwork for a facility in Florida. In all, preliminary data showed that the agency made at least 18 percent of all its art purchases for the year in this one week. One-sixth of the buying in one-52nd of the year.

On Friday, the end was in sight.

“I feel good. Four days, right?” said Corey Forshee, a contracting officer at Joint Base Andrews in Maryland. Forshee was part of a team at Andrews that had done its best to beat the September rush.

The commander, trying to avoid a last-week rush, set his own deadline of Sept. 20. The pizza came early. The chaplain’s office visited early (“use it or lose it” season is traditionally stressful enough to get the chaplain involved). The buying was nearly done.

Now, they had to wait for the last act of the last act: the “fall-out money.”

This was cash that other parts of the Air Force had not been able to spend. It would be redistributed to this office at the last minute.

“We’re waiting for money for that,” Forshee said, going down a list of unfunded projects. A roof for the workout area. A bathroom renovation. “Just waiting for money,” he repeated.

Across Washington, everybody had to wait.

“It’s going to come down to Monday,” said Richer, at ImmixGroup.

On Friday, he said his sales had been about equal to last year’s, despite worries about sequestration.

On Monday, Richer’s people will sell until midnight. Then they will keep selling. “Money rolls across the continent,” the feds say. Cash not spent in Washington might be spent by federal offices in California in the three hours before it is midnight there.

When it is midnight in California — 3 a.m. in Washington — they will keep on. There are federal offices in Hawaii, after all. And it will still be three hours until midnight there.