Budget Cycle and Fiscal Year

The federal budget cycle is the annual process through which the President proposes, Congress deliberates and appropriates, and federal agencies obligate and spend public funds, with the federal government's fiscal year (FY) running from October 1 through September 30, and the full cycle from presidential budget submission through obligation spanning roughly 18 months.

What is the Federal Budget Cycle and Fiscal Year?

The federal fiscal year runs from October 1 to September 30. FY2025, for example, runs from October 1, 2024, through September 30, 2025. This contrasts with most states, which have July 1 fiscal year starts, and the calendar year used for individual taxes. Understanding which fiscal year a contract falls in is essential for correctly interpreting USAspending and FPDS-NG data, which categorize all contracts by their fiscal year of award.

The full budget cycle has several phases. In February, the President submits the budget request (the "President's Budget") to Congress, covering the fiscal year beginning the following October. The budget request is not law, it is a proposal. Congress then works through its own budget and appropriations process, with the House and Senate Appropriations Committees marking up 12 individual appropriations bills covering all federal spending. If Congress completes all 12 bills before October 1, each agency enters the new fiscal year with a full-year appropriation. If not, the common situation in recent decades, Congress passes a Continuing Resolution (CR) to extend funding at prior-year rates.

For contractors, the budget cycle creates predictable patterns in contract award timing. Most agencies obligate contracts early in the fiscal year (October-December), as program managers move quickly once their full-year appropriation arrives. A second concentration of awards occurs in Q4 (July-September), driven by "use-it-or-lose-it" spending pressure as agencies race to obligate remaining funds before fiscal year end. The April-June period (Q2) is often the quietest for new contract awards.

Why the Budget Cycle matters for government contractors

Aligning business development, proposal readiness, and staffing plans to the federal budget cycle allows contractors to respond to peak solicitation periods and avoid wasted effort during periods when agency contracting activity is constrained by CR limitations or budget uncertainty.

Example

A consulting firm targeting DHS contracts observes that DHS historically obligates 35% of its contract dollars in Q1 (October-December) and 28% in Q4 (July-September), based on five years of USAspending data. The BD team ensures proposal teams are at full capacity entering October and again entering July. During Q2 (January-March), when CR uncertainty often freezes new awards, the team uses the slower contracting pace for capture activities, conference attendance, and proposal improvement initiatives.

Frequently Asked Questions

When exactly does the government's fiscal year end and begin?

The federal government's fiscal year ends September 30 at midnight and begins October 1. FY2026 runs from October 1, 2025, through September 30, 2026. Appropriated funds that are "one-year money" expire unused at September 30 of the fiscal year for which they were appropriated.

Why is the February budget submission so early for an October fiscal year start?

The President's Budget submission in February gives Congress approximately 8 months to complete its appropriations work before the new fiscal year begins. Despite this timeline, Congress has passed all 12 appropriations bills before October 1 only a handful of times in the past 30 years, making Continuing Resolutions the practical norm.

How does the budget cycle affect multi-year contracts?

For contracts that span multiple fiscal years, each year's funding is typically obligated one year at a time through contract modifications (for incrementally funded contracts) or option exercises. The contractor cannot rely on future fiscal year funding being appropriated and available, congressional action is required for each year's funds.

Are all federal funds "one-year money" that expires at September 30?

No. Appropriations have different periods of availability. Operations and maintenance funds are typically one-year money. Procurement funds (for buying equipment) are typically two-year money. Military construction funds are five-year money. Research and development funds are typically two-year money. Understanding the period of availability for a particular appropriation matters for knowing how long the government can continue to obligate against it.