What does the election mean for federal contractors?

brian-friel1In the world of federal contract proposal editing, we see a slowdown during presidential elections. What about after the election? What should we anticipate in the months and years to come?
Last week, Brian Friel, a Federal Business Intelligence Analyst for Bloomberg Government, teamed with proposal consulting firm Privia to present a webinar on “Post-Election Opportunities and Consequences for Federal Contractors.”
Federal contracting peaked in 2009, due to antiterrorism, war, and economic stimulus spending. As troops have returned from Iraq and Afghanistan, federal contracting has been declining by single-digit percentages annually over the past 3 years.
The outcome of the election is essentially status quo—Obama reelected, Democrats strengthening their majority in the Senate, and Republicans holding the House with a smaller margin. “And policy drives procurement,” Friel said. Therefore, we should continue to see single-digit percentage declines in federal contracting over the next few years.
“There’s a lot of doom and gloom out there about the administration about sequestration,” said Friel, describing the possible outcomes in early 2013. Whether sequestration happens or not—budget cuts will be made. Significant cuts will occur to both Defense and non-Defense spending.
Meanwhile, post-Hurricane Sandy relief contracts may prop up fiscal year (FY) 2013 spending, Friel said. Congress is considering $60 billion in post-Sandy contracts—for everything from call center support to debris removal.
Where’s the money?
“Professional services,” which includes management and consulting, is the largest category of government contracting spending, coming in at $77.6 billion for 2011. That’s a 2 percent decline from 2010—a relatively small drop compared to, say, construction, which saw a 24 percent drop in the same period.
However, there are growth sectors. From FY2010 to FY2011—

  • Aerospace spending increased by 24 percent to $46.3 billion.
  • Health (i.e., medical) contracts (e.g., TRICARE) rose 9 percent to $36.8 billion.
  • Shipbuilding contracts jumped 108 percent to $19.6 billion.
  • Transportation contracts rose 27 percent to $11.2 billion.
  • Contract spending in technology (“pure technology” as opposed to technology consulting) remained flat—but at $41.3 billion per year, it’s certainly nothing to shake a stick at.

What should we expect?
Bloomberg sees the following trends in federal contracting:

  • Fewer—but larger—contracts, as agencies rethink acquisition strategies and consolidate work. This enables more across-the-board analysis of programs and projects.
  • Shorter contract periods as procurement chiefs push for more frequent competition for work.
  • Automatic review of labor rates over $250,000 per year.
  • Closer tracking of proposed versus actual rates.
  • Increased re-solicitations when only one bid is received.
  • More set-asides for small businesses, including more contracts being wholly executed by small businesses.

istock_000017511821xsmall2What does this all mean?
The contracts are out there, especially in growth areas such as cybersecurity and health IT—sectors that enjoy bipartisan support.
But competition is stiff.
With increased competition, the government sees the opportunity to get more bang for its buck.
Friel highlighted a quote from Frank Kendall, the Pentagon’s chief weapons buyer, addressing contractors: “I want you to be worried about somebody taking your business away and be working as hard as you can to ensure that you deliver more to us.”
Contractors should anticipate “margin pressure” from the federal government, Friel said. Illustrating this, he presented a Navy notice to contractors from May 14, 2012 noting a “significant environmental change in acquisition policy from ‘How quick can I get this done?’ to ‘Do I know how every penny is being spent?’.”
As a result of government penny-pinching, contractors should anticipate closer scrutiny.
And, of course, more scrutiny means more delays.
What this means for proposal editors, I’m not sure… but we’re used to delays and anticipating the unexpected.
Amy Paradysz leads proposal editing teams for Dragonfly Editorial.

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