2017 Federal Contracting Market Trends

By Gloria Larkin
As the United States transitions to a new President, the federal spending market is expected to continue with positive momentum, according to the experts speaking at the “GovConomy Today” event held in January. Larry Davis, Managing Partner at Aronson, LLC, reported that while overall the growth is stable in most federal industries, “..there is outsize growth in cybersecurity, C4ISR, data analytics and healthcare IT…”
Additional federal spending highlights include:
–Proposed base defense spending of $52B in FY17 is in line with the bipartisan budget agreement
–FY17 federal IT spending request is up 1.3% from $88.7B to $89.9B
–$19B is allocated to cybersecurity
–Defense spending favors weapons and platform budgets, but rapid technological changes will drive IT and services higher in the long run.

The federal market will continue to be highly competitive for large and small businesses with little room for uninformed vendors. Businesses must stay informed about changing rules and regulations as well as developing aggressive business development strategies such as:
–House-passed and Senate-passed version of the FY2017 National Defense Authorization Act institutes detailed provisions related to lowest-price technically acceptable (LPTA) contracting practices, bid protests and enhancing competition.
–Continued growth of government-wide acquisition contracts (GWACs) and agency-wide indefinite-delivery indefinite quantity (IDIQ) contracts and increased small business procurement has increased pressure on the mid-size contracting firms.
–New business models have developed to remain competitive including mergers and acquisitions and restructuring.

With President-elect Trump taking office in January, he communicates his top priority areas to include strengthening national security, increased spending on infrastructure projects and improving a global military presence. According to the Aronson LLC GovConomy Today Report published January 12, 2017, the Trump Administration priorities include:

–Increasing spending on critical infrastructure. Over $550B has been pledged through federal tax credits which could generate $1T in private sector investment in a ten-year period.
–Increased opportunities for contractors especially those in the energy, construction and services industries.
–Military funding may include increasing the size of the U.S. Army to 540,000 active duty soldiers; rebuilding the Navy to a goal of 350 ships; provide the Air Force with 1,200 fighter aircraft and growing the Marine Corps to 36 battalions.
It is interesting that before the news of Russia’s cyber hacking affecting the U.S. election, the Trump administration had stated that a top priority includes restoring national security by building resilient cybersecurity systems and technologies in both the public and private sectors. Trump’s platform also supports development of a cyber review team, information sharing to thwart cyber-attacks, the exploration of cyber-insurance, expansion of the cyber workforce and supply chain safety. He would rely heavily on contractors to develop innovative methods and technologies.

One of the local area’s biggest challenges remains finding an affordable workforce. Stephen S. Fuller, Ph.D., George Mason University Dwight Schar Faculty Chair and University Professor, as the GovConomy keynote speaker, stated that the national unemployment rate was recently measured at 4.6%, after declining from a high of over 10% in 2009. He explained that this means the U.S. is essentially at full employment. His overall take on the Trump economic plans include a growing deficit, higher inflation and slower jobs growth rate.

In order for government contractors to see success in the new administration it is this author’s recommendations that businesses explore new federal agencies and business development strategies and tactics, embrace the agile mentality in order to adapt quickly and leverage a multi-prong strategy including simultaneously pursuing business as a prime contractor, a subcontractor and a teaming partner. Including new tools such as customer and prospect management systems, updated opportunity identification services, and cloud-based software solutions for accounting and compliance issues will help reduce overhead and labor costs in this cost-sensitive market.

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