Some very interesting data, trends, and analysis of government contracting, which should be of interest to government contractors, was published in a recent report by the National Contract Management Association (NCMA) and Bloomberg Government (Bloomberg).
Some of the data should come as no surprise to firms seeing how U.S. government contracting dollars continue to be declining. According to the report, titled “Annual Review of Government Contracting, 2015 Edition,” contract spending will likely continue to fall due to budget caps and the continuing military drawdown in Afghanistan.
The report contains some other interesting data. Of all of the states in the country, Virginia has experienced the most federal contract spending, increasing to nearly $1 billion in 2014 over 2013, despite the decrease in federal procurement dollars. California, Texas, Maryland and the District of Columbia were second, third, fourth and fifth, respectively. On the contractor side, Lockheed Martin remains the number one contractor, followed by Boeing, General Dynamics, Raytheon, and Northrop Grumman. Nine of the top ten are DOD contractors, according to NCMA/Bloomberg.
Not surprisingly, defense spending accounts for about two-thirds of all federal contract dollars. The Department of Energy led the pack amongst civilian agencies for the other one-third. Significantly, expenditures on health-related goods and services increased notwithstanding the reduction of federal contracting spending, the report said. And, consistent with the trend away from expenditures on war-fighting capabilities and general belt tightening, NCMA/Bloomberg reported that two-thirds of contracting obligations were spent on services, such as IT support and facilities management, instead of ammunitions and food (“Brains over Bullets and Butter”).
According to the report, there were also more contracts awarded on a competitive basis. Approximately 70% of contracts were competed, representing a three percent increase over the 2013 figures. With regard to contract types that were awarded, fixed price contracts remain the most typical; nonetheless, there was a more significant decrease in the award of such contracts when compared to all other years. According to the report, 63 percent of contracts were awarded on a fixed price basis in 2014; 33 percent on a cost basis; four percent on a time and materials/labor hours basis, and another one percent were not reported.
The report also confirms the very competitive nature of the market. One indicator the report highlighted was the increase in protests in 2014 after falling in 2013 for the first time in five years. The increase in protests, which our firm has also observed, is undoubtedly attributable to the need of contractors to keep a market share that is getting smaller. NCMA/Bloomberg also reported that the number of winning federal contractors is declining because the government is not looking to the private sector for goods and services the way it did in the past. In this regard, NCMA/Bloomberg report that there were 114,520 contractors awarded work in 2013 but only 97,012 in 2014.
Although the data suggests that there are many more losers than winners in the government contracting market, it also shows that firms in certain sectors are doing better than others. For example, the report indicated that the Federal Procurement Data System identified a notable increase in the number of small businesses receiving a greater share of the procurement pie. In addition, the report confirms what many contractors tell us about small business set-aside usage: that it is growing with more work awarded in 2014 to 8(a) and Service-Disabled Veteran Owned Small Businesses.
NCMA/Bloomberg should be commended for the report. It contains simple graphs and has easy-to-read summaries of the data, allowing contractors to gain a better understanding of the latest trends, as well as analysis, of what is taking place in the government contracting market. It should help contractors better understand the state of the federal procurement market for last year as we enter the next government fiscal year.