Survey: Professional services dominate federal buying

In an era of tight federal budgets due largely to the costs of war in Iraq and Afghanistan, a new survey shows that procurement spending is no longer linked to budget fluctuations and that professional services and information technology dominate government buying.

The 12th annual Government Contractor Survey, released Thursday by the accounting firm Grant Thornton LLP, found that professional services procurement grew by $59 billion between fiscal 2003 and fiscal 2006 despite civilian agency budget cuts, said Stan Soloway, president of the Professional Services Council.

Soloway presented an overview of Grant Thornton's findings the same day at the Government Contractor Roundtable in McLean, Va.

Professional, administrative and management support services accounted for 40 percent of that growth and research and development accounted for another 24 percent.

The survey also found that federal buying is becoming more centralized as the move to enterprisewide acquisition contracts continues. Governmentwide acquisition contract sales were down 25 percent in fiscal 2006, the report said.

As for mergers and acquisitions, the survey found that 69 percent of respondents said they expected the environment for M&A to remain the same over the next few years while 23 percent forecast an improved M&A environment.

Soloway said the trends in the report lead to several unanswered questions. For example, is the federal purchasing business model about to be fundamentally changed? He cited pending legislation on Capitol Hill aimed at greater congressional oversight of contractors and procurement, and the expected large-scale retirement of older federal employees.

The conclusions of the Acquisition Advisory Panel report, known as the SARA panel, posed procurement problems, too, he said.

"The most significant piece of the reform would be to redefine how the government designates something as a commercial service," he said. "If we start going and tinkering with the definition of a commercial service, the way the Acquisition Advisory Panel has recommended, I believe it is going to have a major impact on the [federal] marketplace."