Survey: Government contracting industry profits remain modest

Although the government contracting industry’s profits remain modest, 55 percent of government contractors reported revenue increases from federal business in 2008 and only 18 percent reported a decrease, according to a new Government Contractor Survey by Grant Thornton LLP.

Only 14 percent of the contractors participating in the survey reported profit rates of 15 percent or more. Just over a third, or 37 percent, reported either no profit or a pre-tax profit of between 1 percent and 5 percent, while another 39 percent had profit rates of between 6 percent and 10 percent.

The survey also found a slight decrease in the number of respondents who expect revenue from federal prime contracts to increase this year (67 percent versus 72 percent last year).

Grant Thornton’s 14^th Annual Government Contractor Industry Survey is based on findings from more than 120 companies received by July 2008.

The survey also found that management and support staff members as a percentage of total employees increased to 16 percent in 2008 from 9.9 percent the previous year.

The findings are consistent with last year’s survey, indicating that moderate profits are a steady trend in government contracting, Kerry Hall, Grant Thornton’s Government Contractor practice leader, said in a statement today.

“Contrary to public and media perceptions, government contracting is not a business that generates abnormally high earnings,” he said. “One could argue that profits are unusually low, particularly when you consider the performance and financial risks inherent in government contracting.”