Grant Thornton's annual survey shows nearly a third of contractors saw a revenue decrease last year. Did profits also take a hit?
Over the past year, roughly 70 percent of government contractors in a new survey saw some growth or at least no significant change in revenue from their government contracts, but government contracting still is not a booming business.
Half of more than 100 prime government contractors surveyed had revenue growth and 21 percent had relatively little change. However, 29 percent brought in less revenue, according to Grant Thornton’s 17th Annual Government Contractor Survey, released Feb. 20.
“The fact that the highest percentage of companies experienced revenue growth continues a long-term trend reported in previous surveys, indicating that government contractors are far less vulnerable than commercial companies to recessions or slow growth in the overall economy,” Grant Thornton wrote.
Thirty-one percent said they had profits of between 1 percent and 5 percent of profits. And 37 percent of companies had 6 percent and 10 percent growth compared to last year. Eight percent of companies reported profits of 15 percent or more. Only 6 percent reported breaking even or experiencing a loss.
Grant Thornton wrote that the profit rates likely result from a greater reliance on multiple-award, indefinite-delivery, indefinite-quantity (IDIQ) contracts.
“There is little doubt that the amount of true competition for task orders in many IDIQ contracts is far less than was the case before IDIQ contracts became so prevalent,” according to Grant Thornton’s analysis of the survey results. “This lessening of competition in the pursuit of [government] efficiency is likely a contributor to higher profit rates.”
Meanwhile, the 29 percent of companies getting less revenue than last year is the highest percentage reported in several surveys.
The high numbers indicate “that government efforts to reduce deficits are adversely impacting government contractor revenue,” the survey said.
Surveyors distributed questionnaires during the first half of 2011 and received responses from participating companies over the next several months. Financial and business statistics in the survey typically relate to fiscal years ended in 2010 or early 2011. They are treated as belonging to the current year in the survey.