Contractors: Cautious optimism for 2012

Deltek’s annual Clarity government contractor study reveals an industry that is cautiously optimistic but braced for some tough times.

The optimism mostly comes from more than 400 respondents saying their revenue growth was cut in half when comparing 2011 to 2010. The average growth rate in 2011 was reported as 7.3 percent, compared to 14.7 percent the year before. But their expectation for 2012 is a return to double digit growth of 19.6 percent.

There are plenty of reasons for the drop in 2011, particularly with the delayed budget, said Warren Linscott, vice president of GovCon product strategy and management.

“Growth rates just plummeted,” he said as he presented the findings of the Clarity survey.

The survey was taken by 429 organizations that answered questions covering, business development, project management, financial metrics and compliance and risk management.

Among the business development questions, most respondents said that the restrictive spending environment was their biggest challenge, followed by increased competition and limited business development resources.

Program managers said that inexperience project managers were their biggest challenge, followed by issues with collaboration and communications, and accurate project cost forecasting.

The Clarity survey found that companies are taking longer to issue invoices but the average of days sales outstanding dropped by 10 days to 42.8 days.

Linscott said the most likely reason for the longer invoice cycle is that companies are trying to head off challenges to invoices by scrutinizing them more closely before they are sent to customers.

The result is quicker payment because the invoices are of a higher quality and have fewer problems flagged by customers, he said.

“They are taking more time on the invoices to make sure they get paid the first time they are sent out,” Linscott said.

Compliance continues to be an issue for companies with more than 60 percent reporting that government oversight of their company increased in 2011. That compares to 42 percent reporting more oversight in 2010.

Top audit issues were unchanged from 2010 with labor and time-keeping topping the list of issues auditors targeted, followed by indirect rates and internal control systems.