Industry execs see steady improvement as market moves forward

The government market has shown real signs of improvement and executives at a Deltek conference expressed optimism. Where do they see the signs of a market on the rise?

Buoyed by a two-year, bipartisan budget agreement and more clarity in federal agency spending, government contractors are gearing up for steady expansion in the market through 2015.

On the civilian agency side, there has been a 13 percent across the board upswing in contract spending in first half of 2014 versus the first six months of last year, said Kevin Plexico, vice president of federal information solutions for Deltek.

“It’s a pretty substantial improvement in the market,” said Plexico, speaking Wednesday at Deltek’s fifth-annual Government Contracting Industry Event in Tysons Corner, Va. “Most  agencies are now growing versus contracting and in some cases showing pretty impressive growth year over year. We’ve had a nice recovery.”

Plexico’s remarks preceded a panel discussion on the state of the government contracting market led by Warren Linscott Jr., vice president for government-contracting product strategy and management at Deltek. Other panelists were industry consultant Thomas Anderson, Brad Antle, CEO of Salient Federal Solutions, Greg Carper, vice president of business development for Engility, and Rick Wagner, chief strategy officer at TASC.

Observing that task-order solicitations are up 57 percent in the second quarter of 2014 over the second quarter of 2013, Plexico said: “This is the best news I can deliver for 2014, looking at solicitation activity on task order-based contracts, where agencies have real intentions of buying something specific.”

He advised industry executives to look more closely at task orders versus regular solicitations when seeking business. “So many solicitations we see these days are RFPs, where [agencies] are not really committed to buying anything; they’re just setting up a vehicle. But obviously, task orders are real work and a more specific activity that agencies are looking to procure.”

For the rest of fiscal 2014, “we’re going to continue to see strong spending in Q3 and Q4,” he predicted.

Looking ahead to fiscal 2015, Plexico said next year will be “incrementally” better than 2014. “We don’t see major shifts or funding changes in the aggregate but there are these lumpy areas where some agencies are getting a disproportionate share of reductions and while other agencies continue to grow,” he said.

Plexico said that the “hot spots” in the government market “are pretty easy to find,” including cybersecurity, which continues to get a large percentage of IT dollars, health care technology, big data, and construction and engineering, particularly for maintenance and renovation of existing facilities rather than new construction.

“The challenge is how you move into those areas, how you establish a beach head,” he said. “Of course, larger companies have the luxury of being able to acquire to prepare for those hot spots. The challenge that most companies face is finding growth in a market where it’s not easy to move overnight. If you want to do business [for example] in the Veterans Administration, how do you get in? You have plan ahead, you have to be thinking about the contract vehicles they use, you have to start positioning and make sure your capabilities align, and have some differentiators, because it’s obviously going to be crowded.”

Indeed, winning is all about positioning, said Anderson. “Know your customer, know what their spending patterns are,” he said. “Bring real value to the table, including key personnel. It’s so significant to have the right team at the table. The competition is fierce right now. There are many competitors who are entering spaces that you typically didn’t see them in before. Know who your competition is. As part of your business development function, understand their strengths and weaknesses. Do a competitive analysis as part of every opportunity that you go after.”

The panelists also addressed a major concern for government contractors in the human resources area: an imminent “talent crisis,” according to Linscott. “Finding the right talent is going to be a challenge and industry really needs to think about what are they going to do engage new talent,” he said. ‘Unfortunately, pouring more money into recruiting is not necessarily going to solve the challenge.”

Panelists offered the following thoughts on dealing with the talent problem:

  • “We’re in challenging times and that’s not going change overnight,” Wagner said. “You have to attract new people with new ideas who can adapt to the new environment.”
  • “From a business development perspective, look for candidates with entrepreneurial spirit,” Carper said. “Have a strong relationship with a tier one recruiting firm. Have your executive team play a role in helping select your business development candidates.”
  • Young people “are looking for stability in where they work, they’re looking for cool projects and fun things to do, and they’re looking for companies that bring innovation to the table because it sets a tone for where they might be going in the future,” Anderson said. “They want companies to invest in their professional growth.”
  • “We don’t put the hiring in HR,” said Antle. “Hiring is done in our business units. We have dedicated centers that are focused on building networks of individuals that have the kind of skills that we need all the time. So when we need somebody for a job, we already have a line to somebody who can do the job.”