What's driving today's federal market?

There are a number of opportunities for contractors coming in fiscal 2016, and those opportunities are tied to a number of drivers and issues reshaping the federal contracting marketplace.

Speaking on the Professional Services Council’s 2015 Vision Federal Market Forecast webinar, Robert Haas, Vision federal IT budget team chair, said that many of the drivers and issues affecting the market are related to budget, performance and technology.

PSC picked up the annual market research study when it acquired the TechAmerica Foundation. The full findings of the research will be presented during a two-day conference Nov. 18 and 19. The research is conducted by industry volunteers who interview government officials about their needs and priorities.

“The interviewees suggested that the deficit is squeezing the budget over the long term, the continuing resolutions are complicating their planning cycles, to the point where they can’t make long-term investment decisions,” Haas said.

“And then even beyond that, there’s this sequester mentality that exists that’s really driving some changes in the contracting and portfolio management side of things that are not necessarily helpful for long-term transformation of government,” he said.

Aside from budget-related issues, performance-related drivers and issues were often mentioned by interviewees, Haas said, noting that it came up in almost 80 percent of the interviews in various forms.

“What is the government is doing with the money it spends, and what sort of results is it achieving? The FITARA legislation that we saw passed is one that a number of folks are looking forward to as a driver of transformation in the upcoming years,” Haas said.

Another performance-based issue related to the market is the workforce. Agencies are finding that transforming their existing workforce, especially in the hot areas like cyber and analytics, particularly challenging.

“Finally, [interviewees] mentioned making decisions for saving today versus long-term value is very difficult,” Haas said.

Technology wise, one driver is the fact that many chief information officers’ agendas prioritize the modernization of the IT infrastructure as well as cybersecurity. “They’re really focused around changing the environment and making it survivable and stable,” Haas said.

Other big technology-related drivers in the market are the focus on smart IT deliver—examples being the U.S. Digital Service and 18F, Haas said—and the focus on user experience.

“It’s not the fact that we’re introducing cloud and mobile and analytics type solutions, it’s how they’re being used and how quickly the user can adopt them,” Haas said. That is what agencies are focused on doing.

“If we think about what this really means for industry, there are areas of opportunity,” Haas concluded.

Shifting gears to the acquisition side, services still rule the day.

“We see services holding its traditional share, and in fact, I think [contractors] should be more aggressive. Services right now is about 55 percent to 56 percent of total DoD spend,” said Alan Chvotkin, PSC's executive vice president and counsel.

Chvotkin said the percentage should hover around there, but will certainly exceed 50 percent.

There is also going to be an effort to focus on requirements, Chvotkin added.

As far as pockets of growth, he added, contractors should look for opportunities tied to supporting the warfighter or opportunities linked to specific areas like cyber, autonomy and data analytics.

“As the department moves forward on the technology roadmap, I see a greater use of knowledge based services to support those activities,” Chvotkin said.

Contract wise, IDIQs are still the preferred contract of the government.

“I don’t see any move away from that, but there are still not only IDIQs generated within the department, but also IDIQs from others,” he said.

Lastly, there is a continuing debate on innovation—of not only how to buy it, but from whom to buy it, Chvotkin said—and how the government should encourage non-traditional players into the marketplace.

Takeaways from the webinar are manifold. Among them, said Stan Soloway, PSC president and CEO, are that the industrial base may be shifting. The mid-tier market share is shrinking, but it is not consistent, he said.

The government also is leaning toward a tendency of seeing things through "Silicon Valley-colored sunglasses," Soloway said, with the perception of all innovation coming from Silicon Valley.

"I think even the folks at Silicon Valley have agreed with us that that’s a pretty inaccurate representation," he said.