Study: Fed contracts increase but average value declines

As federal contract awards continue to increase, the contracting industry is facing a decrease in the average value of those contracts, according to a new study by the Center for Strategic and International Studies.

The CSIS study, unveiled Feb. 12, examined federal contracting between 1995 and 2007. It assessed federal contracting in 2007 as a $233 billion market.

The study found that although federal services contract actions have increased on average 7.8 percent in the past four years, the average contract value has decreased about 60 percent to $403,000 in 2007, the last year for which data was available.

The contracting market will continues to grow during the next few years, said David Berteau, director of CSIS’ Defense Industrial Initiatives Group.

But he said 2008 will be slightly down as expected. “We’re seeing roughly a five to six percent increase in ’08. Depending on what you think is going to happen in FY ’09, with recovery act funds, etc., we may see a very dramatic change in FY ’09 data.”

The Defense Department remains the largest buyer of contract services, followed by the Energy Department and NASA, he said. “We think that will continue as well.”

The report said so-called fully competed contracts account for the greatest dollar amounts and the largest average awards. The study also refuted the notion held by some lawmakers and other industry experts that no-bid contracts have “run amok.”

The data did confirm another popular notion of concern. The report said that midtier contractors are steadily being squeezed out of awards by the consolidation of industry and requirements from above, and by small businesses with federal set-aside awards from below.

Part of that squeeze is due especially to the large increase in the number of small businesses, Berteau said.

“Small contract actions represent the vast majority of the contract actions,” he said. Awards “under $250,000 [represent] 92 percent of all contract actions. The remaining 8 percent has about 95 percent of the dollars.”

About the Author

David Hubler is the former print managing editor for GCN and senior editor for Washington Technology. He is freelance writer living in Annandale, Va.

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