Conflicting factors will keep fed contracting growth rates low

FedSources budget analysis forecasts modest 2 percent CAGR thorugh 2014

An assessment of the Obama administration’s proposed 2010 federal budget finds four key accelerators that should provide contracting opportunities in 2010 and beyond, according to a new survey by FedSources.

However, the analysis also determined that five decelerators and four neutral ones will outweigh the accelerators, resulting in a slow compound annual growth rate of 2 percent through 2014.

Ray Bjorklund, FedSources’ senior vice president and chief knowledge officer, deemed them the federal addressable market drivers.

The analysis found an emphasis on energy, targeted earmarks, support for the troops and infrastructure security, he told attendees at the June 2 Annual Federal Outlook Conference. See earlier coverage.

The emphasis on energy, in part a holdover from the George W. Bush administration, will be concentrated on reducing U.S. dependence on foreign oil in the next few years, he said.

As for earmarks, Bjorklund said, “This is Congress’ side of the equation where Congress is saying don’t take away those grant programs, don’t take away that kind of spending. Put it back [in the budget].”

He said supporting the troops at home and in combat zones will require large sums of money, especially for healthcare programs and benefits in the Defense and Veterans Affairs departments. “There are lots of new dollars in this budget associated with veterans’ support,” he said.

Bjorklund said infrastructure security includes cyber security as well as physical infrastructure security. “In the budget there is actually a big chunk of money that the Army Corps of Engineers is going to be executing for new contracts to improve the physical infrastructure and security of dams, waterways, canals, locks systems and the like.”

The decelerators that might apply the brakes to CAGR were deficit pressures and a recessionary economy, a lingering shortage of political appointees to fill vital government positions, an understaffed federal acquisition workforce, increasing in-sourcing, and a diffusion of centralized procurements due to the growth of governmentwide acquisition contracts and indefinite delivery, indefinite quantity awards.

Bjorklund described the shift from defense spending to domestic spending, the emphasis on healthcare IT reform and education, procurement “reform,” and increased oversight as neutral, potentially having either a positive or negative affect on the contracting community.

“Reform is in quotes,” he said, “because we’re not seeing that yet but it could be a plus or minus as the administration gets a handle on some of the detailed mechanisms of the way our acquisition systems are working or not working.”

Increased oversight is a plus or minus, he added, because some contractors already have internal oversight tools and methods in place while others facing declining revenues will find that compliance adds to their costs of doing business.

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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