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By Nick Wakeman

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Nick Wakeman

Trump transition: Optimism tempered with hard realities

President-elect Donald Trump is seen as a disrupter of both the political status quo and the way the government operates.

While many details are still unknown and it is doubtful his actions will live up to his rhetoric, there likely will still be plenty of action that will have a significant impact on government contractors.

During a pre-briefing for the Professional Services Council’s annual Vision conference, several executives shared their views on what a Trump administration will mean and how it will impact the market.

As part of PSC’s media policy around Vision, I won’t be quoting people directly because they are expressing personal views and not official views for their companies.

For the most part they see positives. Trump’s plan to freeze hiring of government workers will likely translate into more outsourcing to government contractors.

The huge investment in infrastructure projects will drive many new contracting opportunities. And for large engineering and professional services firms, the investment in roads, bridges and the like will bring more predictability to their markets.

The government will continue to make a shift to more digital services, and that means more opportunities for contractors.

PSC also is optimistic that there will be more of a shift toward capacity-based buying such as the cloud. The cloud still has great potential in the federal market with only 5 percent of federal leaders saying they felt their agency had made enough of a movement to cloud.

Other opportunities for government contractors will be driven by new technologies that are gaining footholds in the market such as mobility, Everything as a Service, big data, the Internet of Things, and machine learning.

But while there are opportunities, there are also great challenges, but these are challenges any new administration would face.

There are macro-economic conditions that will present roadblocks to significantly increasing spending. Current projections have the budget growing from about $3.9 trillion in 2016 to $6.3 trillion in 2026. That’s a compound annual growth rate of 5 percent.

Meanwhile, projections for economic growth are at about 2 percent. This will continue to put pressure on discretionary spending. But the challenge with discretionary spending is finding the places to cut. “Discretionary spending isn’t as discretionary as people think,” one official said.

The expectation from PSC is that the topline number for the budget will not change much, but underneath that there will be significant changes.

As others also have predicted, the Budget Control Act and the threat of sequestration will likely be dealt with, at least for the short term.

But without stronger economic growth, any president will be significantly challenged to increase spending.

Besides a stronger economy, the government, particularly Congress, needs to work more efficiently. They have to move away from the reliance on continuing resolutions, which is particularly challenging for the Defense Department.

Not having predictable and timely appropriations undermines DOD’s ability to plan and implement.

As for Trump’s immediate impact in the market, it might be best to wait. Contract awards and other procurement activity take a sharp uptick traditionally between the election and the inauguration, but by January, spending plummets. One spokesperson attributed that to the fact that so many positions need to be refilled with the turn of an administration, and all of the inertia that comes along with that.

Congress is expected to punt on an omnibus spending bill during the lame duck session, which means the continuing resolution will be pushed well into the second quarter of the fiscal year. This will make new starts even harder to come by.

The takeaway I was hearing is that disruption is coming in what and how the government buys, but it might just take a little while before it gets here.

Posted by Nick Wakeman on Nov 16, 2016 at 1:17 PM

Reader Comments

Fri, Nov 18, 2016

Jack Little: your crystal ball is remarkable capable--if the info is good. In a relative vacuum in national security posts in the upcoming Trump period, we can expect that Sen. McCain will be even more influential than usual in combing the DoD budget for weak programs. Expect him to discover and eviscerate more than the usual number of acquisitions. There are many targets where the big contractors continue to run late and have success, most of the time, getting the govt to pay for their mistakes. The President himself will eventually tune in on this waste. Trump does hate waste. We need to hope that his SecDef is someone good. For those companies that are hyper sales oriented, the hope is for Bolton as Secy of State. But that would not be good for anyone who favors putting some effort into peaceful resolution of conflicts. We need to hope for the best

Thu, Nov 17, 2016 Jack Little NYC

Trump's Acquisition and Procurement Transition team has already come up with a list of eight major procurements that need to be restructured and is going to mandate retraining of a large part of the work force. COTS will be king, according to sources. Productivity improvement and quality assurance rather than "innovation" will be the Trump govcon theme, according to the leading candid for the OFPP slot

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