2020 trends beyond the pandemic that shaped the market

Last year, I had expected 2020 to be marked by increasing growth. Federal contract spending reached its highest level ever in 2019, surpassing $600 billion. This marked four straight years of increased spending. But the major story of 2020 turned out to be something unforeseen by everyone: COVID. This is true for federal contactors as well as everyone else.

However, there were several other issues – often related to the pandemic - that highlighted this year in federal contracting. The following is my take on the trends we faced in 2020 that were somewhat behind the scenes as the pandemic grabbed most of the headlines.

• Incumbents Remained Entrenched - With the pandemic, many government agencies were reluctant to move contracts away from incumbents this year. This resulted in less opportunities for small and medium sized companies to expand to new client spaces. It remains to be seen if this trend will continue into 2021 especially given the changing administration.

• Pricing Became More Competitive - As federal agencies worked through budget constraints, the need for price competitive bids increased in 2020. This forced companies to “prune and tune” throughout the year in an effort to remain at price points that were often tight to begin with.

• More of a Focus on Best in Class Vehicles - For a few years now, the federal government has been pushing agencies to access best-in-class (BIC) government-wide acquisition contracts (GWACs) to increase their buying power and access to pre-vetted industry partners. In general, this has been a positive for mature small businesses and should continue to expand in the coming year. OASIS, STARS III, CIO-SP4, Polaris and a multitude of other vehicles are becoming more prevalent in federal contracting. I view this as a positive development since it enables federal agencies to acquire a wide array of complex professional services more efficiently and cost-effectively.

• New Business and Networking Became Harder – This was mostly due to the pandemic. Meeting prospects and providing capability briefings was much harder in 2020 as there was little opportunity for in-person meetings. It is much harder to make new connections and provide a clear view into company culture and compatibility through Zoom or Google Meet.
• The Importance of Being “Employee-Centric” - It is no secret that talent is at a premium in today’s federal contracting market. In 2020, employers offered flexible work schedules, increased benefits and telework to attract and retain top employees even before COVID hit hard in March. These benefits certainly help attract qualified candidates. However, a more “employee centric” work environment is key for employee satisfaction. This can include processes and procedures that ensure open communication and positive feedback. It also means offering flexibility in terms of schedules and projects that a team member is assigned. This is a trend that will continue going forward.

• Teaming was on the rise – There was an uptick in teaming and joint ventures as smaller contractors looked to market collective capabilities and large primes saw more attractive opportunities in the set-aside arena. Teaming arrangements have been becoming more popular over the last several years in federal contracting, and for good reason. Teaming helps contractors gain access, minimize risk, increase knowledge and offer a more competitive price point. In fact, small businesses often find that teaming is the most effective way to compete and thrive in the federal market. 

Federal contracting was a challenge this year, with a growing economy interrupted by COVID and government priorities geared toward addressing the pandemic. Being on top of trends will help contractors gain opportunities and navigate whatever issues come up. While the trends discussed in this article are not all-encompassing, they will likely be in the headlines throughout the next twelve months and beyond.