Government Contracting Industry Study

EXECUTIVE SUMMARY

6/13/2019

The 10th Annual Deltek Clarity Government Contracting Industry Study depicts a healthy market characterized by steady levels of government spending, continued growth and increased competition.

Deltek has been able to identify the most important trends, challenges and benchmarks in the government contracting sector. The trends and data points in this survey are designed to provide actionable insights into the sector as a whole while also capturing forecasts into the next year.

Growth and competition increases for most businesses.

The overall market for government contractors remains healthy as government spending has continued to increase. Businesses are seeking to make the most of the bullish spending environment by pursuing growth and profit-maximizing strategies. Competition is up as contractors are expanding into new government agencies and looking to grow their customer base.

Diversification into new agencies and pursuing new customers are increasingly successful strategies. 

Diversification is increasingly important to all businesses. As firms are looking to increase revenue and mitigate risks associated with agency-specific budget cuts, firms are expanding into new markets. Diversification has challenged firms by exposing them to unfamiliar contracting vehicles, making opportunities more difficult to identify early and increasing the importance of selecting the right teaming partners.

Attracting qualified talent and retaining top performers continues to be a major factor for success—and a high priority among the most successful companies.

High-performing talent is increasingly hard to find, hire, and retain in this economy. Firms are challenged by the ability to both match qualified candidates to open positions and retain top performers. Accordingly, employee retention has emerged as a competitive response. Businesses are now increasingly focused on improving the entire employee experience with new HCM technology, continuous performance management and robust career development programs.

IT departments are prioritizing security, compliance,  and cloud-based applications for the second year in a row.

Cybersecurity concerns continue to challenge contractors, especially as they transfer an expanding number of business functions to the cloud. About half of businesses reported that the number of cybersecurity incidents had stayed the same compared to last year, whereas 37% reported an increase. Accordingly, 48% of firms cited IT/data security as one of their top concerns. Strong interest in cloud-based applications continued for this year, with 46% of firms reporting that they have more than 50% of their business applications in the cloud. The expansion into the cloud has also introduced companies to new compliance standards, increasing costs, and regulatory burdens.

Cost of compliance for Contracting Purchasing System Review (CPSR) audits are on the rise. 

CPSR audits were indicated as a significant cost for firms in 2018, with 83% of respondents indicating it as a “moderately” or “more costly” compliance to meet. This is a relatively significant increase of 17 points from respondents last year. 

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This article originally appeared in the 2019 PSC Federal Acquisition Conference Thought Leadership Compendium.