Government contracting fuels the US economy and is forecasted for continued growth in the years ahead. In fact, the Government Accountability Office (GAO) predicts that federal spending on contracts will reach $7.5 trillion by 2027.
In his article on government contracting trends, Govcon expert Kevin Plexico highlighted the return of budget uncertainty in 2023. However, the release of Biden Administration’s fiscal year 2024 discretionary budget brings clarity to the federal government market. The budget request totals around $1.8 trillion.
The federal discretionary budget request assigns $842 billion to defense and $907.2 billion to civilian agencies. The top-funded departments include Air Force, Navy, Army, Health and Human Services, and defense agencies.
Deltek’s annual report, Clarity 2023: Government Contracting Industry Study, provides valuable insights into the industry. It examines challenges, benchmarks, and trends, highlighting positive performance and revenue growth. Deltek surveyed more than 700 GovCon leaders for the report.
In the Clarity survey, respondents showcased impressive performance and optimistic outlooks. 49% saw revenue rise in 2022; 62% expect further growth in 2023, indicating positive trends in government revenue. Additionally, over half (57%) of the participants reported an increase in overall federal contracts, particularly among larger businesses. Findings suggest a trend: more contracts won in quantity than value, indicating an abundance of smaller government contracts.
Why is growth happening?
A number of factors are driving this growth. Including:
- The need to modernize the nation’s infrastructure.
- The growth of the technology sector.
- The need to develop new technologies to address national security threats.
- Aftermath of the pandemic.
Here we will delve into more detail.
- The need to develop new technologies to address national security threats
Increased government spending on defense and homeland security. The U.S. government is facing threats, both domestic and international. To address these threats, it is increasing defense and homeland security spending. This increased spending is creating a significant demand for government contracts. For example, the U.S. Department of Defense is the largest single buyer of goods and services in the world. It spends billions of dollars each year on contracts for weapons, ammunition, vehicles, and other military equipment. The Department of Homeland Security also spends billions on contracts for border security, cybersecurity, and homeland security initiatives.
Cybersecurity is a top concern for 68% of GovCon officials surveyed in Deltek’s Clarity 2023: Government Contracting Industry Study
- The need to modernize the nation’s infrastructure
The U.S. infrastructure is in need of significant improvement. The government is investing in a number of infrastructure projects, such as roads, bridges, and airports. This investment is creating a demand for government contracts in the construction industry. For example, the U.S. Department of Transportation is responsible for the nation’s roads, bridges, and airports. The department invests billions annually in contracts for infrastructure construction, maintenance, and repair projects. - The growth of the technology sector
The technology sector is one of the fastest-growing sectors of the U.S. economy. The government is increasingly relying on technology to deliver services to its citizens. This growth is creating a demand for government contracts in the technology sector. For example, the U.S. Department of Health and Human Services is responsible for the nation’s healthcare system. The department spends billions of dollars each year on contracts for the development and use of healthcare technology. - Aftermath of the pandemic
The current climate is also affecting federal spending on contracts. The COVID-19 pandemic greatly impacted the US economy, leading to the government spending billions on pandemic response. This spending is creating a demand for government contracts in a number of industries, including healthcare, manufacturing, and transportation.
The Government Contractor Confidence Index (GCCI) shows an upward trend in 2023 as the economy recovers from the pandemic, providing industry optimism.
Other factors also contribute to the growth in federal contract spending, in addition to the mentioned reasons. These include:
The ageing population. The ageing U.S. population creates a demand for government services like healthcare and Social Security. The government is spending billions of dollars each year on contracts to provide these services.
The increasing complexity of government operations. Increasing government complexity drives demand for specialized services like information technology and engineering, leading to government contract opportunities.
The growing demand for government accountability. The public is demanding that the government be more accountable for its spending. The increase in government contracts ensures value for money by ensuring the government gets the best possible value.
This growth presents a significant opportunity for businesses that are able to compete for government contracts. To succeed in government contracting, businesses must understand the procurement process and agency-specific requirements. They also need to be able to develop and submit competitive proposals that meet the government’s needs.
To help you create competitive and compelling proposals, we’ve compiled the ultimate guide to proposal writing, drawing on the expertise of experienced proposal writers.
You can read it for free here.
The Biden Administration’s Fiscal Year 2024 Budget Request
As mentioned earlier, The Biden Administration’s initial fiscal year 2024 discretionary budget request amounts to approximately $1.8 trillion. The budget request funds defense and civilian agencies, including Air Force, Navy, Army, Health and Human Services, and defense agencies.
The Department of the Air Force receives $259.2 billion, including funding for the U.S. Space Force. The Department of the Navy is allocated $255.8 billion, an increase of $12.8 billion from the previous fiscal year. The Department of the Army receives $185.3 billion, slightly more than the FY 2023 level. Defense agencies receive $141.7 billion, showing a slight increase from FY 2023.
The Department of Health and Human Services (HHS) receives an allocation of $144.3 billion, reflecting a 13.6% increase. HHS funding highlights include investments in public health agencies, infectious disease prevention and treatment, cancer research, and IT funding.
The budget focuses on national security, cybersecurity, research and development, infrastructure modernization, public health, climate resiliency, and clean energy.
Areas of R&D spending include IT modernization, cloud computing, data analytics, artificial intelligence, and high-performance computing. Additionally, other areas of R&D spending encompass quantum information systems, robotics, biotechnology, and cybersecurity.
Top Government Contracts
Explore some of the top government contracts in the market today, offering lucrative opportunities for businesses. These large, complex contracts demand substantial time and resources from the winning bidders for successful execution.
You can find out more about these contracts in our Top Government Contracts blog.
CIO-SP4 RFP: $40B Chief Information Officer – Solutions and Partners 4
Streamlined IT acquisition for federal agencies, covering areas like cloud computing, cybersecurity, and more. CIO-SP4 holds transformative potential for small businesses, with approximately 400 contracts to award.
Protech 2.0 Fisheries Domain RFP: $8B
This contract supports NOAA’s National Marine Fisheries Service, offering professional and technical services in studies, engineering, and fisheries management. Reserved for small businesses, it presents a significant revenue opportunity.
GSA’s OASIS+ MAC Draft RFP: $60B
Providing flexible solutions for complex professional service requirements, this multiple-award contract encompasses management consulting, engineering, and financial services. Large and small businesses can participate, and the RFP has undergone updates to enhance opportunities.
DLA JETS 2.0 RFP: $12B
This contract supports DLA’s IT enterprise, program management, and research and development, encompassing various IT services. It offers opportunities for businesses to provide technical support to defense programs.
Gain insights and make informed decisions by downloading our free compliance matrix and comparison reports for each contract.
What can you do to get ahead?
In addition to our free ultimate guide to proposal writing we have some more tips to grow your government contracting business.
- Do your research. Before you start submitting proposals, it is important to do your research and understand the government’s procurement process. You should also research the specific agencies you are targeting and their specific needs.
There is nothing more frustrating than putting in many hours of work on a poorly qualified bid. This time equals valuable dollars wasted and and missed opportunities to invest in more suitable pursuits for you and your team. - Build relationships. Networking is vital in government contracting, enabling access to valuable opportunities and relationships for contract success. By building connections with key decision-makers you can gain valuable insights into upcoming projects, contracts, and procurement processes. Furthermore, networking enables you to establish trust, credibility, and a positive reputation within the industry. Building a reputation as a reliable contractor increases your chances of proposal consideration and contract awards.
- Develop a strong proposal. Your proposal is your chance to sell your company to the government. Make sure it is well-written, error-free, and that it addresses the government’s specific needs. Using software like VT Docs and VT Writer in the proposal process can elevate you from the competition.
With VT Docs you can automate past performance analysis, drill down into aspects like style references and Labour Category (LCAT) tables. You can also compare multiple docs side by side using key concept density visualization. Using automation can speed up the ability to identify the most relevant contracts quickly. - Use the customers tone and terminology. Incorporate the customer’s language. There is a psychological element called “mirroring” that you can take advantage of by mimicking the customer’s language. Mirroring their language shows that you know the customer and are compatible with them in your approach. Run proposal volumes through a readability analysis to score them. This will pinpoint inconsistent tone-of-voice and different writing styles. You will deliver a consistent tone of voice when multiple authors collaborate on a proposal.
- Be prepared to compete. The government contracting industry is highly competitive due to the significant financial resources involved. High-value contracts drive fierce competition as businesses aim to seize lucrative opportunities for significant revenue and expansion. Strict requirements and standards set by the government further fuel the competition. Government contracts’ long-term commitments and stable income lure numerous businesses, intensifying the already intense competition.
Government contracting drives the U.S. economy despite its complexity and competitiveness. Discover additional tips in our blog – Why did we lose? And what you can do to land that multi-million-dollar bid. Read it here!
In conclusion, the government contracting industry presents significant growth opportunities for businesses. With federal spending on contracts predicted to reach $7.5 trillion by 2027, it is crucial for organizations to understand the driving factors behind this growth. National security, infrastructure modernization, technology adoption, and pandemic aftermath drive the need for action. Businesses need procurement process knowledge, agency understanding, and competitive proposal skills for success in government contracting.
By leveraging the insights provided by experts like Kevin Plexico and Deltek, businesses can position themselves for success. Accessing resources like our ultimate guide to proposal writing is also essential.
