Contractors Predict Tightening of Federal Opportunities in Next 5 Years

Remzi / Shutterstock.com

Governmentwide spending on defense and civilian contracting risks being pinched over the next five years by growing mandatory spending on entitlements, according to industry research being unveiled Wednesday and Thursday at a conference convened by the Professional Services Council.

Though the overall federal budget will rise from current $3.9 trillion to $6.2 trillion in 2025, the defense portion is projected to fall from 15 percent to 11 percent of that total, while discretionary spending shrinks from 30 percent to 20 percent, according to the group’s first annual Vision Federal Market Forecast, a synthesis of the thinking of some 300 contracting specialists from industry, agencies, think tanks and Congress.

“Interest payments on the debt alone will double by the mid-2020’s,” said Stan Soloway, the council’s retiring president and CEO, in a preview conference call with reporters. This and entitlement accounts such as the Social Security Disability Insurance Trust Fund will have a huge financial impact, which often gets glossed over, and is “untenable and unsustainable,” he said.

For contractors and contracting officers, the deficit squeeze, Congress’ use of continuing resolutions and a “sequester mentality” are driving a change in contracting and portfolio management, ’PSC's forecast concluded. Contractors and agency officials will continue to plan on a tight budget but crave a spending commitment more enduring than a continuing resolution “so that contractors can compete for new work rather than re-competing old work,” one analyst said.

All will need to learn how to function in an environment where the customer can’t necessarily manage for the long term while still trying to make predictive and timely contracting decisions.

Industry leaders said companies need to stand up to crippling bureaucracy because “the procurement process is so burdensome it needs to be completely revisited,” According to PSC. Contracting officers generally complained that the Obama administration’s rules and policies are not being vetted at the local level and are “keeping us from doing our jobs, while slowing procurement.”

The forecast included some upbeat news. Specifically, the unclassified federal information technology budget for procurement, transition to the cloud and transforming the workforce will tick upward from $79.5 billion in fiscal 2016 to $85.9 billion in 2021, though inflation flattens some of the growth. Pentagon services contracting will maintain itself at $100 billion annually between now and fiscal 2025,  accounting for more than half of the government’s services spending, said PSC Counsel and Executive Vice President Alan Chvotkin.

Opportunities for contracts in the shifting market exist in cybersecurity, Pentagon experimentation, consolidation of contracts under General Services Administration shared vehicles and small business set-asides, the analysts said. But many contractors feel like “piñatas, on the receiving ends of whacks,” Chvotkin said. He cited a “significant shift of risk” for such mishaps as database breaches, labor unrest and reporting compliance to prime and subcontractors at a time when prices are coming down and the government relies more in indefinite delivery/indefinite quantity contracts.

Too many in the field view innovation, however, through “Silicon-colored glasses,” the analysts said, arguing that the industry has more versatile offerings than just those at startups in Silicon Valley.

The budget situation leaves contractors with little choice but to wait until Congress produces a budget deal that goes deeper than the political expediency that lets issues “float” until after the 2016 election, the analysts said.

Information technology policy has been a nonpartisan issue for decades, the analyst noted, but Democrats and Republicans clearly have sharply contrasting spending priorities, judging from their budget submissions.

Soloway said that some of the current administration’s new rules, such as President Obama’s Fair Pay and Safe Workplaces executive order, are seen by many would-be federal contractors as a “counterintuitive” compliance and reporting burden, which might prompt both parties in the future to use cost-benefit analysis to consider whether the rule “has gone overboard.”

(Image via  / Shutterstock.com)

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Going Agile:Revolutionizing Federal Digital Services Delivery

    Here’s one indication that times have changed: Harriet Tubman is going to be the next face of the twenty dollar bill. Another sign of change? The way in which the federal government arrived at that decision.

    Download
  • Cyber Risk Report: Cybercrime Trends from 2016

    In our first half 2016 cyber trends report, SurfWatch Labs threat intelligence analysts noted one key theme – the interconnected nature of cybercrime – and the second half of the year saw organizations continuing to struggle with that reality. The number of potential cyber threats, the pool of already compromised information, and the ease of finding increasingly sophisticated cybercriminal tools continued to snowball throughout the year.

    Download
  • Featured Content from RSA Conference: Dissed by NIST

    Learn more about the latest draft of the U.S. National Institute of Standards and Technology guidance document on authentication and lifecycle management.

    Download
  • GBC Issue Brief: The Future of 9-1-1

    A Look Into the Next Generation of Emergency Services

    Download
  • GBC Survey Report: Securing the Perimeters

    A candid survey on cybersecurity in state and local governments

    Download
  • The New IP: Moving Government Agencies Toward the Network of The Future

    Federal IT managers are looking to modernize legacy network infrastructures that are taxed by growing demands from mobile devices, video, vast amounts of data, and more. This issue brief discusses the federal government network landscape, as well as market, financial force drivers for network modernization.

    Download
  • eBook: State & Local Cybersecurity

    CenturyLink is committed to helping state and local governments meet their cybersecurity challenges. Towards that end, CenturyLink commissioned a study from the Government Business Council that looked at the perceptions, attitudes and experiences of state and local leaders around the cybersecurity issue. The results were surprising in a number of ways. Learn more about their findings and the ways in which state and local governments can combat cybersecurity threats with this eBook.

    Download

When you download a report, your information may be shared with the underwriters of that document.