Industry Trends: Discretionary Spending Down, Profit Margins Up – Read more!

March 19, 2012

Deltek releases GovConClarity Industry Trends this week, confirming our observation of trends over the past year. Highlights from the survey are:

  • Overall pool of available dollars for discretionary spending is down 4%.
  • There are a few growth sectors – Energy/Conservation, Budget Streamline Processes for the Government; Healthcare; and, of course, Cyber.
  • In general, it appears that, although growth has slowed and the amount of negative growth has doubled for contractors, profit margins have increased on a year-to-year basis, which means that contractors have made adjustments to the more competitive pricing, etc. they are seeing. The good news on this is that we should begin to see a stronger focus on the longer term future of your business vs. a redirect of business “in the moment.”
  • Significant increase in plans for M&A activity – large and mid-size contractors are looking for strategic acquisitions.
  • Cost reimbursable-type contracts are up 15% over last year at the large company level.
  • Fixed price contracts are up by 10% for mid to small companies
  • Strong focus on: BD initiatives, specifically in finding the opportunities earlier; teaming partners that are strategic; and exploring new markets.
  • Overall fringe pool dollars are down. Employers are making some cuts and trimming on the benefits – a very fine balance in also needing to attract and retain key employees.
  • Strong focus on a robust project management process internally.
  • Significant increase in government oversight with the top three areas being labor and timekeeping, indirect rates and internal control systems.

For more information on the survey, see GovCon Clarity Industry Trends Report