BLOOMBERG FORECASTS CONTRACTION IN FEDERAL MARKET
Federal spending could shrink by 5%, or perhaps a bit more for the remainder of FY’22, according to a recent market forecast issued by Bloomberg Government. Contract spending could decrease from $650 billion last year to $617 billion this year, or even a bit less depending on the actions of certain agencies. The overall downturn is anticipated to be led by reduced activity in HHS, Agriculture, and the Department of Homeland Security. These three agencies increased spending during the core of the pandemic to meet the needs of those who rely on their programs. Bloomberg’s outlook for the defense market is less certain, with forecasts showing both an increase or a decrease depending on certain actions. Proposed increases for R&D, medical services, and operations would fuel an increase while drops in medical services, professional services and weapons programs could drag spending numbers lower. Bloomberg speculates that fewer and larger contracts may go to fewer and larger companies. Contractors could also assess their competitive approach on how they participate in large contract vehicles and the overall number of bids they submit. Not mentioned in the Bloomberg report was the impact of severely late Congressional appropriations on the acquisition cycle. FY’22 presents an almost perfect storm of a tightly compressed acquisition time frame with significantly fewer acquisition professionals to execute each project. Market intelligence, relationships, and focus will be especially important factors for contractors as they attempt to navigate this year’s market. More than one commentator has suggested that it is time to “hold on tight”. In the meantime, Bloomberg projects that FY’23 could result in a rebound of contract spending to within 2-3% of FY’21 totals. Indeed, spending could be much higher depending on any number of internationally related factors.