Contractor Confidence in Government Market Less Certain Amid Pandemic

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The coronavirus has increased uncertainty in the public sector market.

Before the coronavirus outbreak, the contracting community expressed “high confidence” in public sector sales for 2020, expressing optimism in steady government buying following 2019’s lengthy government shutdown that set many companies back.

Now, amid a pandemic with no end in sight, a largely remote workforce and other contractor challenges, the contracting forecast for 2020 and beyond is much less certain.

“We saw a strong performance across the board in 2019, and as we entered 2020, the outlook was rosy,” said Amy Champigny, senior product marketing manager at Deltek. “Now, to some degree, that has happened, but not in the way people expected. The COVID-19 pandemic is going to force a lot of contractors to think carefully about how they come out of this.”

Champigny spoke with Nextgov about Deltek’s Clarity Government Contracting Industry Study, a wide-scale survey of hundreds of government contractors regarding issues, trends and opportunities impacting the market. At the time the survey was fielded—between Jan. 6 and March 2—70% of contractors expected government sales to be higher in 2020 than 2019. Now, “consensus expectations call for significant negative growth in the second half of 2020, and there is not yet a clear path to recovery,” the authors state.

Even before the pandemic, however, the survey elevated trends that are significantly impacting the contracting community. They include an “ongoing struggle for talent,” compliance challenges with “ever-increasing regulation,” the increased importance of data availability, prioritizing IT investments and portfolio diversification.

Technology-specific challenges mirrored overall contracting challenges, with 64% of respondents citing IT and data security as a “top challenge” and 57% concerned about meeting regulatory requirements. Just over half—53%—of respondents said they planned to move on-premises solutions to the cloud, a “data point that would probably be a lot better right now,” given the shift to remote operations, Champigny said.

“In my opinion, moving forward we’re going to see a lot more of a hybrid approach [for government contractors],” she added.

The top four technology trends referenced by contractors all involved data: big data, data science, artificial intelligence and machine learning.

“Companies are collecting more data than ever before but are they using it effectively?” Champigny said. “Maturity with data is important here, no matter what section you’re looking at. If we’re talking about IT, there’s a people story in [the report] in how companies are providing modern tools to a modern workforce to get what they want and need. We’ve seen contractors pay more attention to their brand, and whether they are perceived as a modern company.”

Champigny said there’s so much uncertainty regarding 2020 and beyond in part because there are so many variables in play. In theory, she said contractors with diverse portfolios should be better positioned to weather an extended storm, but nonetheless a significant number of contractors reported—even before COVID-19—challenges regarding cash flow. She said it’s also unclear how much of the $2 trillion federal stimulus money will flow to contractors.