As many in the government sector know, the 2013 government shutdown and subsequent triggering of the sequestration negatively impacted the government contracting market. Though the extent of the impact has been difficult to discern. If you just look at the top level year-over-year trends, for instance, there’s no missing the $56 billion reduction in total obligations between FY 2012 and FY 2013 – a 10% drop.

What’s less obvious are the longer term impacts of the 29% reduction in new contract awards that occurred between FY 2012 and the next two fiscal years (about 1.7 million in 2012 to 1.2 million each in 2013 and 2014).

Contract spending during the years immediately following the congressionally imposed spending restrictions was buffered by spending against prior year awards. However, as those contracts awarded in the early 2010s reach their period of performance end dates, the longer term impacts of the reduction in new contract awards may begin to reveal itself.

Fortunately for those in the federal contracting industry, the market is growing again. While obligations remained depressed in 2015, new contract awards increased significantly – more than 2.5 million new contracts were awarded. And perhaps just as crucially, the number of new companies entering the market is also rebounding.

Prior to 2013, the number of first time awardees (companies winning their first government contract) averaged about 15,000 per year. That figure dropped to under 11,000 in 2013, but it has increased to nearly pre-sequestration levels since then.

This is an important statistic. There has been some concern in the industry that budget cuts and spending restrictions would further entrench legacy contractors and make it more difficult for new market entrants. With regard to at least this one metric, that doesn’t necessarily appear to be the case.

By agency, the growth in first time awardees is fairly consistent. The one exception is The Department of Veteran Affairs which, according to the Washington Post, has admitted to spending billions of dollars on private medical care for veterans without contracts over the past few years.

Also interesting is a look at first time awardee growth by set-aside type. There’s been notable growth in Service Disabled Veteran Owned Small Business set-asides as a mechanism for bringing new companies into the government market, as well as Total Small Business growth. For 8(a) firms, the government has been leveraging its ability to sole source. This is somewhat counterintuitive or a first time award as a company would be less likely to have the quals for a sole source justification without any prior government contracts.

The majority of first time contracts were awarded without set-aside, and this group is also experiencing the most growth. This could be due to the fact that The White House is working to reduce no- and limited- competition awards in an effort to increase competition and reduce contract spending waste. This has increased the number of competitively won first time contracts but may be bad news for companies looking to enter the market by leveraging a socioeconomic set-aside designation.

In sum, the recent growth in the number of contract awards (including growth in first time awards) may portend opportunity for new market entrants. However, firms without 8(a) status will likely need to be prepared to win competitive and other non-set-aside contracts.