As I discussed in my blog posts at last fiscal year end, the federal government packs a large percentage of its procurements into Q4 every year. Between 35-40% of procurement activity takes place just between July and September. That percentage is even higher in some sectors and for some agencies. Take a look at the blog posts from last year for more detail on the agency-by-agency comparison and the NAICS code analysis.
As we approach another fiscal year end it seems a good time to look back at federal contracting trends over the past several years. Specifically, I wanted to see if we could use Q1 through Q3 award and spending activity to forecast Q4 activity.
Starting at the macro level, here is a chart of federal government-wide contract spending since 2011.
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 and nature of the impact has been difficult to discern. Bear with me as I begin to unpack this.
If you just look at the top level year-over-year trends, there’s no missing the $56 billion reduction in total obligations between FY 2012 and FY 2013 – a 10% drop. There was also a $20 billion (3.7%) drop in spending between FY 2011 and FY 2012 as a result of the Budget Control Act of 2011.
If we next take a closer look at just the civilian agencies (non-defense), we get a better sense of how these spending reductions manifested. The chart below shows both award count and total spending by fiscal year. In red are the stats for the full fiscal year, and in blue are the stats for just Q1 through Q3.
As you can see, the FY 2011 to FY 2012 spending reduction disproportionately affected civilian agencies. They absorbed half of that $20 billion spending reduction, which represented about 7% of total annual spending. (The $10 billion that came out of defense spending represented only about a 2% reduction.) However, obligations remained flat between FY 2012 and FY 2015 for civilian agencies. So the sequestration-related further reductions, which went into effect in early 2013, seem to have come entirely out of defense contract spending.
It’s also worth noting how consistent year over year award volumes are, both for the full fiscal year and for Q1 through Q3. Every year, civilian agencies complete approximately 64% of their contract awards and obligate about 65% of their contract dollars prior to Q4. Based on this trend, we can forecast with high degree of confidence that civilian agencies will obligate another $48-50 billion in Q4 of FY 2016, and will award another 190K+ new contracts.
It’s also very possible that both FY 2015 and year-to-date FY 2016 figures are underreported due to data latency. While many federal agencies have been getting better about timely reporting of contract awards and obligations, there are still new data trickling in to FPDS.gov for transactions that occurred back through the middle of last year. I would not be surprised if, by the end of this calendar year, FY 2015 civilian agency obligations increase another $1 to 1.5 billion (and new awards at about the same percentage). This would obviously also change our projections for FY 2016 in the positive direction, and would be in line with the increase we’ve been seeing in procurement solicitation volume and frequency.
We’re going to be digging in to other fiscal year end trends and news over the next few weeks. A defense agency analysis is coming soon, as are a few posts about large and/or significant multi award vehicles for which there is a current procurement activity. In the meantime, we encourage you to dig in to the data yourself. Our Contract Explorer allows for deeper dive analysis of agency and category trends than I can get in to in a blog post. (Learn about the Contract Explorer.)