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White Paper: What you need know about Federal Procurement as the Federal Government Ramps Up Its Spending.
Procurement Today:
The United States government is the largest consumer of services and supplies in the world. With more than $250 billion in annual purchases, no other nation, corporation or organization can match its spending power.
The federal government presents a tremendous potential market for small businesses and large corporations pursuing federal procurement across a wide variety of industries. Among the companies that stand to benefit the most from federal spending increases are those in the field of information technology (IT).
Trends:
The federal government’s use of IT products and services has increased greatly since 2001. IT also has become crucial to conducting business in today’s global information-driven economy, and in our post-9/11 world, the government’s needs for new IT solutions to obtain, implement, and protect information are crucial to national security.
Federal IT spending as a percentage of the government’s discretionary budget has grown from 4 percent in 1989 to more than 7 percent projected for 2006. Spending has increased from about $20 billion in 1989 to an estimated $71 billion this fiscal year.
Drivers of this significant increase in IT spending include the developing and implementing of Homeland Security solutions, the restructuring of the Department of Defense in areas such as communications, networking, infrastructure and knowledge management, and the advent of e-government. Our nation’s continued military presence in Iraq, growing energy costs, corporate governance and intelligence reform also increase the demand for information technology products and services.
This spells opportunity for information technology firms of all sizes and focuses who take the proper steps to secure federal procurement. Despite larger federal procurement budgets, competition for obtaining funds from the federal government is on the rise, as cost will become a decisive factor.
Forecast for the Future:
According to Reston, Virginia-based government market research firm INPUT, government IT spending will grow from $71 billion in 2005 to $92 billion in 2010. Spending on homeland security systems and streamlined federal agency business processes are the causes of increased spending.
“Homeland security initiatives will continue to be the primary driver behind significant growth for another one to two years,” said Payton Smith, director of public sector market analysis at INPUT. “We will then see IT spending return to levels of normalcy as two things happen: 1) homeland security becomes ingrained in each responsible federal agency’s mission and 2) the Office of Management and Budget (OMB) exercises more control over IT expenditures. Although homeland security will remain a budgetary consideration, we will not see frantic spending on these initiatives that we have seen over the past three years.”
Online General Services Administration (GSA) schedules have allowed federal procurement agencies to find various suppliers that previously were unable to act as key players in the procurement process. The Internet has also been instrumental in allowing various companies to become federal suppliers, with the access to procurement and process information.
One company’s experience:
According to Kris Suneson, director of contractors at ENSCO, a privately owned technology company that is based in Falls Church, Virginia, the Internet has enhanced competition for federal contracts. “Competition is being facilitated by the use of Web-based technologies that allow for wider, more visible distribution of Requests for Proposals to the supplier base,” he said. He added that “potential suppliers are providing more feedback to government procurement agencies on specific ways that they can improve their approaches to a specific requirement or problem.”
“While there is still a great deal of bureaucracy associated with becoming a federal supplier, the ability to access procurement information and understand the process, via the Internet, is much more visible for novice firm than it was previously,” Suneson said.
“Federal procurement tends to be freer and open competition, especially for new work that allows outsiders to play versus other environments wherein being the incumbent is a big advantage and may be difficult to displace due to insider contacts,“ Suneson said. “Funding streams tend to be more predictable, with five-year time spans, versus the commercial marketplace where funding streams may shrink relatively quickly based on daily changes in the marketplace.”
Procurement Postings:
There are a few things you need to know to take advantage of federal procurement opportunities by visiting www.fedbizopps.gov to review procurement opportunities valued at more than $25,000. This is a must-visit Web site for identifying vendors seeking federal markets for their products and services.
Proximity to Procurements:
Even in an age of Web-based programs, face-time with customers is crucial to success. Many high-tech companies that are interested in federal contracts locate near the nation’s capital to have more access to government procurement officials and policy-makers, and the numbers show why. Companies in Fairfax County, Virginia, just outside Washington, D.C., won $9.6 billion in federal contracts in fiscal 2003, more than 47 states.
"Clearly companies have a better chance at getting federal business if they are located in this area. Fairfax County offers the best combination of business attributes and high quality of life for companies interested in a Washington-area location, and we are here to help companies with that decision," said Gerald L. Gordon, Ph.D., president and CEO of the Fairfax County Economic Development Authority.
Karl Pringle, general manager of Strategic Thought Inc., a technology and software services company that is based in the U.K. but has U.S. operations in Herndon, Virginia, added: "To really understand how federal procurement works and to get 'in amongst the agencies' you need to be located near D.C. We did admirably from our U.K. base, but since being here [in Fairfax County] our knowledge of how things happen, the time it takes to get things to happen, and who the people are who make things happen has increased significantly. Ultimately we have noted an upswing in revenue from the federal market and this is having a real positive impact on our commercial customer base."
Thousands of companies have chosen Fairfax County, Virginia, located just west of Washington, D.C., as the best place to expand or relocate. Fairfax County is home to six Fortune 500 companies, 4,700 IT companies and a growing number of bioinformatics and bioscience firms—several of which are housed in the county’s bioscience incubator. Fairfax County features a quality of life that's hard to beat. It has the highest percentage of residents with bachelor’s degrees or higher in the nation. And being this close to the federal government provides access to billions of dollars in federal contracts. If you are thinking about expanding or relocating your company, give Fairfax County a look. The Fairfax County Economic Development Authority has experts who can help your relocation decision—at no charge. Call 703-790-0600 or check out other areas of this site
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