Contractors boost confidence in government market
A May 2017 survey of government contractor sales expectations set a new record high score for respondents' confidence for the coming 12 months. Respondents cited an improving economy that is allowing them to focus on increasing public sector sales and marketing investment. With growing confidence in the government contracting sector, vendor sentiment in this market looks good for the upcoming year.
How confident are government contractors?
The 2017 Onvia Government Contractor Confidence Index (GCCI), now in its third year, showed a score of 135.8 for 2017, representing a 5 percent uptick from 2016's score of 129.4. With an upper range of 200, any score higher than 100 typically indicates government contractors can look forward to an expanding market for their services.
"The 2017 GCCI provides a view into why government vendors are feeling optimistic about their prospects for increased sales," explained Paul Irby, business-to-government market analyst for Onvia. "The 5 percent increase in this year's score was driven most notably by 21 percent improvement in expectations for overall agency spending and 8 percent improvement in the outlook for funding in specific departments."
The GCCI surveyed 424 companies who sell to federal, state, local and education agencies on their opinion for how the next 12 months will fare compared to their self-reported performance over the past year.
The index questioned these companies on how agency budgets are likely to impact their sales and how public sector sales grow. GCCI asked how respondents felt about the upcoming year for:
- Outlook for individual agency department budgets.
- Outlook for overall agency budgets.
- Expected increase in sales.
Nine factors were considered as the top drivers of growth, including:
- Overall economy.
- Overall agency budgets.
- Allocation of funding by agency department.
- Company sales and marketing budget.
- Cooperative purchasing.
- Contract requirements.
- Government regulations.
- Competition for agency contracts.
- Labor market constraints.
Among these factors, overall economy, overall agency budgets, allocation of funding by agency department and government regulations saw the most positive increases at 26.7 percent, 14 percent, 8.9 percent and 7.6 percent, respectively.
When asked which government market would have the greatest potential for growth in the next two to three years, 40.8 percent said federal, with 29.2 percent saying local, 21.9 percent saying state and 8.2 percent saying education.
What this means for government contractors
While the 2017 GCCI represents a marked improvement over the uncertainty surrounding the election-year index of 2016, it's still merely a gauge of expectations, so the reality of the matter may be subject to change. However, if these predictions hold true, then government contractors will be facing very favorable conditions in the coming year.
"Government contractors will need to step up their marketing endeavors to more agencies."
To take advantage of the current positive environment, government contractors will need to step up their marketing endeavors to more agencies. This will ensure that contractors are building brand awareness and generating buzz about their capabilities to attract more businesses and sign more lucrative contracts.
With the federal fiscal year approaching at the end of September, American City and County recommended being more strategic about spending marketing dollars at upcoming events, whether they are conferences, trade shows, seminars, agency briefings and more. Be sure to target events with producers that are focused on the public sector, especially those sponsored by a government agency. It's also wise to be wary of event producers that only visit government markets occasionally, as these most likely won't have the greatest connections to agencies.
In some cases, contractors can pursue government work from agencies or in areas they previously did not focus on in the past. They can take this moment as an opportunity to expand their operations and generate more revenue by moving into new fields. This might also require increasing sales staff to target different market segments and achieve these objectives. While it can be risky to move into a new sector, the rewards can be more than worth it.
With government contractors' confidence reaching record highs, now is the perfect time for identifying new growth opportunities and pursuing lucrative new contracts.