Herndon, VA (PRWEB) April 15, 2014
According to a new report from Deltek, the President’s FY 2015 budget request reveals agencies’ attempt at some level of recovery in FY 2014 while making targeted cuts for FY 2015. The request reflects a decline in federal contractor-addressable spending from $647 billion in FY 2013 to $608 billion in FY 2015. Most interestingly, agency estimates reveal growth in most market segments for FY 2013-2014, which is likely a reflection of the reprieve established by the two-year budget deal passed in December.
Similar to the FY 2014 budget request, Professional Services (excluding Aerospace & Defense-related services) is one of the hardest hit segments, with a decline from $67 billion in FY 2013 to $54 billion in FY 2015, for a Compound Annual Growth Rate of -10.4%. Though declining, these numbers are actually higher than last year’s request, due to a significant shift from Aerospace & Defense-related professional services to other types of professional services. At the same time, Deltek’s preliminary estimates for contractor-addressable spending on Information Technology products and services shows a more modest -3.6% CAGR, declining from $106 billion to $98 billion from FY 2013-2015.
“FY 2015 Federal Budget Request: Challenges and Opportunities,” provides insight into contractor-addressable budgets across 10 major market segments, including Professional Services, Aerospace and Defense (A&D), Architecture, Engineering and Construction (AEC), and Information Technology (IT) – helping contractors identify areas of budget growth and contraction so they can better plan and execute their business development strategies.
Although there is a marked and expected decline in overall contract spending, there are many instances of increasing budgets in FY 2014 to address programmatic “bottlenecks” caused by previous budget uncertainty. “This budget request appears to reflect an environment of relief that FY 2014 won’t be as difficult as FY 2013, but also concern about the cuts required to create new, lower baselines moving forward,” said Deniece Peterson, Director of Federal Industry Analysis at Deltek.
While budget austerity has become the norm, there are hundreds of billions of contract dollars at stake for contractors aligned with agency priorities. However, accessing those opportunities won’t be without its challenges, and will require contractors to develop strategies to minimize risk while also positioning for growth opportunities in the market.
Budget Shows Impact of IT Mandates
Unlike the FY 2014 IT budget request, the FY 2015 request reflects a decline in spending, which the Office of Management and Budget (OMB) attributes to multiple factors, including overall discretionary budget reductions and increased IT acquisition oversight and efficiency. OMB’s IT budget reporting reflects a total request of $79.0 billion for FY 2015, down 2.9% from FY 2014.
IT mandates such as data center consolidation, shared services and cloud computing appear to be paying off for agencies. However, those investments remain primarily within Operations & Maintenance (O&M) efforts, with a continued decline in the amount of spending dedicated to Development, Modernization and Enhancement (DME) efforts.
“Tightening budgets simply mean that agencies must focus on the ‘must have’ investments,” said John Slye, Advisory Research Analyst at Deltek. “We continue to see investments around cloud, cyber, big data analytics, mobility, and C4ISR as priorities.”
As Budgets Decline Pockets of Opportunities Exist
Aerospace & Defense spending continues to decline as Defense leadership scales back investments such as aircraft and ground vehicle spending to meet new budget parameters. Despite budget constraints, the Department of Defense continues to protect investments that support force readiness and agility such as Anti-Access/Area-Denial (A2/AD) technologies and Pacific military installation infrastructure to support its focus on Asia.
Most market segments are declining within these new budget realities, but key investments continue as agencies transition to new approaches to meeting mission needs. For an added boost, the administration is proposing an Opportunity, Growth and Security initiative, which would add roughly $55 billion for education, R&D, infrastructure, job creation, citizen services, and defense programs.
Deltek’s John Slye stated that there are reasons for contractors to remain optimistic. “Agencies are being forced to become more cost-efficient and effective. Contractors that can help agencies accomplish this - and can prove it - have a distinct advantage in this market.”
For more information on GovWin IQ and this report, visit the “FY 2015 Federal Budget Request: Challenges and Opportunities” page on GovWin.com, or download the free report summary now. The report is free to subscribers of GovWin’s Federal Industry Analysis program. Press interviews can be arranged by contacting Lauran Cacciatori.
About GovWin IQ
Deltek’s GovWin IQ provides the market intelligence tools and analysis government contractors need to gain a competitive advantage and be a formidable player in the federal market. Backed by a team of government research and analysis experts, GovWin IQ provides the most powerful, comprehensive, and timely lead generation and business intelligence solutions available. More than $1.8 trillion opportunities are tracked every year – a number no other provider can match.
Deltek is the leading global provider of enterprise software and information solutions for professional services firms and government contractors. For decades, we have delivered actionable insight that empowers our customers to unlock their business potential. 16,000 organizations and 2 million users in over 80 countries around the world rely on Deltek to research and identify opportunities, win new business, optimize resources, streamline operations, and deliver more profitable projects. Deltek – Know more. Do more.® http://www.deltek.com