Tracking the State, Local and Education Market’s Pandemic Recovery

In this special feature article, drawn from GovWin’s recent Q3 2021 State and Local Procurement report, we present an analysis of the state, local and education (SLED) market’s recovery toward pre-pandemic conditions, using a new SLED Recovery Index that provides a balanced composite indicator of market health and returning confidence.

The index has four major purposes: 

• Simplify. The index provides greater visibility into general conditions within the SLED market by simplifying complex data with more than one source. 
• Show Overall Direction. At a time of uncertainty, the index can help us “place a finger on the pulse” of this market by describing the overall direction that things are headed. 
• Measure Progress. The values of the index measure progress in returning to pre-pandemic levels of activity or volume. 
• Predictive of Future. The index is predictive, hinting at events to come and future trends rather than merely describing the past.

The first index component is formal bids & RFPs issued. Unlike total spending, issuing a formal bid is forward-looking and requires confidence in the stability and growth of that government. The “bids” component measures how far a given quarter is from pre-pandemic levels in issued bids and RFPs. 

The second component is employment in SLED government. Decisions to furlough SLED jobs or bring them back are forward-looking and reflect overall confidence in how revenues will be trending. The “jobs” component measures how far a given quarter is from pre-pandemic levels of jobs. (The source for this is the Bureau of Labor Statistics.) 

Both the bids and jobs series can be broken out into state, local and education segments of the market. This enables us to create three sub-indexes along with the overall SLED Recovery Index itself. As the next charts will demonstrate, the path of recovery can look very different depending on which segment or type of government organization the vendor is targeting. 

• State: State government and its departments and included sub-agencies. 
• Education: Independent K-12 districts and public higher education. 
• Local: All other types of government including cities, counties and special districts.

The Bid Recovery Index Component

Overall, the market hit a low of 74.2 or 74% of pre-pandemic bids and RFPs in Q2 ‘20 – a decline well beyond those previously seen since 2007. But the partial rebound was immediate in Q3 and progress essentially stopped temporarily and went sideways for several quarters. The index finally gained ground in Q2 ‘21 and again more strongly in Q3 ‘21. 

Interestingly, while state government went sideways in Q3, both education and local government rose to basically the same level. Education and local levels had met before in Q4 ‘20 but this is the first time they had reached the same level as state government. As shown in the lower chart, bids and RFPs issued fell the furthest in the first half of 2020 within the education segment. State government, which benefitted from its larger scale, typical two-year budget lengths, diverse revenue sources and heavier mix of longer-term stable contracts, saw the fewest impacts on bid volume over the last 18 months.

The Jobs Recovery Index Component

As the upper chart shows, the overall index value of the Jobs Recovery Index reached a low of 93.6 in Q2 ‘20 but has steadily increased to 96.7 currently (Q3 ‘21). 

After initially making progress, education government saw a second downturn in Q4 '20 with thousands of districts deciding to not fully open for fall classes due to the pandemic. Local government, after making progress by Q4 ’20, has seen slight losses since, as has state government. Most recently during Q3 ‘21, education government saw a spike in new jobs with the school year starting, which takes it nearly to the level of state government. 

The last several quarters featured incremental cutbacks and tightening by non-education SLED governments. These entities took the opportunity to streamline their operations where they could, without announcing major new furloughs. This could take the form of simply refusing to replace positions that were being vacated by retirements, and/or involving re-organizing certain well-staffed functions resulting in a few lost positions. But it is consistent with a mentality of continued caution and a market trying to move forward and recover, yet still not sure about how many risks to take or when it will arrive at full normalcy.

Summary: The SLED Recovery Index

Combining the bids and jobs components produces an index that is more stable than either of them individually. Removing some of the statistical noise, the result is a clearer picture of how the market is progressing in its mood, confidence and overall outlook for purchasing. >

Overall, the SLED Recovery Index has increased from a low of 83.9 in Q2 ‘20 to its current level of 95.6 for Q3 ‘21. The acceleration of the trend seen in the most recent Q3 data is encouraging, and indicates that this recovery story may continue to be one of the key trends in the 2022 SLED market. 

Education and local government have managed to close most of the gap with state government since the start of the pandemic. State government has risen slightly over this period, from 93 to 96 while all other types have improved by around 12-15 points.

For more information on how the SLED market is recovering and the latest themes emerging from the market, download the Q3 2021 State and Local Procurement report today.