November 2019 SLED Analysis: The Benefits of Private and Public Sector Business

Posted by Paul Irby on December 5, 2019

Benefits of Private and Public Sector Business

GovWin’s research staff of more than 100 federal and state, local, and education (SLED) market analysts provide in-depth research reports, timely articles, webinars, presentations, and consultations to help clients build business development plans and navigate the government market effectively.

Our feature for November is an excerpt of a special feature from the State and Local Procurement Snapshot for Q3 of 2019, which examines the case for doing business in both the private sector and public sector markets, and how selling to the government can provide counter-cyclical stability and diversification to business revenue.


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The public sector helps companies access a market that can offer more revenue during times of economic slowdown and recession.

In recent years, GovWin’s State and Local Market Research team has noted that the SLED market for new bids is sensitive to shifts in economic confidence, which can lead to proactive tightening of these approvals. Part of this sensitivity is a desire to not over-bid in advance of softening state and local tax revenue. However, total spending in dollars tends to be more stable and lag behind the economy. During an actual recession, SLED governments will attempt to incrementally slow current spending in line with their current revenue, while continuing to “time” the new bids to be consistent with expected future slowing in tax revenues. So the big question then is “how quickly are these revenues slowing?”

 “The public sector offers businesses the important benefits of a much larger universe to sell to, and the promise of a counter-cyclical trend of demand that can help stabilize business revenues through a major downturn.”

-Paul Irby, Principal Research Analyst, State, Local and Education (SLED) Market Analysis, Deltek

Based on our data on total spending from the last two recessions, one thing is clear: In an economic downturn, a private sector buyer will generally make immediate cuts in their spending. A tax-funded government buyer, however, may not see the full impacts of a slowdown for several years. The public sector (including the federal government) has historically been a counter-cyclical force in the economy, which reacts differently – and with different timing – than the private sector. Since many businesses sell to both SLED and federal agencies, this article looks at the public sector as a combined market; we will compare and contrast public and private markets both overall and for certain types of purchases.

Why Does the Public Sector React Differently?

One of the reasons for the counter-cyclical aspect is that while a recession immediately impacts sales to the private sector, public spending relies on tax revenues that can lag in time. For example, property taxes in SLED may not decline until two full years after a recession has begun due to delays in home prices changing and the delay in assessing home values for taxes. Also, rainy day funds among state governments can help cushion any loss of tax revenues when a downturn first arrives. The federal government can also remain independent or “counter-cyclical” due to stimulus funds and the ability to maintain deficit spending each year. By knowing this, businesses have more foresight into how the government market may react in the next downturn.

Agencies will certainly be impacted by a recession in significant ways, but those impacts are likely to play out differently over time, and businesses can offset slowdowns in private sector sales that typically comes at the very beginning of a downturn with selling into the public sector.

The full version of this feature examines how government contractors can learn from the last downturn, and examines the Architecture, Engineering and Construction (AEC) Market as a case study. You can read the full feature when you download your free copy of the State & Local Procurement Snapshot – Q3 2019 report produced by GovWin’s SLED Market Analysis team.

It’s easy to learn more about current procurement opportunities and research in the GovWin IQ SLED database – often before the contracts even go out to bid. Not yet a subscriber? Learn more about Deltek's GovWin IQ service at the link below.


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