How COVID-19 Impacted State and Local Government Purchasing in H1 2020

Posted by Paul Irby on September 2, 2020

New Jersey State Government House

With the first half of 2020 in the past, GovWin researchers have provided a high-level summary and review of the impacts from COVID-19 on state, local and education (SLED) government bidding opportunities, including by level of government and industry. This special feature article is taken from the State and Local Procurement Snapshot – Q2 2020 report, now available to download for free.

 

State and Local Procurement Snapshot – Q2 2020


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Below are some of the key takeaways from this special feature.

Total Impacts of COVID-19 on Bids & RFPs

As the chart below shows, during the first half of 2020, the SLED marketplace lost around 44,000 bids versus the same period of 2019.

COVID-19 Bids and RFPs From Governments

Even though exactly one half of the year has transpired, the total loss expected for the year is not likely to double. This is due to Q2 being considered the peak of the negative trend and the first half normally representing 55% of the year. On a percentage basis, the market during H1 2020 lost 16% in bids and RFPs versus last year. Assuming the remainder of the year features declines of 14-17% the entire year would come in at around -15% to -16%, which would be around twice the size of the 4-8% declines in bids seen during the worst period of the Great Recession.

State, Local and Education Governments Impacted Differently

When we examine the first half 2020 results by the three major levels of SLED government (state, local and education) we immediately see that state government has fared much better (only declining by 8%). As we’ve pointed out, there are a number of reasons for states to issue a more stable stream of competitive bids, including larger and longer-term efficient multi-purpose contracts, which can often also be piggybacked on by local governments. Local government declined by 17% over this period, and education government (independent school districts and public higher education) declined the most, by 21%.

State, Local and Education H1 Bids and RFPs

Impacts on Major Industry Groups

When it comes to our 12 major industry groups, finding the actual “impact” from COVID-19 means not only considering how much they have changed from last year’s levels but also looking at where they should have ended up if the pandemic had never happened.

We pulled forecasted growth rates for the entire 2020 year from our 2020 Forecast report. These percentages, shown in the third column of the table below, provide a baseline for likely performance without the virus.

COVID-19 State and Local Bids and RFPs by Industry

In some cases, such as architecture & engineering (A&E), healthcare and water & energy, these industries were expected to post healthy growth rates this year of 4-5%. Factoring in these baseline expectations with the actual declines measured gives us the estimated true “gap” displayed in the last column.

Overall, the SLED market was impacted only slightly more (17.2%) than the amount of the actual decline (16.1%) because 1) it was only expected to grow by 1%, and 2) because of the much larger size of the two largest groups (construction and O&M) that happened to have a near zero baseline. In the case of these two sectors, work has largely continued even with office shutdowns and social distancing because construction work was deemed “essential” and operations & maintenance (O&M) contracts include the critically important area of cleaning and disinfecting. Public safety, which includes equipment used by first responders, was the healthiest major industry overall (-12%).

Key Takeaways for State and Local Government Contractors

COVID-19 has had a very sharp and deep impact on this marketplace during the first half of 2020 – with an overall decline of around 16% year-over-year in bids. While this figure is historically large, it offers a more balanced sense of where this market is trending than simply looking at the unusual and likely one-time Q2 2020 rate of -26%.

While there were greatly reduced impacts among state governments, no major industry was spared. However, there were a few specific products and services benefited in a significant way. We’ve outlined those products, and took a deeper dive into how the market performed in Q2, in the full version of the State and Local Procurement Snapshot – Q2 2020 report. Download it today to see which products and services relevant to your business have been seeing a spike in growth.

For more information and ongoing analysis of how COVID-19 is impacting state and local government purchasing, visit our Coronavirus Government Response Resource Center.


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