Diamonds are a Government Contractor’s Best Friend – 10th Annual Clarity Study Top Gems

Posted by Marc Holliday on June 27, 2019

10th Annual Deltek Clarity GovCon Industry Study Summary

By Marc Holliday, Director, Product Marketing, Deltek

It’s a diamond anniversary for the Deltek Clarity Government Contracting Industry Study! A decade of collecting data has yielded the most comprehensive year-over-year snapshots of the government contracting market, with 2019 being no different. So, what were the most prevalent sentiments from the more than 750 survey respondents? One word, bullish.


 

10th Annual Deltek Clarity Government Contracting Industry Summary


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Clarity Government Contracting Survey

During the webinar 10th Annual Deltek Clarity Government Contracting Industry Summary, now available on demand, I reviewed the top-line results from eight key business areas within government contracting firms, beginning with an overview of the survey itself.

Conducted January through March 2019, the Clarity Government Contracting Survey collected information from a cross-section of companies operating in the market space. Firms ranged in size from one to 24 full-time employee (FTE) shops, to organizations supporting a payroll of 1,000 plus. Survey participants were asked to answer most questions based on results from their 2018 calendar year in the disciplines of:

  • Business development
  • Project and risk management
  • Finance and financial compliance
  • Human capital management
  • NEW Contract management
  • Information technology
  • Manufacturing
  • NEW Procurement.

For the purposes of the survey results, small businesses are considered firms with less than $20 million in revenue, medium-sized businesses achieved revenue between $21 million and $99 million, and a large business is any organization with more than $100 million in revenue.

Standout Results

The cautious optimism of 2018 morphed into near full-blown buoyancy with solid financial performance being reported by government firms of every size. Record-level defense spending spawned growth and increases in competition, causing many businesses to continue diversification strategies into new agencies and customer segments. Low unemployment rates made retaining top-performing talent and attracting qualified applicants key priorities for handling increasing workloads.

Business Development

For the first time, the Clarity Government Contracting Survey included a Government Contractor Confidence Index (GCCI). Based on last year’s sales, the outlook for 2019 sales and sentiment about the overall spending environment, Clarity respondents are optimistic and feel confident in the health of the market. But, the positivity is not without its challenges. Business development leaders cited their top difficulties as limited business development resources, increased competition (possibly due to the resurgence of other transaction authority, or OTA, contracts), and customers using contract vehicles that the business in pursuit of the opportunity is not. To address these challenges, many leaders are working to better understand contract requirements, are pursuing opportunities within other government agencies and are attempting to identify opportunities earlier.

Changes in overall win rates mostly stayed the same or increased, with approximately a fifth of businesses seeing decreases. Also on the rise, indefinite delivery/indefinite quantity (IDIQ) contracts; 40% of firms saw an increase in these opportunities.

Project and Risk Management

Overall, project management leaders are feeling confident in their abilities to deliver projects on time and on or under budget. Small and medium businesses reported feeling the most confident, likely because they generally deal with less complexity and shorter project delivery timelines. The challenges threatening this confidence are accurate project cost forecasting and collaboration and communication, which jumped from the fourth and fifth top identified issues of 2018 to primary and secondary for 2019. Also noted as top-tier difficulty, poorly defined scope. How are leaders getting over some of these hurdles? By working to develop internal project management best practices, investing in training and hiring more qualified staff to fulfill project needs.

Finance and Financial Compliance

Finance departments are getting better at controlling costs, even in the midst of heightened federal spending and the competition that comes with it. The year-over-year Clarity Survey averages for general and administrative (G&A) expenses, overhead and fringe rates are all trending down. Similar to 2018, increasing profitability, cash flow and organic top-line growth are first, second and third priorities for financial leaders. Pursuing new customers and markets, as well as better vetting the profitability potential of new opportunities, historically have not been on the strategic radar of finance departments, but according to Clarity data, they are being brought to the table sooner and more often within government firms.

When it comes to compliance in relation to finance, indirect rates, internal control systems and labor and timekeeping accuracy have compliance departments sweating the smallest of the small stuff. To combat these adversities, those keeping tabs on the government mandates are conducting their own internal audits, hiring third party assistance with compliance and assigning dedicated resources. Small and medium businesses mostly report that the amount of audits they have encountered has decreased or stayed the same, with large firms feeling more of a pinch from an increased amount of audits. Defense Contract Audit Agency (DCAA), internal controls and incurred cost submission (ICS) are the most common audits firms have seen in the past two years, with contractor purchasing system review (CPSR), DCAA and Defense Contract Management Agency (DCMA) audits proving the most costly.  

Human Capital Management

Because the government contracting market is currently experiencing a surge in business to be done, it’s not surprising the number one acquisition challenge reported by human resource (HR) leaders is the availability of good candidates. Attracting better qualified talent and offering competitive compensation and benefits to candidates also topped the list of worrisome items to address in terms of an overall HR acquisition strategy. The tried and true tactics of hiring more recruiters and outsourcing recruiting are some of the avenues being pursued to fill open positions, however, for the second year in a row respondents reported, “rebranding ourselves to reach better qualified talent,” as equally important for finding good candidates.

Noted management hurdles echo what is reported in the HR acquisition results. Retaining top talent, succession and development planning and effective performance management are tripping up internal administration plans within government contracting firms. Ninety percent is the average retention rate reported within this year’s Clarity Survey, with HR teams working overtime to match resources with the opportunities being pursued. More formal career development programs, competitive reward and recognition programs and creation of human capital management metrics are being employed to retain talent.

Contract Management

Trying to get a clear view across a business’s entire enterprise is the most pervasive struggle reported in Clarity when it comes to contract management. Tracking non-financial aspects of contracts, time spent entering contract information into finance and business development systems, and maintaining data integrity between opportunity, contract and the project record are proving the most problematic for those tasked with managing the contract lifecycle. Shared drives are the most common tool respondents use to house and manage contract data; a hard to search method that doesn’t guarantee the right clauses get attached to contracts. With more contracting opportunities in play than in decades past, government contracting leaders are updating business processes, finding methods to integrate current contract management software with financial systems, and customizing capture and customer relationship management (CRM) software to improve contract management efficiency and to ensure all compliance boxes are checked.

Information Technology (IT)

Businesses of all sizes anticipate healthy IT spending across the board over the next 12 months, with small, medium and large businesses predominately stating that monetary levels will stay the same or increase. Security and authentication, accounting and finance, and business intelligence are noted as the top avenues for IT spending. A majority of businesses report that cyber security incidents with their firms have either stayed the same or increased somewhat, which explains part of the strategy shift.

Government requirements and National Institute of Standards and Technology (NIST) compliance are some of the other challenges keeping IT leaders up at night. Investments in new security policies and procedures, a reengineering of business processes, and building a newer, more fully realized IT infrastructure seem to be the top answers for many IT concerns, as is a significant increase in dollars being spent on compliance that specifically address IT and data security.

A Decade of Data

Ten years ago, the Deltek Clarity Government Contracting Survey painted a much different picture of the government contracting landscape. Flash forward to present day, firm leaders in every internal business vertical are truly optimistic about the immediate and no-so-distant future of their business. The on demand webinar 10th Annual Deltek Clarity Government Contracting Industry Summary offers even more regarding the results. Download and listen to the complete session to learn some additional takeaways, like the top traffic stopper identified by project-based businesses, and how it’s not what you think.

Want to explore more specific results from the Deltek Clarity Government Contracting Study? Register for the complete, in-depth webinar series.

You can also download the full Deltek Clarity Government Contracting Study.