Procurement and Manufacturing Results Make Their Clarity GovCon Debut

Posted by Annette Grotz on November 7, 2019

Clarity GovCon Study Procurement and Manufacturing

Procurement and manufacturing data was included for the first time in this year’s Deltek Clarity Government Contracting Industry Study. In this inaugural year of results, an interesting snapshot came into focus for manufacturers delivering on government contracts and procurement professionals covering the complete lifecycle of contracts. In the recent deep dive webinar, 10th Annual Deltek Clarity Government Contracting Industry Study: Procurement & Manufacturing Trends, I reviewed the key trends and common challenges identified within the initial results. From the impacts of growth and competition, to quality control and standing up to regulation, the important benchmarks began to take shape.

Clarity Basics

Approximately 750 government contractors were surveyed over the course of two months in early 2019. Seventy-three percent (73%) reported having 499 or fewer full-time employees, and 27% claimed a payroll of 500 to 1,000+ full-time employees. More than half (55%) are located outside of the Washington, D.C. metro area, serving the industries of:

  • Professional services
  • Information technology
  • Defense, weapons, aerospace or manufacturing
  • Management consulting
  • Engineering services
  • Health care or medical.

Small businesses are defined as less than $20 million in revenue for the purposes of the survey, with medium businesses claiming up to $100 million in revenue, and larger businesses posting more than $100 million.

Also new this year with Clarity is the inclusion of a government contractor confidence index. It factors in the previous year’s whole sales, the outlook on current year’s actual and projected sales and the overall spending environment. With an index of 139.6 on a scale of up to 200 (200 being “irrational exuberance,” to quote Allen Greenspan), business leaders are confident in sustained growth and sales going into 2020.


 

10th Annual Deltek Clarity Government Contracting Industry Study: Procurement & Manufacturing Trends


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Procurement Findings

Procurement effects all government contractors and covers everything from pre-award to contract closeout and the associated challenges within each phase, such as cost and compliance issues. The most commonly tracked key performance indicators (KPIs) by procurement leaders are days payable outstanding (DPO), procurement cycle times and dedicated full-time employees. Days payable outstanding is defined as the average number of days it takes a company to pay suppliers, with the average DPO reported by businesses of all sizes being 30 days.

Firms that track procurement cycle times are more likely to deliver projects ahead of schedule and on budget. For the purposes of the Survey, procurement cycle times begin when a procurement function receives a requisition line item and ends when a purchase order is submitted to a supplier. Manufacturing procurement, for example, reported a 90% on-time delivery rate, and stated that it takes an average of three days to track down counterfeit or defective parts that would affect cycle times.

Government businesses report starting at least two audits in 2018, with the top audit types for the past two years being Defense Contract Audit Agency (DCAA), internal controls and incurred cost submission (ICS). The most expensive audit survey respondents encountered was the contract purchasing system review (CPSR). That particular burden fell on 83% of respondents, likely indicating that their internal systems were not prepared for the scrutiny.

According to the July 24, 2019 podcast from the National Contract Management Association, the Defense Contract Management Agency (DCMA) issued a variety of updates to the CPSR guide book, many focusing on the supply chain and supply chain security. Something to also keep an eye on is the proposal to double the CPSR threshold to $50M. The DCMA believes this would reduce the burden on small businesses and allow the administrative contracting officer to use “CPSR resources to review larger contractors where more taxpayer dollars are at risk.”

Manufacturing Results

Quality control, calculating true manufacturing costs and staying compliant with government regulations are the top three challenges manufacturers are wrestling with, according to the Clarity Study. Of those citing compliance as a challenge, they found it to be their number one challenge. The most common methods discussed for addressing compliance are employing subcontractors more often, investment in new manufacturing software solutions and integrating manufacturing solutions with finance systems.

Engineering change requests (ECR) and the resulting engineering change orders (ECO) can result in costly mistakes if not managed well. Small companies are the only ones to report a significant increase in ECOs, with investing in manufacturing software being one of the top remedy methods reported to address these challenges.

Additional metrics that Deltek will be able to track over time with the Clarity Study: shipments delivered on time (90%) and scrap rate (2%). The Clarity Study will also revisit the reported efficiency and performance trends of re-engineering processes, integrating manufacturing software with enterprise resource planning (ERP), 3D modeling, and evaluating a manufacturing execution system (MES) solution.

Final Thoughts on Procurement and Manufacturing

Reading between the lines of the 2019 Clarity Government Contracting Industry Study results revealed some correlations to keep an eye on for the future. First, the ability to successfully control ECOs is directly related to quality control. Second, capturing and analyzing data, like procurement cycle times, can be directly related to projects coming in on or ahead of schedule. Third, being better prepared for CPSR audits can cut down on the costs for the audit. And finally, integrating manufacturing with other business functions can help with quality, cost and compliance challenges.

Discover even more interesting Study results, like the variance of match rate by government firm size and how successfully integrating manufacturing with other business functions can improve quality and efficiency, by listening to Deltek’s in-depth take for yourself with the 10th Annual Deltek Clarity Government Contracting Industry Study Deep Dive: Procurement & Manufacturing Trends webinar, now available on demand.

Want to explore more specific results from the Deltek Clarity Government Contracting Study? Watch the complete, in-depth webinar series. All registrants receive a free copy of the report.