2012 is fast approaching, and with it comes big changes in the Federal IT industry. WashingtonExec is giving local executives the opportunity to share their thoughts on where they see the government contracting industry headed. Leaders of the industry were asked a series of predictions questions focused on challenging issues such as cloud computing, healthcare IT, defense and so forth.
This Friday’s predictions are from Bobbie Kilberg, President & CEO of the Northern Virginia Technology Council (NVTC).
“We are looking at tough times for our region, an area that has previously been recession-resistant due to our strong federal contracting base. However, $450 billion in defense spending cuts over the next ten years as well as homeland security and civilian agency budget cuts will negatively impact our region. We also face the distinct possibility of an additional $600 billion in defense cuts due to the Super Committee sequestration mechanism. According to Steven Fuller, Director of George Mason University’s Center for Regional Analysis, this scenario could result in zero growth to our regional economy in 2013. Some analysts believe the sequestration cuts will not take place at anywhere near the stated levels, but that cannot be assumed with any confidence and the uncertainty has a chilling effect of its own.
Small and mid-size companies who are federal contractors will be particularly vulnerable and you may see a significant number of small companies close their doors due to their inability to wait out budget cuts, lack of capital availability to carry them through lean times and fewer subcontracting opportunities as large contractors place some functions in-house to cut costs, and as the federal government continues to insource key positions that oversee program management and run critical programs, despite public statements that insourcing will be reduced. There also could be less M&A activity for mid-size companies, either as subjects of acquisition or as acquirers, as uncertainty about federal contracts takes its toll. Our large technology companies, as well as our mid-size and small firms, will increasingly look to the private sector for new business generation. And research and innovation will be put on the back burner.
There will be bright spots for our technology companies in the areas of intelligence, cyber security, healthcare IT, data storage, including cloud computing, smart energy, and cost efficiencies. However, competition in these growth areas will be high, so companies’ flexibility, agility and ability to control costs will be critical to winning business in these sectors.”