2012 is here, and with it comes big changes for the Federal IT industry. WashingtonExec gave local executives the opportunity to share their thoughts on where they see the government contracting industry headed.
Today’s 2012 Government Contracting Outlook comes from Sam Malhotra, CEO of Subsystems.
Sam Malhotra: I have been in this industry for over 28 years and have seen the budget pendulum swing many times. However, the budget conversation of this administration and perhaps of many coming administrations will be more pragmatic and will not have the appetite to spend recklessly. Our industry is in that crosshairs. I, however, personally remain cautiously optimistic that our industry will flourish in the coming years.
My optimism and confidence stems from following and studying the 2012 budget. The 2012 budget chooses a path to prosperity—by limiting government to its core constitutional roles, keeping America’s promises, and unleashing the genius of America’s workers, investors, and entrepreneurs.
The current CBO data suggest the U.S. economy is expanding at a moderate pace, though the recovery from the recession and financial crisis still promises to be long and difficult.*
Real GDP grew by just more than 21⁄2 percent in 2010. Private Blue Chip forecasters expect growth of just more than 3.0 percent in 2011, rising toward 31⁄2 percent (with some upside potential) in 2012. Since late last year, the unemployment rate has declined from 9.8 percent to its current level of 8.8 percent. Still, a broader gauge of unemployment, which includes individuals who are marginally attached to the workforce, are closer to 16 percent.
The manufacturing sector has been showing signs of strength recently, after a significant decline. The Institute of Supply Management’s manufacturing index has topped 61 in recent months (readings above 50 indicate expansion) and manufacturing employment is up by more than 125,000 in the past 5 months.
I do however believe that our industry will see significant changes. There is no doubt that the IT and Defense budgets will shrink. As the Government shrinks to become for efficient, effective and responsible, there will be opportunities for savvy contractors. There always have been and will be opportunities in chaos.
Further, The Govt. will rely on more multiple award IDIQ’s as compared to single awards. A trend underway already. Small businesses will see more work slated for them, the large primes will be more willing to bring on small businesses for these multiple award IDIQ’s. The market for M&A will be robust in 2013 and beyond as another round of consolidation takes hold.
* Concurrent Resolution On The Budget— Fiscal Year 2012, Report of the Committee On The Budget House Of Representative