We look forward to a new year and new opportunities for innovation and growth in the government contracting community. WashingtonExec reached out to those most knowledgeable and experienced in the federal contracting space. We asked executives in and around the Beltway for insight on where they see the government contracting community headed in 2017.
Here, Ingenicomm Inc. President and CEO Amit Puri addresses the impact of the Trump administration’s policies, the reduction of agency budgets and regulation, and the promises of lower corporate tax rates.
It’s impossible to discuss the outlook for business in 2017 without considering the changes that will result from the new administration now in Washington. We’ve all noticed the recent upward trend in the financial markets, and the general feeling seems to be that the administration’s policies will be good for business overall, and that the markets will maintain their bullish posture as a result.
We do, of course, need to be cautious when it comes to federal government contracting, and particularly when it comes to small companies and set-asides for minority-owned and disadvantaged businesses. The proposals to cut funding to the Minority Business Development Agency, the Economic Development Administration, the International Trade Administration and the Manufacturing Extension Partnership, for example, are quite concerning; for a minority-owned business engaged in international trade, like ours, the prospect of losing the support we’ve enjoyed in past years is not a happy one.
Similarly, I am concerned about the recent calls to greatly reduce the size and budget of the Department of Commerce and the Department of Interior, among others; we’ve built our organizational around a core mission of supporting our nation’s civil space agencies, including NOAA and USGS, and will need to closely monitor any proposed cuts within these areas.
At the same time, many of the ideas now being discussed – reduced regulation and taxation, increased Department of Defense and Department of Homeland Security budgets, and reprioritization within the Department of Health and Human Services – are likely to result in new opportunities. As with any period of shifting policies, businesses will need to be alert for these opportunities and respond by organically developing solutions or by pursuing mergers and acquisitions to swiftly acquire new capabilities.
Some specific developments that I believe bear watching:
- The push to reduce government regulation, which has been in the news in recent days, bodes well for small businesses, which have often struggled to implement onerous compliance processes based on regulations written for large conglomerates. At the same time, potential regulatory changes on the financial side – such as relaxation of some of the provisions of the Dodd-Frank Act – may give companies easier access to debt markets and drive down the cost of capital. Of course, any companies which have built a business around providing regulatory compliance services will see this quite differently.
- The promise of lowered corporate tax rates is always welcome, and changes in this area could easily increase cash flow for small businesses, fueling future growth and investment. However, more than 80 percent of small business owners account for business income through personal taxes rather than corporate taxes, so corresponding changes would need to be made there as well.
- The recent move away from the Trans-Pacific Partnership, coupled with talk of increased tariffs or other restrictions on goods produced outside the U.S., may signal a more protectionist approach to international trade that could level the playing field for small U.S. manufacturers competing against larger European and Asian companies. Faced with stringent export control regulations, smaller American companies catering to the aerospace sector have traditionally lagged in the international marketplace, while foreign companies have had no such challenge selling to U.S. aerospace programs; the new policies being discussed could reverse this situation by imposing a cost premium on foreign-built items.
- An effective replacement for the Affordable Care Act would, if implemented correctly, allow companies to obtain reasonable medical insurance benefits for their employees at more competitive rates, bringing overall fringe costs down to the levels seen prior to the ACA’s introduction while reducing the compliance costs of the current ACA model.
- The moves toward shrinking the overall size of the federal government, such as some of the recently imposed hiring freezes, will no doubt provide greater opportunities for federal government contractors to increase their staffing footprint in order to clear the backlog of work that will be left behind as civil servants retire and are not replaced.
At the end of the day, if your small business is a performance-driven solutions provider, you will have a bright future ahead of you as the federal government continues to push for commercialized solutions that offer superior value at a lower cost than having the government reinvent the wheel. At the same time, businesses need to keep an eye on specific programs and agencies and understand program cuts and where funds are being redirected, rather than looking at things purely at an overall policy level.
Related: Kevin Robbins Shares Wolf Den Associates’ 2017 Federal Market Outlook
