With the federal budget process practically grounded to a halt, federal contractors are hiring and investing less with reduced revenue and historically low profit margins.
According to a recent survey by Centurion Research Solutions, more than 90 percent of the 131 industry respondents interviewed indicated they had been impacted by the inability of political leaders to establish a more predicable budget process.
Referencing the survey results, Gary Loyd, Centurion’s CEO, noted that, “Only 11 percent of responding companies are making a significant investment in new business initiatives and 67 percent of respondents are doing no or little new hiring, which, of course, does not bode well for the economy.”
Here are some more findings:
- More than 50 percent of the surveyed companies experienced a moderate or significant impact on their business growth results in 2012.
- Almost 80 percent of these companies anticipate a moderate or significant impact on their business growth plans.
- The budget morass is also significantly impacting their partners in government. Many of their procurements are being delayed and program budgets reduced with a corresponding decline in moral.
- Because of the budget and procurement uncertainty and the need to reduce overhead costs to remain competitive, a majority of the companies appear to be refraining from any substantial new business investments.
- Practically all companies have reduced or eliminated new hiring. Considering the number and size of the companies that participated in the survey, this is having a serious impact on the job market.
- 16 percent of the respondents indicated they are shifting focus from B2G to B2B.
This survey is a sobering reminder of the challenging times that many industry members are confronting right now. With the sequestration deadline nearly two weeks away, we will surely be seeing more news and insights into where the marketplace is headed. Chances are more difficult times are just around the corner.
The timing of the implementation of the Federal Strategic Sourcing Initiative (FSSI) and Sequestration is a “Double Whammy” for small business contractors.
As Sequestration is expected to result in the loss of jobs and increased unemployment, there is another federal action which will magnify the negative impact on small business federal contractors, especially those doing business with DoD. I am referring the current plans to mandate Federal Strategic Sourcing (FSSI) which will shrink the base of small business contractors. This displacement of small business contractors will result in additional job losses which will add to the job losses from Sequestration.