Government Contractors May Be Biggest Stimulus Winners
While the U.S. House and Senate must still reach a compromise of their versions of the Economic Stimulus legislation, it’s already apparent that significant dollars will go to physical security, information security and R&D of new technologies. The major sectors: Federal and state government; labor, health and education; energy and the environment; agriculture and rural development; commerce, justice and science; and defense and security. The latter – one of the smallest sectors in terms of dollars – will cover research and development as well as other spending areas. All the sectorswill have security spending opportunities.
While criticism has centered in part on wasted money, it’s also obvious that a lot of the money over the course of time will go to government contractors who already have strong ties to local, state and federal agencies and the military through technology, integration, development, outsourcing and consultant services.
The irony is that both the Clinton and Bush administrations have shipped more work to private sector contractors while, at the same time, seriously reducing staff and programs to oversee and audit the work.
Top Federal Contractors
According to GovernmentExecutive.com
Lockheed Martin Corp.
Northrop Grumman Corp.
General Dynamics Corp.
L-3 Communications Holdings
United Technologies Corp.
There is already drum beating over the contractors’ role.
For example, Federal contractors should not wait until the economic stimulus package is passed to uncover $62 billion dollars worth of potential opportunities. While the Senate finalizes its version of the legislation, INPUT has already identified several areas expected to find a place in the final bill. The key: identify shared priorities between the House and Senate.
The House passed its version of the American Recovery and Reinvestment Act (ARRA), while the Senate prepares to vote on their amended version early this week. According to INPUT, contractors should focus on the commonalities in the two pieces of legislation as these will be the programs that are most likely to be enacted.
“There’s a heated partisan debate over the content, structure, and impact of the ARRA,” stated Deniece Peterson, principal analyst with INPUT. “However, the common priorities that are mission-critical, create jobs, or address high-priority, long-term federal goals have the most staying power.”
Border and transportation security were called out in both versions of the ARRA, with funding set-aside for detection and checkpoint technologies. The Senate would also fund baggage screening, tactical communications equipment and radios, SBInet technology and fencing, and other security activities for total spending of $1.4 billion, compared to the $600M allocated in the House bill. The State Department would likely receive funding for its role in the Comprehensive National Cyber Security Initiative and technology upgrades, while the Social Security Administration could be set to receive funding for a new
Contractors involved in facilities construction and modernization could see $27 billion in opportunities. These infrastructure projects are at the center of the government’s job creation strategy. While both sides of Congress have a long list of agencies needing updated facilities, they agree in a number of areas: research facility modernization (NSF, NIH, CDC); military housing and child development centers facilities (DoD); health facilities (HHS, DoD); road, bridge and trail repair (DOI); and energy conservation projects for existing facilities (GSA, DoD, VA). These projects will call for contractors to provide products and services to upgrade technology (e.g., networking, computers, energy efficiency monitoring, etc.), equipment, lighting and heating, as well as professional services (e.g., design, testing, inspection, etc.).
Both versions of the ARRA have projects related to some of the federal government’s long-term initiatives, such as energy and health IT. Smart grid modernization, alternative energy R&D, and the development of a health IT architecture and electronic health records are critical elements of the federal government’s plan to save money and to reduce its carbon footprint. The stimulus plan could contain up to $34 billion in energy and health IT initiatives.
The stimulus package will represent other opportunities inherent in such a large scale effort. “The workforce shortage and the volume of spending will require support in grants, financial, and program management,” said John Slye, principal analyst with INPUT.
Both bills require expenditure plans within 30 days and project starts within 120 days in many areas. These time constraints introduce vendor risk, depending on how prepared the government is to implement large scale initiatives in such a short period of time. Contractors seeking opportunities from the ARRA should be prepared with ready-made solutions, despite uncertainty around acquisition time frames.
Contractors that mobilize around these Obama administration priorities – which would likely receive funding with or without a stimulus package – will be better prepared when agency dollars begin flowing than those taking a “wait-and-see” approach.