I recently read an article by Deltek regarding Government Contracting Industry Study. Although this article is almost a year old, I believe that the study of the government contracting industry is still spot-on for the industry. Deltek has identified essential trends, challenges, and benchmarks in the government contracting sector. Overall, the statements made in the article are correct. However, I am concerned with the increase in audits and the new DoD Cybersecurity Maturity Model Certification (CMMC) that is coming in September of 2020. I believe that many micro-small companies will not be able to afford the certification costs. As a result, many companies will leave the government marketplace. Having a strategy on how you are going to tackle government contracting is necessary now more than ever.
Increased Growth and Competition for businesses.
The Government procurement market is healthy due to Congress increasing government spending. As expected, businesses are capitalizing on the spending environment, which allows them to experience growth and profit-maximizing strategies. As a result, many contractors are expanding into new government agencies as they look to expand their customer base.
Also, many businesses impacted by the COVID-19 are likely to expand into the government marketplace. These businesses are hoping to recoup some of the revenue they lost during the pandemic. However, those businesses that already are experienced government contractors will probably be able to capitalize on these opportunities. Why? They have a strategy that is already working for them. Those inexperienced in government contracting will have to become a quick study if they wish to receive a contract. Many experienced government contractors will seek out new customers and new agencies. Let’s look at these new strategies next.
Seeking New Customers and New Agencies will Continue to be a successful strategy.
Even more now than before, small businesses will try to diversify into new agencies and pursue new customers. Many companies that expand will confront unfamiliar contracting vehicles. Generally speaking, to capitalize on these new markets, companies must select the right teaming partner. That is where their government contracting strategy comes in. Another obstacle faced by many companies is finding qualified talent and retaining top performers. Next, we will look at this.
Qualified Talent and Retaining Top Performers
In the current economy, it can be challenging to find, hire, and retain high performing talent. Open employee positions have been a challenge to many small businesses. Now it is yet to be seen what the impact the COVID-19 will have on government contractors. This pandemic may increase the number of high-performing talent that government contractors are needing. Many businesses are focusing on improving their employees experience with new technology, continuous performance management, and top of the line career development programs. Again, this is why you need a strategy. Next is cybersecurity concerns.
Businesses seeking DoD Contracts will need to ensure that their IT systems can meet the new Cybersecurity Maturity Model Certification (CMMC). Meeting the new CMMC will be more complicated for those businesses who have transferred their business functions to the cloud. Some companies report a 37% increase in cybersecurity incidents compared to the year before. Government contractors are being introduced to new compliance standards, increasing costs, and regulatory burdens.
Compliance cost for Contracting Purchasing System Review (CPSR) Audits are rising.
As more CPSR audits are taking place, this is putting a high cost on the government contractors. Many contractors are stating that it is moderately or more costly to meet the compliance requirements. Next is the summary.
In Summary – Why You Need a Strategy
In summary, it will be interesting to see which companies continue to perform government contracts in the future. The compliance requirements may be too costly for many small businesses forcing them to go to other agencies or even move into the commercial marketplace. In the long run, I worry about the impact of these mandatory audits and certifications are going to have a small business. Will small businesses be able to pay for these certifications? In the end, only time will tell. Well, that is it for this week’s article.
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