By Kevin Plexico, Senior Vice President of Information Solutions at Deltek
The government contracting market is a challenging and competitive space. With U.S. elections, evolving policies and funding uncertainty, 2024 will be especially competitive. To succeed, companies need a strategic approach that anticipates key trends and positions them to beat the competition in an increasingly dynamic market.
Our team of experts at Deltek has used GovWin’s comprehensive data to identify the most significant trends in the U.S. federal, SLED (state, local and education), and Canadian government markets, offering valuable guidance for businesses selling to the public sector.
Federal trends for 2024
2024 is of course an election year, and that brings greater uncertainty than usual when projecting the federal contracting trends to watch in the next 12 months. The outcome of the federal elections is a clear issue to watch, along with budget uncertainty, inflation/interest rates, AI investment and the government’s continual focus on supporting its small business vendors.
Budget uncertainty: Ongoing congressional gridlock and growing agency mission needs create budget uncertainty and heightened scrutiny. The Fiscal Responsibility Act sets a framework for near-term budget levels, assuming they are honored. It will be worth watching closely to see how budgets may be impacted by potential changes in congressional leadership and/or appropriations committee leadership, and how that could impact the government contracting landscape.
Inflation and interest rates: The Federal Reserve anticipates inflation to continue to decline in 2024, with cautious optimism regarding overall economic health. While contractors are feeling the effects of high interest rates, supply chain costs and wage inflation, there are encouraging signs that inflation will continue to fall, and interest rates may begin to fall soon as well.
Small business focus: Agencies are under additional pressure to expand small business opportunities. The focus on equity among underrepresented groups will also direct extra attention to providing contract opportunities for women-owned and small disadvantaged businesses.
Artificial intelligence: The transformative impact of artificial intelligence on federal agency missions is a theme that will drive continued federal investment in 2024 and likely new governance structures to guide their adoption.
Contract consolidation is another theme that we have been watching for the last several years. Following the budget sequester triggered in FY 2013, contract spending began to rebound. However, the trajectory of vendor participation continued to decline. There are numerous drivers of this consolidation, including the broad use of IDIQ contracts to speed buying and leverage purchasing power which limits the number of prime contract positions, the complexity of the acquisition process and rules, the costs and complexity of compliance requirements (such as CMMC, supply chain, audits, etc.), and M&A to acquire contracts, customers and capabilities.
Regardless of your business size or focus, it’s important to stay informed about the top federal government contracting trends for 2024. This on-demand webinar gives a deeper look at the government’s 2024 spending patterns and plans, along with some forward-looking steps you can use to get ahead.
SLED trends for 2024
Some of the same themes to impact the federal public sector are expected to drive SLED — or state, local and education — government contracting in 2024 as well. The recession question will no doubt linger well into 2024. In general, a slow growth environment without a major financial/economic crisis or significant recession would be favorable for SLED government purchasing.
Because of the positive impact of stimulus on SLED budgets and fiscal confidence, decision-makers have generally not been proactively delaying projects or cutting back in recent months. In the absence of conclusive evidence of a recession beginning, SLED governments are focused on returning to status quo operations and funding levels that had been disrupted earlier with the pandemic.
One theme that will continue to make a mark is the growth of cooperative purchasing. This is driven by strong demand by public sector buyers for convenience and efficiency. GovWin’s own analysis of 13 leading national coop organizations supports a current market size of around $64 billion for 2023, which should reach $72 billion by 2026.
Deltek Manager of SLED Market Analysis Paul Irby shared these details and more recently in this webinar that you can watch on-demand.
Canadian government trends for 2024
2024 is shaping up to be a year of steady and moderate growth for Canadian governments. While the outlook for procurement spending across Canada is not bullish, some growth is expected. In 2024, procurement spending is expected to increase by 2.8 percent for the Government of Canada, and up by 2.9 percent for its provinces and territories. Procurement spending may be further impacted by a few specific Canadian trends and market conditions in 2024. Canada’s digital transformation will see powerful tools like AI transform government operations and services.
Governments in Canada are expected to continue pursuing clean energy solutions to achieve their net-zero carbon emissions goals. Supplier diversity programs will increase the amount of government procurement dollars going to minority suppliers. Governments will also take on more civil infrastructure projects following historic funding investments. Vendors should also be aware of upcoming and trending purchases, many of which match up with this year’s key trends. Goods and services ranging from electric vehicle chargers to administrative services to the construction of government facilities will be in high demand.
You can learn more about why AI solutions and supplier diversity initiatives are set to have a greater impact on Canadian contracting — plus a broad look at the Canadian market — by watching this on-demand webinar, hosted by Deltek Senior Research Analyst Brynn Bruder.
Next steps for government contracting success
You can prepare for the future by staying ahead of emerging trends that will shape the market and better understand the unique dynamics of each sector within GovCon and the current opportunities and challenges.
Leveraging a trusted source of government intelligence, like Deltek’s GovWin IQ platform, can help you prepare and empower you to build a winning government contracting strategy for the year ahead.
