For the past several years, large and small contractors have been bidding on an expanding pool of projects awarded by the federal government. But all that may be about to change. Industry watchers say that government contracts are expected to shrink by 5% next year. Ashley Bergander, manager of federal programs at FedSources, says "The government is doing everything possible to consolidate and spend as little money as possible in this upcoming year.”
Some analysts believe that more projects will be managed in-house. For example, the Department of Defense may choose to have its own employees handle work that had been previously outsourced. In other cases, work will be cut completely.
However, there are a few key areas where the government lacks expertise. These include cybersecurity and health information technology. In addition, when the government does open up contracts for bidding, it is establishing reserves for small businesses. In this way, it also hopes more small businesses will compete for work. And when the usual follow-on contracts for existing projects are released, the feds will be looking to up the competition as well. The firms that hold the main contracts will find themselves competing on a more level playing field for smaller award amounts that will appeal to small businesses.
These changes may cause larger companies to begin marketing their services more aggressively to private enterprises. And smaller businesses may sense a growing opportunity with the federal government and begin the process to bid on new contracts.[Source: Brodsky, Robert. Contracting market set to shrink in fiscal 2011. Govexec.com. 7 Oct. 2010. Web. 19 Oct. 2010]