Budget impasse puts the hurt on contractors

A new survey leaves little doubt of the pain contractors are already feeling from the budget impasse. Where does it hurt the most?

Forget about bracing for the impact of sequestration; contractors are already feeling the pain of the budget impasse on Capitol Hill.

A new study by Centurion Research found that contractors are taking hits to revenue and new business opportunities.

Participants in the survey also told Centurion that they are seeing fewer requests for proposals and experiencing delays in contract awards.

In other words, the pain has already started, and I guess anyone reading this is already feeling it, but perhaps there is some comfort in knowing you aren’t alone.

When the survey asked what contractors see for 2013, the bleakness continues:

  • 83 percent see a moderate to significant impact to revenue
  • 88 percent see a moderate to significant impact on new program starts.
  • 89 percent see moderate to significant impact to award schedules

The picture isn’t any brighter when the survey questions focused on what contractors see as the impact on their customers.

  • 90 percent expect moderate to significant delays in RFP releases
  • 66 percent see a moderate to significant impact on the willingness of customers to talk to contractors
  • 75 percent see a moderate to significant impact on agency morale

Interestingly, when Centurion asked about companies' willingness to invest in new business initiatives, only 17 percent said there would be no new investments. Minor investments are expected by 30 percent of the respondents, 42 percent expect some investment, while 11 percent expect significant investment.

The survey also asked about strategic plans, and 50 percent said they were focusing on agencies with more secure budgets, such as intelligence agencies, Veterans Affairs and NIH.

Another 36.9 percent said they were staying the course, and were not planning significant changes in their plans or focus.

Increasing merger and acquisition activities is a priority for 24.6 percent of the respondents.

Perhaps a bit chilling is the finding that 30.7 percent are rethinking their entire strategy.

I can’t argue with Centurion’s conclusion that the federal market is in the middle of a major transition. I think the transition would take place whether or not we were experiencing a budget impasse.

But that impasse takes an already difficult budget environment, and heaps on uncertainty and a manufactured crisis that no seems to be able to solve.

My optimistic side stays focused on the day we do solve sequestration and have a longer term view of the budget. Even with cuts, the stability and visibility into where the government is spending could spark a bit of a business boom, as hard as that is to imagine right now.

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