First, let me say that I am an optimist. The glass is usually half-full for me and I don’t tend to frown much. Life is normally a “box of chocolates” and sunshine for me. That being said, there is a slippery slope in government contracting where war amongst the few is going to break out. There will be a doomsday on the horizon in which government contractors become cannibalistic and cut, cut, cut to meet the demands of continued government spending that is well below what they have recently seen. *CUE DRAMATIC MUSIC* The scene is set for mergers and acquisitions. There is already a marked increase in protests in the early part of 2011 and this trend is going to continue. The battles have been started and the war is just beginning.
There has been a lot of chatter on discussion boards, blogs, and news sources about the decrease in government spending for 2011 and beyond. Well, duh!? Government contractors have seen unprecedented spending under the guise of bailouts, recovery, reinvestment, TARP, etc. over the past few years and now that the government is not going to spend, there seems to be a lot of talk that equates to withdrawal. I only half-snicker when I make the analogy to an addict (food is mine). As long as the supply is there everything is good – as soon as it is taken away everything becomes a battle to survive.
Let’s take a step back. Some would say that the government spending has been all about government control and advancing a socialistic movement. Others may argue that the spending was to empower the private sector to begin to create jobs and provide an AED shock to the economy. One thing I do know is that the effects of any huge decision such as this cannot normally be seen in the short-term. A great history teacher I had in high school once told me that if you want to see the effects of political decisions, take a look back at the decisions that were made 4-6 years ago and that is what is shaping today’s environment. That being said, there is a real and immediate need for government contractors to take a look at the landscape created by the current policies in order to properly plan for the future.
There is very clearly a desire cut and a lack of funding that will cause a cut in government spending. Fewer dollars in the pipeline means fewer contracts or fewer awardees. See where this is going? Fewer awardees mean that you may need to be a one-stop-shop for whatever your niche market is. Worse yet, you may have to combine with your competitor in order to meet the challenges of streamlining that will need to be made. Or even worse, sell out and cash out to let someone else try to figure it all out.
Another trend that I have witnessed is the change in the landscape within the “Information Age.” Everyone wants information and everyone has an opinion on what the data means. Regardless, there is a clear trend toward even more transparency and accountability that cannot be denied. The requirements from the bailouts and the stimulus are not going away any time soon. In fact, it will be interesting to see how far the requirements go…