Government Contractors

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 216,400 government contractors in the US sell a wide range of goods and services to agencies of the federal government, state governments, and local governments. Goods range from advanced military jets and weapon systems to office supplies. Services range from complex information systems design to janitorial services and food contracting services. Contract types vary from firm fixed price contracts to cost reimbursement or time and materials contracts.

Qualifying For Procurement Preferences

Contractors will be at a competitive disadvantage in winning federal government business if they do not qualify as a preferred vendor.

Cost Overruns Hurt Profits

Government contractors must possess strong project management skills to successfully manage large, complex projects and avoid cost overruns.

Industry size & Structure

The average government contractor generates about $4-5 million in annual revenue.

    • The government contractor industry consists of about 216,400 firms that generate $1 trillion in annual revenue.
    • The federal government spent $1 trllion in FY 2021 on contracts, or 11% of the total federal budget. State government contract spending on goods and services was over $423 billion.
    • There are over 41,600 defense contractors in the US.
    • The largest government contractors are Lockheed-Martin, Northrup Grumman, Boeing, SAIC, Raytheon, General Dynamics, Hewlett-Packard, and Booz, Allen & Hamilton.
                                Industry Forecast
                                Government Contractors Industry Growth
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Nov 12, 2022 - Proposal Would Require Emissions Reductions By Contractors
                                • The Biden administration has proposed a rule that would require all major federal contractors to set targets for reducing their emissions in line with the 2015 Paris climate accord. The rule would also mandate that federal contractors publicly disclose their greenhouse gas emissions and the risks they face from climate change. The federal government is the world’s largest buyer of goods and services, purchasing more than $630 billion in the last fiscal year alone. President Biden has previously called for the government to become carbon-neutral by 2050.
                                • North Atlantic Treaty Organization (NATO) member states are urging weapons manufacturers to boost production to help them restock their own stores and to supply Ukraine for its fight against the Russian invasion, according to Bloomberg News. Billions of dollars in arms, munitions, and equipment has been sent to Ukraine since February. Defense companies in the US and Europe are now seeing demand rise for air defense and anti-tank arms alongside other equipment, with governments increasingly recognizing that Ukraine will probably need military support for years to come. NATO members also need more arms to shore up the alliance’s presence on its eastern flank. Experts say that it could take years before supply catches up with demand because defense companies face hurdles to expand production to the scale that is necessary.
                                • Government contractors are likely to benefit from project funding approved in the Inflation Reduction Act signed into law in August. Green procurement funding, for example, includes $2.15 billion to install low-carbon materials in General Services Administration-owned buildings; $2 billion for Low-Carbon Transportation Grants to reimburse and incentivize the use of low-carbon materials for Federal Highway Administration projects; $250 million to develop and standardize Environmental Product Declarations for construction materials, with grants and technical assistance for manufacturers; and $100 million to identify and label low-carbon materials and products for federally funded transportation and building projects.
                                • Many legal experts suggest that a recent Supreme Court ruling which substantially limited the authority of the Environmental Protection Agency (EPA) to regulate carbon emissions from power plants may result in litigation of pending Securities and Exchange Commission (SEC) rule changes that would require public companies to increase their disclosures relating to climate risk. The June 2022 West Virginia v. EPA ruling addressed the proper scope of executive agency rulemaking, so it may impact other regulatory agencies. The SEC's proposed rules would require contractors supplying goods and services to the federal government to disclose the greenhouse gas emissions that they directly and indirectly cause if the emissions are "material" or included in a company-set emissions target.
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