Government Contractors

Industry Profile Report

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

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, 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

                                Coronavirus Update

                                Jun 2, 2022 - Pentagon Program Finds Contractors’ Software Vulnerabilities
                                • A Pentagon pilot program found an array of software vulnerabilities at dozens of defense contractors. The goal of the "Vulnerability Disclosure Program" was to find and fix flaws in the email programs, mobile devices, and industrial software used by Pentagon contractors before malicious hackers can take advantage of them. "We really wanted to focus on those smaller defense contractors that may not have all the budgets and resources," said Melissa Vice, interim director of the Department of Defense Cyber Crime Center's DOD Vulnerability Disclosure Program. Such initiatives are increasing in importance as Russian and Chinese hackers continue to try to steal sensitive data from the US defense industrial base. The FBI and other US agencies warned a week before Russia's full-scale invasion of Ukraine in February that Kremlin-backed hackers had acquired sensitive information on the development of US weapons by breaching American defense contractors over the last two years.
                                • A US Circuit Court of Appeals revived in April the Biden administration’s Covid-19 vaccine mandate for federal executive branch employees, lifting a district court’s January injunction that had halted the requirement and ordering the lower court to dismiss the case. Legal experts say that lawyers for the mandate’s challengers could take the case directly to the Supreme Court or put it first in front of the full appellate court. The Biden administration said that it won't immediately reinstate the mandate, saying that “there are still procedural steps that need to take place to lift the injunction; at this time the district court’s preliminary injunction remains in effect.” A vaccination mandate for employees of federal contractors like airlines and manufacturers that was blocked by a federal judge in December was still blocked in early May.
                                • Most Americans are safe without a mask in indoor settings, the Centers for Disease Control and Prevention (CDC) said in early March. The change to the agency's mask guidance leans less heavily on the number of COVID-19 cases as a key measure, instead giving more weight to hospitalizations and local hospital capacity.
                                • Legal experts suggest the large sums of COVID-19-related money that flowed to contractors from the Small Business Administration will further the trend of tighter DOJ enforcement under the False Claims Act. Contractors are urged to ensure eligibility when applying for contracts and when subcontracting or providing contract support for partner companies.
                                • A presidential executive order to protect workers and on-site government contractors in government agency offices during the pandemic went into effect in January. The order created the Safer Federal Workforce Task Force, which, in cooperation with the Office of Management and Budget (OMB), has issued initial guidance for heads of government agencies to implement COVID-19 workplace safety plans. The guidance outlines protocols relating to several pandemic-related issues, including mask-wearing, vaccinations, signage, visitor access, symptom screening, and building operations.
                                • A Pentagon policy change early in the pandemic helped keep many smaller defense subcontractors afloat, according to Government Executive. The policy allowed prime contractors – such as Lockheed Martin and BAE Systems – to receive a larger share of contract payments upfront, allowing them to pass the money on to smaller subcontractors. The policy change was particularly helpful for aerospace subcontractors that saw demand from the commercial aircraft market dwindle amid the drastic drop in airline traffic. Such companies were able to pick up the slack with higher upfront payments for their military contracts. About 75% of member companies in the Aerospace Industries Association say they benefitted from increased upfront payments. Contractors would like Congress to pass legislation to make the Pentagon’s policy change permanent.
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