Federal Contract Spending Dipped 1.5% in 2015, Study Finds

Total federal contract spending in fiscal 2015 came in at $440.8 billion, a 1.5 percent decline from that in fiscal 2014, according to the fifth annual Bloomberg Government 200, released on Tuesday.

Companies among the top 200 government contractors won about the same share of federal contract dollars as last year, some 62 percent, and the study’s highest-ranked firms remain unchanged.

The top firms witnessed “decreased contracts, enduring budget pressures, continued consolidation and unprecedented mergers and acquisition activity,” concluded Donald Thomas, head of the Government Contracting Solutions Business at Bloomberg Government.

Some 91 companies rose in the rankings, while 70 dropped. The top five remained the same as last year: Lockheed Martin, Boeing, General Dynamics, Raytheon and Northrop Grumman.

The recent decline in contract spending “may have bottomed out in 2015 so that fiscal 2016 and 2017 will see more of a rebound,” said Bloomberg quantitative analyst Duncan Amos during a preview for reporters. “Contract spending by civilian agencies increased to 38 percent, a 15-year high,” he added, noting that services still dominate.

Amos attributed the recent trend toward consolidation of contracts to the Obama administration’s pursuit of category management—an approach to bulk purchasing of common products and some services common in the private sector. “Companies will have to adjust or rely on subcontracts to continue in the federal space,” Amos said.

“Even with the improving budget picture, the federal government services sector is still primarily a battle for share,” Brian Friel, founder of the consulting firm One Nation Analytics who worked on previous editions of the Top 200 study, told Government Executive. “It remains a tough environment for organic growth. Mergers and acquisitions accounts for some of the larger companies’ increase in market share. Health also remains a bright spot in federal contracting.”