fy 2018 opportunities for small businesses

FY 2018 Opportunities

for Small Businesses

April 2018

Director of Government Contracts Research, BGOV

Executive Director, NACA

President, National 8(a) Association

Program Manager, NCAIED

2Executive Summary

Long-term spending trends are positive

• Most agencies are seeing a multiyear rise in contract spending

• Set-aside spending, usually flat during downturn, is rising in lock-step with year-over-

year spending increases

Spending in fiscal 2018 has matched the president’s fiscal 2018 budget priorities

• Most agency spending amounts align with the president’s request

• Defense agencies accelerated spending; nondefense agencies cut back spending

Congress wanted to spend much more money on:

• Specific defense programs such as weapons and upgrades, readiness support, and

upgrades to existing IT systems

• Nondefense agencies, but no detailed plans beyond border security and infrastructure

How to spend it?

• Use of multiple-award contracts

• Small-business spending

Fiscal 2019 outlook

• Budget caps already raised, but president doesn’t have to request or spend up to them

Market primed for growth in fiscal 2018 and 2019

3

Federal Spending to Rise for Third Straight Year

In fiscal 2017:

• Defense spending rose by

$25 billion, or 8.1 percent, to

$331 billion

• Civilian spending rose by

$9 billion, or 5.4 percent, to

$181 billion

No two-year losers:

• The few large civilian agencies

that saw declines in 2017 –

Treasury, Transportation,

Commerce, Interior, and EPA –

had banner years in 2016

Fiscal 2017 was the best year since fiscal 2012

Source: Bloomberg Government

$167 $189

$161 $153 $150 $156 $160 $171 $181

$387 $372

$380 $369

$316 $291 $282 $306

$331

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Civilian Defense

Obligations in billions

4

Set-Asides Continue Uptick in Annual Spending

In 2017:

• Women-owned set-aside spending

rose by $276 million, or 62 percent,

to $718 million

• Veteran-owned set-aside spending

rose by $1.2 billion, or 19 percent,

to $7.3 billion

• Indian Small Business Economic

Enterprise spending rose by

$18 million, or 28 percent, to

$85 million

While large categories dominate, recent trends portend shifting future

Note: Categories are aggregates of sole-source and competitive programs. For example, “veteran owned” includes set aside and sole-source service-disabled

veteran-owned small business spending, as well as sole-source and set-aside veteran spending. Values less than $2 billion are unlabeled.

$23.9 $28.6 $28.1 $30.0 $30.0

$34.2 $34.8 $40.0

$43.8

$17.9

$18.8 $17.4 $16.6 $14.7

$17.1 $16.7

$17.4 $17.1

$3.2

$4.8 $4.7 $4.8

$4.6

$4.9 $5.0

$6.1 $7.3

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Small business set-aside 8(a)

Veteran owned HUBZone

Women owned Other

Obligations in billions

Source: Bloomberg Government Contracts Intelligence Tool

5

Most Agencies Have Spent Less in Fiscal 2018

Note: Defense Department contract data is reported with a 90-day delay. Values shown compare first fiscal quarter for defense and first half for all other agencies.

Defense contract spending up in first quarter; most civilian agencies down in the first half

DOD outpaces nondefense agencies such as USAID and Energy, which may be

experiencing repercussions from planned cuts in fiscal 2018 budget request

$4.5-$2.3

-$4.1-$1.2-$0.9

$1.3-$0.4

$0.2-$1.2

$0.2-$0.2

-$1.1-$0.6

$0.1$0.1

$0.0$0.1

$0.0$0.0

Defense

Energy

Veterans

HHS

NASA

Homeland

Justice

Transportation

State

USDA

GSA

Treasury

USAID

Commerce

Education

Interior

Labor

EPA

SSA

Dollar change in obligations, year-over-year

7%-17%

-32%-13%-11%

22%-13%

11%-35%

12%-7%

-39%-28%

8%11%

-3%26%

-3%-3%

Defense

Energy

Veterans

HHS

NASA

Homeland

Justice

Transportation

State

USDA

GSA

Treasury

USAID

Commerce

Education

Interior

Labor

EPA

SSA

Percent change in obligations, year-over-year

6

Higher Budget Caps Signal More Spending

Fiscal 2018 Budget CapsBudget authority in billions

This change creates an enormous

tension between year-to-date spending

and goals for the entire fiscal year

Budget authority in billions

This change provides the illusion of

stability in budgets and contracting. The

president does not have to request to

these levels, but such new limits were

previously a floor, not a ceiling

Congress raised fiscal 2018 and fiscal 2019 caps on discretionary budgets prior to omnibus


New Old Change

Defense $629 $541.9 + $79.9

Nondefense $579 $515.7 + $63.3

Fiscal 2019 Budget Caps

New Old Change

Defense $647 $562 + $85

Nondefense $579 $529.1 + $67.9

7

Agencies Far Behind in Spending

Congress provided many agencies additional funding not requested by the president

Notes: Defense Department contract data is reported with a 90-day delay.

Values shown compare first fiscal quarter for defense and first half for all other agencies.

Agency

FY18

appropriation

Change

from request

Change

from FY17

Appropriations

percentage change

from FY17

YTD Obligation

Change, FY17 to

FY18

Commerce $11.1 $3.3 $1.9 17% 8%

Energy $34.5 $6.7 $3.8 11% -17%

HHS $177.1 Unavailable $16.0 9% -13%

Homeland $47.7 $3.7 $5.3 11% 22%

HUD $42.7 $11.3 $3.9 9% -8%

Interior $13.1 $2.5 -$0.9 -7% -3%

Justice $30.3 $2.0 $1.4 4% -13%

NASA $20.7 $1.6 $1.1 5% -11%

NSF $7.8 $1.1 $0.3 4% 3%

State $54.2 $13.5 $3.4 -6% -35%

Transportation $86.2 $11.1 -$10.0 12% 11%

USACE $6.8 $1.8 $0.8 12% 31%

8

Spending Booms at the End of Year

2017 was an average year

Fourth quarter is by far when

most of the money is spent

• Defense spent one-third of its

annual obligations in the fourth

quarter of fiscal 2017

• Civilian agencies spent 35

percent of its annual obligations

in the fourth quarter of 2017

Slowest quarter

• Defense spent 21 percent of its

annual obligations in the first

quarter

• Civilian agencies spent 19

percent of its annual obligations

in the second quarter

Yet, even in a normal year, it is extremely hard to predict fourth quarter obligations

$68.7 $77.3 $74.8

$110.6

$39.2 $35.1 $42.8

$63.5

Q1 Q2 Q3 Q4

Defense Civilian

Obligations in billions, fiscal 2017

Source: Bloomberg Government Contracts Intelligence Tool

9

Spending Trends and Cycles Are Predictable

Patterns emerge, but aren’t precise enough for market sizing


Fiscal quarters end on high notes

• June and September spending is 80

percent higher than prior months

• December and March spending is 45

percent higher than prior months

The fourth-quarter “race to the

finish” starts as a marathon, but

ends as a sprint on the last day of

the year

$19 $23 $27 $23 $21

$33

$20 $20

$35 $30 $28

$52 $14 $8

$18

$12 $10

$13

$10 $11

$22

$13 $17

$33

Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept.

Defense Civilian

Obligations in billions, fiscal 2017

$5.7 $7.2 $10.3

$20.7

$7.8

$4.0 $4.8

$6.8

$10.8

$6.9

Sept. 1-7 Sept. 8-14 Sept. 15-21 Sept. 22-28 Sept. 29-30

Defense Civilian

Obligations in billions, September 2017

10

Agencies Buy More I.T & Services Later in Year

Civilian AgenciesShare of spending by category in fiscal 2017

Substantial increases in share of spending across most categories

Notes: Uses definitions of information technology, professional services, and facilities and construction provided by the General Services Administration

Defense DepartmentShare of spending by category in fiscal 2017

13.3%

18.2%

13.6%

17.7%

22.7%

18.3%

InformationTechnology

Professional Services Facilities andConstruction

First half of fiscal year Second half of fiscal year

7.7%

10.5%

8.0%10.2% 10.9%

12.9%

InformationTechnology

Professional Services Facilities andConstruction

First half of fiscal year Second half of fiscal year

11

Most of the Market Ahead for 8(a) and WOSB

8(a) spending in 2017 Dollars in millions

USDA and State have greatest share of spend left to the second half of year

Women-owned business spending in 2017Dollars in millions

$216

$166

$152

$287

$270

$288

$521

$566

$676

$5,546

$351

$403

$465

$427

$528

$827

$692

$915

$1,435

$10,923

0% 20% 40% 60% 80% 100%

VA

DOJ

USDA

GSA

DOT

DOS

NASA

DHS

HHS

DOD

First Half Second Half

$190

$136

$233

$139

$278

$332

$556

$570

$642

$5,685

$345

$471

$390

$517

$430

$424

$618

$1,218

$1,363

$9,599

0% 20% 40% 60% 80% 100%

DOC

DOS

DOT

USDA

DOJ

VA

NASA

DHS

HHS

DOD


12

Set-Aside Spending is Concentrated at Year End

SDVOSB spending in 2017 Dollars in millions

HHS leaves 75% of SDVOSB to second half; many HUBZone agencies with 80% ahead

HUBZone spending in 2017Dollars in millions

$22

$79

$48

$50

$60

$53

$145

$210

$165

$1,823

$139

$141

$204

$223

$216

$231

$257

$367

$463

$3,710

0% 20% 40% 60% 80% 100%

DOI

GSA

DOC

USDA

HHS

DOS

NASA

VA

DHS

DOD


$58

$85

$140

$113

$155

$180

$197

$349

$1,595

$4,080

$161

$207

$152

$354

$321

$299

$306

$712

$3,605

$6,981

0% 20% 40% 60% 80% 100%

USDA

DOT

GSA

HHS

DOS

DOJ

NASA

DHS

VA

DOD


13

Energy Department Details

FundingBudget authority in millions

13 percent fiscal 2018 funding increase counters 18 percent spending decline at NNSA


Agency Bill

Vs.

FY

2017

Vs.

request

%

Change

National Nuclear

Security

Administration

$14,669 $1,731 $738 + 13%

Energy programs $12,918 $1,634 $5,407 + 14%

Environmental

and other

defense activities

$6,828 $76 $445 + 1%

Power Marketing

Administration$105 ($2) $0 - 2%

ContractingObligations in millions

Agency

First

half of

FY17

First

half of

FY18

First

half

change

%

change

Nuclear Security &

National Nuclear

Security

Administration

$6,746 $5,518 -$1,228 - 18%

Undersecretary for

Science$3,402 $2,646 -$756 - 22%

Undersecretary for

Management &

Performance

$3,215 $2,889 -$326 - 10%

14

Commerce Department Details


Four percent fiscal 2018 funding increase counters 13 percent spending decline at NOAA


Agency Bill

Vs.

FY17

Vs.

request

%

change

National Oceanic

and Atmospheric

Administration

$5,909 $234 $1,139 + 4%

Patent and

Trademark Office$3,500 $270 $0 + 8%

Census Bureau $2,814 $1,344 $1,317 + 91%

National Institute

of Standards and

Technology

$1,199 $247 $474 + 26%


Agency

First

half of

FY17

First

half of

FY18

First

half

change

%

change

National Oceanic

and Atmospheric

Administration

$646 $563 -$84 - 13%

Patent and

Trademark Office$457 $459 $2 0%

Economics and

Statistics

Administration

$201 $361 $160 + 79%

National Institute of

Standards and

Technology

$59 $69 $10 + 17%

Office of the

Secretary$44 $39 -$5 - 11%

Bureau of Industry

and Security$7 $7 -$1 - 8%

15

State Department Details


Widespread spending cuts countered by additional funds to many programs


Agency Bill

Vs.

FY17

Vs.

request

%

change

Global health

programs$8,690 ($35) $2,210 0%

Security

assistance$7,602 $1,180 $1,700 + 18%

Diplomatic &

consular$5,744 ($403) $461 - 7%

Development

assistance$3,000 $5 $3,000 0%

Embassy

Security$2,243 $1,125 $1,101 + 101%

International

organizations$1,786 ($30) $617 - 2%


Agency

First

half of

FY17

First

half of

FY18

First

half

change

%

change

Undersecretary for

Management$2,662 $1,431 -$1,231 - 46%

Undersecretary for

Political Affairs$459 $501 $42 + 9%

Undersecretary for

Civilian Security,

Democracy and

Human Rights

$295 $275 -$20 - 7%

Undersecretary For

Arms Control and

International

Security

$43 $35 -$8 - 18%

Undersecretary for

Public Diplomacy

and Public Affairs

$24 $23 -$1 - 6%

16

Major Small-Business MACs• Agencies will likely continue to satisfy requirements using many of the same multiple-award

contracts that have been used since fiscal 2013

• Some existing vehicles such as Alliant SB, Seaport-e, VA-T4, and others are being eclipsed by

follow-ons

IT 70 - Schedule 70: General Purpose Commercial Information Technology Equipment, Software, and Services; PSS – Professional Services Schedule; SEWP - Solutions for

Enterprise - Wide Procurement; OASIS - One Acquisition Solution for Integrated Services; DLS Logistics Special Ops - DLA Special Operational Equipment Tailored Logistics Support

Program IDIQ; CIO-SP3 SB - Chief Information Officer - Solutions and Partners 3 Small Business; AMCOM EXPRESS - Army Aviation Missile Command Expedited Professional and

Engineering Support Services; T4-NG - Transformation Twenty - One Total Technology; Schedule 84 - Total Solutions for Law Enforcement, Security, Facilities Mgmt, Fire, Rescue;

NETCENTS-2 SB - Network Centric Solutions 2: Products (Small Business); Army R23G - Rapid Response Third Generation; eFAST - Electronic FAA Accelerated and Simplified

Tasks; ARMDEC PIF - Aviation and Missile Research, Development, and Engineering Center Prototype Integration Facility; EIS - Enterprise Software Initiative; Schedule 65IIA:

Medical Equipment and Supplies

$0 $5 $10 $15 $20

Schedule IT-70

PSS

SeaPort Enhanced

SEWP V

8(a) STARS II

SEWP IV

Alliant SB

OASIS SB

DLA Logistics Special Ops

CIO-SP3 SB

AMCOM EXPRESS

VA-T4

Schedule 84

NETCENTS-2 SB (Products)

Army R2-3G

FirstSource II

FAA Efast

AMRDEC PIF

DoD EIS

Schedule 65IIA

2013 2014 2015 2016 2017

Dollars obligated, in billions, by fiscal years.

17Conclusion

Long-term spending trends are positive

• Most agencies are seeing a multiyear rise in contract spending

• Set-aside spending, usually flat during downturn, is rising in lock-step with year-over-

year spending increases

Spending in fiscal 2018 has matched the president’s fiscal 2018 budget priorities

• Most agency spending amounts align with the president’s request

• Defense agencies accelerated spending; nondefense agencies cut back spending

Congress wanted to spend much more money on:

• Specific defense programs such as weapons and upgrades, readiness support, and

upgrades to existing IT systems

• Nondefense agencies, but no detailed plans beyond border security and infrastructure

How to spend it?

• Use of multiple-award contracts

• Small-business spending

Fiscal 2019 outlook

• Budget caps already raised, but president doesn’t have to request or spend up to them

Market primed for growth in fiscal 2018 and 2019

fy 2018 opportunities for small businesses

Documents