Kevin Plexico, senior vice president of information solutions at Deltek and a 2022 Wash100 Award recipient, published his latest article as a part of Executive Mosaic’s GovCon Expert program on Tuesday.
Previously, GovCon Expert Kevin Plexico provided a look into the four key stages of the government contracting (GovCon) lifecycle process and provides a full overview of the four stages in order for government contractors to understand how to advance opportunities and find success in the highly competitive federal sector.
In the latest GovCon Expert feature from the three-time Wash100 Award winner, Kevin Plexico discussed the most significant challenges facing business development professionals in the GovCon market, including the tension of increased competition as well as the importance of investing in BD resources and thinking strategically in a restrictive spending sector.
You can read Kevin Plexico’s latest GovCon Expert article below:
Top Three Challenges Facing Business Development Professionals in the GovCon Market in 2022
By GovCon Expert Kevin Plexico
For the last 13 years our team of analysts at Deltek has conducted a survey of government contractors to identify key performance indicators, market conditions, industry benchmarks and challenges, and the performance outlook for businesses. We call this study the Deltek Clarity Government Contracting Industry Report and consider it to be the best way for businesses to take the pulse of the government contracting market.
In the 2022 edition of Clarity, we heard from many businesses that although 2021 was not necessarily a stellar year overall, business development (BD) results moving into 2022 were surprisingly positive with increased win rates expected and a favourable growth outlook. Nevertheless, there were three top business development challenges reported by contractors from our survey:
- Increased competition for government opportunities
- Limited BD resources
- More restrictive spending environment
Below, I’ve summarized some of the findings from this year’s Clarity Study to demonstrate how companies are experiencing these business development challenges, as well as some of the measures high performing companies are taking to overcome them.
Fighting Off Increased Competition to Win More Government Opportunities
As agencies have shifted their contract spending to adopt some of the principles of Category Management and IDIQ based vehicles, we’ve witnessed a significant decline in the number of unique prime positions in the market, despite strong growth in contract spend. In this increasingly competitive government market, it’s no secret that standing out is a challenge that becomes harder each year. When we surveyed government contractors, they were asked to rank their top three business development challenges: 15% chose increased competition as their top overall challenge, and about a third ranked it in their top three (33%). This trend is one shared by companies of all sizes and in nearly every industry.
Fortunately, the diversity of companies facing this challenge is matched by the diversity of ways that companies are able to overcome it and win more government contracts. Almost three quarters of respondents (73%) noted that they count on their active client relationships to win business over competitors – standard operating procedure for any contractor. Additionally, two thirds (67%) mentioned that they rely on their business development staff to do their part, underscoring the importance of talent.
A third, increasingly common approach to surpassing the competition is to identify new pipeline opportunities early through teaming partners or networking. Our survey found that the top performers in the market with the highest reported win rates are the companies constantly looking for novel ways, like teaming, to approach proposals more strategically, all to make sure they are investing in the right efforts. As an example of this, more than eight in 10 of high performers (84.6%) identified teaming partners and networking as critical to their opportunity identification strategies.
Investing in Valuable Business Development Resources
Many respondents acknowledged having limited business development resources – in particular those at smaller companies – and this area continues to be a concern, with 12% of respondents labelling it as their top challenge. However, in last year’s survey, 19% of respondents listed this as their top challenge, signalling that there is a broadly shared positive outlook around increased BD investment, and rising expectations appear to be rooted in renewed support within their companies. Observing the attractive market conditions in government contracting compared to other industries, we see that companies are looking to invest in business development to drive growth.
Thirty percent of all respondents to our survey indicated that their organizations will continue to invest in business development in a similar fashion as they have done previously. However, as I discussed on our recent Clarity webinar, the vast majority of successful companies are prioritizing growth within business development. Specifically, 65% indicated that they expect their organizations to increase investments in BD areas. This pattern holds true for companies of all sizes, which is in stark contrast with what our results reported in 2020, where only large organizations were making this type of investment a priority.
Acting Strategically and Opportunistically in a Restrictive Spending Environment
For the first time in many years, a more restrictive spending environment was also expressed as a concern (12% of respondents cited this as their top challenge, and a total of 33% listed it in their top three). In observing contract spending, growth in Defense contracting stalled in 2021, while civilian spending remained in single-digit growth rates. We think this may be driving this change in perspective. Compounding it is the delay we witnessed in appropriations for FY 2022, lending uncertainty to the funding environment. This lack of visibility around what the spending environment would be was a concern held more by larger companies (15%) than their small-size counterparts (7%).
We have heard from many survey respondents, as well as many Deltek customers who use GovWin IQ for their market intelligence, on their best practices for building a long-term pipeline when the amount of future government spending is hazy. A common theme is the increased importance of being strategic with the opportunities that each business pursues, and identifying where opportunities are going to appear well before they are publicly released. The choice to bid on opportunities without strong positioning with the buyer and a well-put-together team and capture plan decreases the win rate and may use up those valuable business development resources.
Key Takeaways for Government Contractors in 2022
Despite these challenges, the overriding sentiment in the government contracting industry remains cautiously optimistic, and the pulse of the market is beating strongly. In fact, the majority of respondents (78%) in business development predict their win rate to trend upward in future years. And our Government Contractor Confidence Index reported a modest increase in sentiment that government contractors can grow their public sector sales over the next 12 months.
At Deltek, we have watched our customers first-hand be able to find a great deal of success in growing their government business operations through turbulent times. Small businesses and large companies alike have met these challenges and won more government opportunities than ever before (and government agencies are contracting more than ever before).
The challenges facing contractors today are not new. For the past three years, the three challenges most cited are limited resources, steep competition and constraints in spending. The only thing that has changed is the order in which they appear. With the right strategy, solid execution, and the courage to invest in the appropriate resources, business development professionals can have the confidence that the market opportunity is available for them to be successful.