2018 Federal Government Contracting – Under a Lens

With a number like $550 billion, how could you not be intrigued? Whether you are a curious tax-paying citizen or you are in the government contracting business, it is important to stay current on what the government is spending money on, and who got the money. With that being said, the Government Accountability Office (GAO) has released a snapshot of Fiscal 2018’s Federal Government Contracting numbers, so let us have a look.

At a glance, the Department of Defense spent the lion’s share, totaling about $358.3 billion in discretionary spending with the Navy being its largest contributor. Civilian federal agencies did measure up, however, spending approximately $195.8 billion. Some notable agencies scoring high in the spending column included the General Services Administration (GSA), the Department of Health and Human Affairs (HHS), the Department of Veteran Affairs, and the Department of Energy. Federal agency contracts for goods and services accounted for 40% of the governments discretionary spending.

Small businesses saw a good portion of the money spent in fiscal 2018. To promote small business participation in federal contracting, there is a government-wide goal to award around a quarter of contract dollars to small businesses. In 2018, one quarter amounted to approximately $124.2 billion, with $52 billion going to civilian agencies, and $72.2 awarded to defense agencies.

The amount of money spent annually in federal government contracting has risen around $100 billion since 2015. Given the current trend, it seems likely that these figures will continue to grow, leading to more opportunities for those in the contracting business, and especially for small businesses.

 

Source:

Federal Government Contracting for Fiscal Year 2018 (infographic)

F-35 Funding in Danger

The F-35 is said to be the answer to the worldwide problem of aging tactical aircraft, serving as the most advanced multi-role fighter in the world. It boasts versatility, lethality, and affordability – yes affordability. While this seems like an odd characteristic of a state-of-the-art war machine, the reality is that the US government and its allies sought to find the most cost-effective option to protect our skies and our fiscal policies.

In order to accomplish this feat, the government allows firms to compete for the contract, thus capitalizing on the competitive market. The lucky winner of the F-35 contract went to Lockheed Martin Corp., but as the US budget deficit continued to grow, the government took further steps to reduce costs; By threatening to cut the $728 million budget for fiscal 2020 in half, the Pentagon hopes to acquire the data rights to certain spare parts for the F-35, allowing the government to create more competition and procure parts cheaper.
Lockheed Martin, the current leading defense contractor, has yet to respond to the defense department. Byron Callan, a defense analyst with Capital Alpha Partners, believes that Lockheed will continue to resist, as he stated, “I assume Lockheed Martin will fight this as consensus growth expectations for the company include a healthy increase in revenues from sustaining the F-35 fleet.”

Should the government’s request for spare parts data be fulfilled, it could mean opportunity for other firms. Currently, spare parts are in high demand, as several nations employing the F-35 struggle to acquire the parts needed to keep their fighters in the air. According to the Government Accountability Office, the backlog of 4,300 spare parts last year caused 30% of F-35’s to remain grounded.

Sources:
https://www.bloomberg.com/news/articles/2019-05-20/f-35-spare-parts-funding-at-risk-as-pentagon-seeks-data-rights
https://www.military.com/equipment/f-35a-lightning-ii

Entrepreneurial Optimism: Small Business and Technology

The world we live in getting more complex, especially in the realm of data and business. As technological change continues to offer new, more efficient solutions to big business problems, the demand for cutting-edge tech is achieving astronomical heights. For the largest financial institutions in the world, revamping and modernizing data platforms and software is not as easy as writing a check and flipping a switch. Although change is coming, the financial behemoths are slow to move and act, allowing small business entrepreneurs the chance to swoop in and offer quick solutions to those in the market.

Having painted this basic picture of a truly multifaceted state of affairs, the point is to highlight the opportunity and consequent optimism for those small businesses and entrepreneurs who are investing in cutting edge tech. In fact, the small-business optimism index by the National Federation of Independent Business grew to a four-month high in April, rising 1.7 points to 103.5. According to the NFIB, earning trends had the largest increase of all ten components. Basically, small businesses are making money. But in this world, you need money to make money, so how are small businesses acquiring the funds to invest in industry-leading tech? Well, small business loans are experiencing record approval rates.

Basic economics tells us that investment in capital is one of the only ways to grow an economy, and with large and small banks alike lending to small businesses in record fashion, the result is a surge of success for small businesses getting their feet wet in the tech/software world. Specifically, FinTech (Financial Technology) entrepreneurs and small businesses are finding greater success. As illustrated previously, larger institutions are a bit more constricted when it comes to change, and in the realm of finance, time is money!

Small bank approvals of business loans increased from 49.4% in March to 49.8% in April, and that’s not all small banks are approving of when it comes to small businesses. In an interview with American Banker, former SBA Administrator Karen Mills said that the next wave of the evolution of banking will be partnerships between FinTech entrepreneurs and banks, mainly small banks. Mills, who had just written a new been entitled Fintech, Small Business and the American Dream, had this to say about the optimistic future relationship between banks and small businesses, stating, “We have come to a moment where banks want to partner with FinTechs for technology and for platforms without developing it themselves. They can access bank accounts, Amazon purchases, and eBay activity to determine if a small business is creditworthy.” The possibilities are endless!
There was a time when the thought of small business brought tears to the eyes of those who thought they were witnessing the extinction of the American Dream through the diminishing prevalence of the small business sector. Luckily, technological change has been known to shake things up in the economy, and in this respect, it certainly has. The American dream is alive and well, and opportunity and optimism are growing for tech savvy small business owners and entrepreneurs.

Sources:
https://www.forbes.com/sites/rohitarora/2019/05/15/small-business-lending-soars-at-banks-technology-is-a-big-reason-why/#53f763493e00

https://www.marketwatch.com/story/small-business-optimism-index-climbs-to-four-month-high-in-april-nfib-2019-05-14

GSA’s Top Tech for Fiscal 2019

As technology grows at its current explosive rate, the federal government is not to be left in the dust when it comes to keeping up and modernizing its own tech. GSA’s (General Service Administration) IT category lead, Bill Zielinski, sounded off on the topic of IT modernization, highlighting several areas of activity to be on the lookout for.

We have all been hearing about or even using the cloud for some time now, but whether or not that term evokes excitement or makes your skin crawl, the reality is, according to Zielinski, that government agencies are increasingly moving to the cloud. While there are hybrid options as well as on-premises solutions, a growing trend in true commercial cloud purchases has been documented. While the cloud may be scary, Zielinski believes that government agencies will continue to move toward cloud-based platforms, stating, “You’ll continue to see that as a theme and continue to see a variety of different initiatives move out in government for that.” Of the top four technologies highlighted by the GSA, the cloud was number one.

Leveraging new technology is a great way to get ahead in business, and federal agencies are looking to do just that. As the size of the challenges at hand continue to grow, an increasing number of agencies are looking to leverage emerging technologies to help solve some pressing business problems. Tech like artificial intelligence, machine learning, robotic press automation, and block-chain were some of the emerging technologies mentioned by Zielinski. As block-chain continues to gain momentum, the federal government has invested money to keep up and compete to be on the technological forefront. Artificial intelligence and robotic process automation allow for increased productivity beyond the capabilities of human capital alone. As technological processes become more complex, it is critical that federal agencies begin to get on board with the latest and greatest to be able to solve the tough problems and increase productivity.

With the evolution of all this new, complex tech, someone needs to be at the helm. Enter the Chief Data Officer (CDO). Since the OPEN Government Data Act, there has been rising pressure for federal agencies to implement data-driven decision-making processes and to appoint chief data officers to organize and manage the incredibly intricate foundation of data that comes with IT modernization. The role of the CDO is a topic in itself, but the discussion is being had according to Zielinski.

Trying to keep up with the latest technological breakthroughs, inventions, and implementations can be overwhelming. The General Services Administration’s Information Technology Category Lead, Bill Zielinski, gave us the breakdown of the top trends he’s seen in thousands of ongoing acquisitions government wide, some of which are new, while others were not surprising. The cloud is still going strong, and more agencies continue to move toward cloud-based solutions on a yearly basis. New budding technologies like artificial intelligence, robotic process automation, machine learning, and block-chain were seen trending as well. And if you were thinking, “How can anyone keep up?” Well, the answer is the Chief Data Officer or CDO, a position becoming increasingly more widely talked about and sought after to streamline and organize a seemingly indecipherable complexity of data that comes with emerging technologies. The future is here, and federal agencies are on board, pushing toward IT modernization.

Source: https://www.nextgov.com/it-modernization/2019/05/whats-hot-federal-tech-gsas-it-category-lead/156701/

Small Businesses Should be Wary of Artificial Intelligence

With the onset of Artificial Intelligence making its way into common business practices, many companies are rushing to understand the science, so that they can be the first on the frontier of new technology in business. This rush is beginning to trickle down to smaller businesses as well, but, as this rush begins to affect smaller businesses, business owners should be wary of the speed in which they jump on the AI bandwagon. Perhaps it may be better for small businesses to be cautious of how accepting they are of AI technology.

The first point to understand this topic is perhaps the most understandable, and that is how AI is not going to magically solve company problems instantly. The technology is not perfect and still has many years of improvements to go, and there really is no direct evidence of companies getting a return on investment as it is so expensive. This problem is compounded when assessed through a small business lens. With more limited resources and data, as it stands it could be fiscally irresponsible to invest in this technology as there is hardly any likelihood that that investment will pay off.

Moreover, small businesses often have more specialized needs and business practices than larger corporations. That AI would be able to support only with the skills of a few people and resources able to create the technology needed for these businesses. Because of the lack of availability, and the specific needs of small businesses, it is not worth it to spend copious amounts of money in order to obtain this technology.

On top of acquiring this new technology, infrastructure must be in place in order to govern it and make sure it is secure. This adds on to an already exorbitant cost and creates a sustained fixed cost of having this technology incorporated into small businesses. Even with this infrastructure in place, an overwhelmingly large percentage of small businesses do not yet need this technology to become more profitable. However, as technology becomes cheaper and more accessible, perhaps these opportunities will be more relevant to small businesses.

While no company should be rushing into incorporating AI into their business, this does not mean they should entirely rule it out. AI is a fascinating technology with benefits that could, one day, far outweigh the costs. Even now, in more indirect ways, some small businesses are using AI technology and it is proving to be a benefit in many larger companies.

However, with that, there are a few key takeaways from using AI as a small business. AI is not an instant benefit and has no guarantee (currently) that it will help turn a profit. It also is still shrouded with confusion, as it is a newer technology, and few people really know the intricacies of the technology. Finally, the mad rush to be the first to have this technology should not be done simply for merit, as that can run businesses into the ground with the expenses. There should be tangible, fiscally responsible uses for this technology that makes its purchase and maintenance worthwhile.

 

Source: https://www.techrepublic.com/article/small-business-owners-dont-rush-into-using-ai/