The uncertainty of 2012 has many pondering how to plan their federal Architecture, Engineering and Construction pipeline for the coming year. By getting back to basics, companies can balance trends found in three sources – historic federal spending , budget requests, and what potential opportunities are to be released in the next 12 to 18 months – to develop a business development plan for 2013.
From fiscal years (FY) 2008-2011, the federal government reported spending $2.2 trillion for various goods and services. Of that sum, $229.4 billion was spent on Architecture, Engineering and Construction (AEC), which represents 11% of total reported spending. AEC is consistently in the top five categories for federal spending, followed by Defense and Aerospace, Professional Services, Information Technology and Research and Development.
Figure 1 (above) shows that reported federal AEC spending totals vacillated from year to year, with an annual average of $57 billion.
When looking at how federal AEC money was spent, analyze obligations made by categories like department, vendor or North American Industrial Classification System (NAICS) codes. For federal AEC spending:
• The FY 2008-2011 top spending departments were the Army, Navy, Air Force, GSA and Energy; this can be used to target where AEC business development efforts should be focused.
• During this time, the top AEC vendors were Hensel Phelps Construction, CH2M Hill, The Shaw Group, Bechtel and URS. It is always good to track the competition, as well as identify companies that are finding success as they could be the ones to target for teaming opportunities.
• The top NAICS, by far, was 236220-Commercial and Institutional Building Construction which, at more than $105 billion accounted for 49%of total reported AEC spending. Knowing where the money is being spent can help shape a market strategy.
President’s Budget Request
When the President’s Budget Request for FY 2013 was released, Deltek’s Chief Knowledge Officer Ray Bjorklund analyzed the AEC budget request in his report Federal Outlook® 2013 Prospecting for Gold: Where Are You Going to Dig? The FY 2013 AEC budget request was $27 billion, down from 2012’s $32.1 billion.
Two trends of note in the 2013 budget request for the AEC market are shifts from funding major to minor construction and pure planning and design to integrated design build contracts. What this means is that when developing a federal AEC business pipeline, be aware that the budget is less than it has been in previous years and projects may be smaller in scope. To take advantage of the shift to the integrated contracts, vendors may consider placing a priority on relationships with prime contractors to ensure their position to bid and win.
Building a Business Pipeline for AEC
Using Deltek’s GovWin IQ to identify federal AEC opportunities released through December 2013, we find that the total value of the anticipated AEC opportunities is $55.7 billion. When we compare the top ten NAICS of the anticipated opportunities for 2013(Figure 3) to the top ten NAICS based on historic spending (Figure2), seven of the same NAICS appear on both charts, including 236220-Commercial and Institutional Building Construction, 541330-Engineering Services, 562910-Remediation Services, 561210-Facilities Support Services, and 541310-Architectural Services.
Similarly, three of the top five AEC spending departments for fiscal years 2008-2011, the Army, Navy and Air Force, are also the top departments for anticipated opportunities in 2013. DoD and Veterans Affairs round out the top five for anticipated opportunities.
In Deltek’s recent Top Ten Federal AEC Opportunities for FY 2013 report, many of the anticipated high dollar value opportunities for the coming year are for infrastructure and modernization of existing facilities, as reflected in the budget request. Additionally, new and follow-on Multiple Award Task Order Contract, or MATOC, opportunities abound in the federal AEC pipeline. Like in other segments of federal spending, agencies are establishing contract vehicles that leverage a pool of pre-selected contractors that are qualified to complete the work required, doing so efficiently and with great speed.
What does this mean?
Federal AEC contractors should keep the following in mind when developing a business development plan for the next year:
• The federal government has historically spent money in the AEC market, making it one of the top five industry segments for federal discretionary spending;
• The FY 2013 budget request reflects budget cuts imposed in fiscal year 2012 and represents a shift in types of projects being planned, as well as the federal government’s approach in transitioning from pure design to integrated design build contracts; and
• Budget cuts are impacting the federal market as a whole, and vendors of all types are competing more intensely for the fewer federal projects that are being procured. With $55.7 billion in anticipated federal AEC opportunities, market intelligence is more critical than ever to ensure a company’s position to select the right opportunities to bid and increase win ratios.
Jennifer Sakole is a principal analyst at Deltek and a member of Deltek’s Federal Information Services team, which provides federal regional and past performance analysis. Sakole specializes in public sector business development, market research and analysis, and training.