Western Regional Contracting Landscape

OVERVIEW:

Contract obligations for the Western Region averaged $111B per Fiscal Year between FY 16 and FY 17. FY 2018 spending is on track to maintain if not exceed that average. This is a sizeable market, and is one that cuts across multiple different industry segments. For companies or teams focused on the western states, we will look to shed some light on this market through three different viewpoints:

1. Overall Market Sizing: the spending trends for the region in terms of overall spending, as well as by industry and by State
2. Main Buying Centers: the main buying centers driving spending in this region, and those that represent potential entry points into the market
3. Top Opportunities for FY 2019 and FY 2020: the main opportunities from the perspectives of value, small businesses set-asides, and sectors

This region is being defined here as the following 13 states: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming

MARKET SIZING FOR THE WESTERN REGION:

Overall Spending in the Western Region since FY 2010

A return to FY 10 - FY 12 levels:

Based on spending trends alone, FY 13 and FY 15 (when sequestration had its greatest impact) represented a low period in spending for this region. Spending was at or below $100B each of those years. What FY 16 and FY 17 suggest, and what FY 2018 is likely to corroborate, is a return to levels prior to when sequestration took effect, when spending averaged above $110B.

Relatively consistent spending profile:

The spending profile for this region is relatively consistent after taking into account that FY 13 and FY 15 represented an anomalous time period. FY 10 to FY 12 spending was above $110B each FY. FY 16 and FY 17 have maintained those level, and FY 18 is expected to do the same.

Graph:

*NOTE: FY 2018 spending data is not yet complete due to a 3-month built in delay for reporting DoD spending

Top 5 States in the Western Region

The top 5 states (see below graph) make up 80% of the spending in this region during the noted. California is the single largest market in this region, and accounts for almost 50% of the spending.

The top 5 sectors within California, in order of largest to smallest by spending, are the following:

1. R&D: R&D is the largest single category of spending, with NASA and the Air Force being the main sources of that R&D spending.
2. Medical & Scientific Equipment: this is the second largest category of spending in California, with Veterans Affairs being the main source.
3. Defense & Aerospace: D&A is the third largest category, with the Navy and Air Force as the predominant sources.
4. Professional Services: The Air Force, followed by the Navy, Army, and DoD make up the largest buyers in California’s PS space. DHS comes in as the 5th largest buying organization.
5. Information Technology: The IT sectors very much mimics the PS sector. The top 5 sources are the Air Force, Navy, Army, DoD, and DHS.

Top Sectors in the Western Region:

Above we looked at the top sectors within California. The regional view paints a similar picture, but with Operations and Maintenance (O&M) making it into the top 5.

*NOTE: FY 2018 spending data is not yet complete due to a 3-month built in delay for reporting DoD spending

Top Sectors in the Western Region: Civilian vs Defense

The ‘civilian’ vs ‘defense’ market can in some ways be looked at as distinct in and of themselves. Work within the same sector can vary depending on whether the customer is a civilian or defense agency. With that in mind, below is a look at the top segments within these markets.

What stands out is that R&D and AEC spending is evenly split between the two, civilian and defense. Operations and Maintenance spending on the other hand, is over 80% civilian-based. The IT category is 79% defense-based.

MAIN BUYING CENTER AND AGENCIES:

When looking at the largest combined value of upcoming opportunities, Energy and GSA are the standout agencies with over $50B and $36B in potential opportunities anticipated through 2023. That said, these values are concentrated in a small set of opportunities that happen to be especially large.

For GSA, $35B of the combined value is concentrated between two Federal Strategic Sourcing Initiative (FSSI) Building Maintenance and Operations (BMO) efforts: FSSI BMO Unr Zones 7 - 14 (Opp ID 150101), and FSSI BMO SB Zones 7 - 14  (Opp ID 150112).

Within Energy, the overall potential value is concentrated among 5 potential Maintenance and Operations (M&O) efforts.

In other words, while the potential value of opportunities coming out of GSA and Energy is substantial, the volume of is relatively low.

Outside of these two agencies, within defense the main buying centers are the Defense Logistics Agency and the Missile Defense Agency (followed by the MILDEPS).

Within the civilian space, the agencies with the greatest value and volume of upcoming opportunities are NASA, Veterans Affairs, and DHS.

TOP FY 2019 / FY 2020 OPPORTUNITIES:

Top Overall and Small Business Opportunities:

When looking at the opportunities coming out of the Western Region over the coming Fiscal Years, the Facilities Support NAICS code (561210) is among the most prevalent in terms of the number of opportunities coming up, and in terms of the combined value of those opportunities.

NAICS code 541330 (Engineering Services) stands out as well. While the cumulative value of the opportunities under that NAICS is less than 561210, it has more than twice the number of possible opportunities. In short, the sectors affiliated with these NAICS codes are set to be especially busy over the coming years. 

Graph: Illustrating this trend is the below graph, which looks at the 5 largest overall opportunities (regardless of competition type) and the 5 largest small business opportunities, that are expected in FY 2019 and FY 2020. The NAICS codes noted above consistently make an appearance. Only two opportunities (Opp ID 95474 and Opp ID 169763) are tied to completely separate market segments.

Additional Note: To round out the list, included below are two ‘Honorable Mentions’. These are efforts that don’t yet have a value established, but that might still be ‘strategic-level’ efforts in terms of their scope and importance to a given buying agency.

Top Opportunities by Sector:

Given that the largest opportunities are predominately associated to two NAICS, the graph below will look at two of the largest opportunities by major market sectors: IT, Professional Services (PS), Architecture / Engineering / Construction (AEC), Operations and Maintenance (O&M), and Research and Development (R&D). A sector by sector view mitigates some of the ‘crowding out’ effect of NAICS 561210 and 541330, and introduces smaller albeit still strategic opportunities. Two other civilian agencies appear as well, in NASA and Veterans Affairs.

CONCLUDING THOUGHTS:

When looking at the Western Region as a market, it is important to keep in mind that is subject to various ‘crowding-out’ effects. Among the ones discussed, include:

• 60% of its spending comes from defense agencies
• 50% of the spending is California-based
• Spending Categories / Market Segments can be weighted toward either Civilian or Defense agencies
• GSA and Energy have a concentrated number of high-value opportunities
• Two NAICS code account for a lot of the largest opportunities