One of the newer tools we’ve introduced at GovWin is an index to track confidence in the state, local and education (SLED) market of government purchasing over the coming 12-month period. Named the “SLED Analyst Purchasing Confidence Index,” it measures the collective insights of our own internal team of researchers who track and monitor this vast $2 trillion annual market of contracts and purchases.

Unlike our other metrics measuring and forecasting trends in dollars spent or volume of RFPs released, we wanted to offer an additional perspective by looking at the confidence level of our analyst team in the growth and direction of this market over the next 12-month period—taking into account all of the inputs and patterns we’re noticing as we examine the available data and evidence. To make sure the insights remain current, we are polling our team at the end of each month.     

The index is based on a five-question survey. We first measure confidence in the overall direction of this market, then rate four major sub-groups of products and services: IT, professional services, AEC (architecture, engineering and construction) and commodities or basic purchases. Values of 100 represent a neutral stance, suggesting buyers and government officials are neither more cautious nor more optimistic than normal in their market outlook. For example, a 110 index would suggest a purchasing outlook that is around 10% more positive than normal.

The 2025 Context and Background

SLED governments were already dealing with the winding down of the $350 billion post-pandemic ARPA stimulus program, with final allocations from Congress in late 2024. For many governments, this has placed downward pressure on budgets, but another factor has been the increased uncertainty around federal funding in 2025, with shifts in priorities and grants flowing to the states in the first 100 days of the Trump administration.

In our analysis of the “state of the state” governors’ addresses this Spring, one of the themes to emerge was how SLED leaders, regardless of partisan background, are trying to make government as efficient and affordable as possible. That doesn’t mean absolute declines in spending will result, but it does mean taking a look at how to do it even more effectively. They will be looking to the private sector for ideas and leaning on them to offer the best solutions and expertise.

Historically, this market still manages to grow faster than the rate of inflation, and tends to slow during recessions, with minimal if any negative years. Of course, I’m referring to the overall market, as individual sectors or product/service types can vary. On the whole, SLED governments devote around half of their total expenditures to purchases and contract spending. A large part of that simply cannot be halted or even greatly slowed without interrupting the business of “doing government.” Public sector staff can only do so much on their own; their individual efforts must be joined by those of responsible and trustworthy businesses.  

There is a lot of direct and regular accountability in SLED for not only fiscal responsibility (since budgets must balance) but also making sure needs and acceptable service levels are met to everyone’s satisfaction. In many cases, when things get a bit “run down” or neglected, citizens, local business owners and key stakeholders will object and push back. Or in some cases they can be motivated to approve targeted tax increases or special dedicated bonds. Taxes might slow in a recession, but no one can just decide to stop paying them.

The results: Year-to-date index values

Since January, confidence began slightly above the neutral level (at 101.3) but quickly declined to 90.1 by March (reflecting greater uncertainty)—around 10% more cautious than normal. Again, confidence doesn’t necessarily translate into actual declines in dollars but can point to delays or reduced appetite for approving some of the most discretionary new purchases.

However, with more clarity around federal funding and the passage of the “Big Beautiful Bill,” along with the economy holding steady with modest inflation so far, confidence has been steadily increasing to a current level of 96.7. In other words, we’re now at just 3.3% below normal, as the analysts consider trends out to August of 2026. The following chart shows the index values each month beginning in January 2025.

  

Looking further into the components of the index, professional services and construction have lagged somewhat while IT and commodities have remained slightly higher. Their more positive scores reflect the continued importance of innovation for pursuing efficiency and a 100% commitment to keep on buying all basic goods and services required to meet public needs.

Some professional services and types of consulting can be seen as discretionary in nature while construction funding for major structures will be softening over the next 1-2 years due to the winding down of the core part of the Infrastructure Act stimulus (IIJA) program. Smaller maintenance-oriented construction projects can also be scaled back as needed to accommodate any softening in general budgets from changes in federal spending and/or any slowing in the economy.

Possible Roadblocks or Yellow Flags to Consider

In addition to economic uncertainty and the impact of less-stimulus-driven growth in the coming months, there is a possibility of a federal government shutdown. Federal funding for FY 2025 is currently in place through September 30. The passage of the “One Big Beautiful Bill Act” provided appropriations, supplemental funding and cuts in specific funding categories and programs and helped restore some certainty among contractors. Congress now needs to approve a full budget for the new fiscal year to keep the federal government going, or alternatively, pass a short-term continuing resolution by October 1st. If neither occurs in time, a temporary federal government shutdown will take place and may have a negative impact on the general level of caution that SLED government officials are feeling about their near-term outlook. With a shutdown, some state and local governments might see temporary pauses to certain federal funds flowing into their accounts.  

But on the whole, our team continues to have confidence in the stability and continued growth of the market—particularly by this time next year. They are considering both the risks and the opportunities, and their net level of optimism is just below the neutral point. While some uncertainty remains, the greater clarity into federal budgets and grants to states that can affect this market have led to incremental improvements since March. The fact that confidence is this close to the neutral line for conditions over the coming year is encouraging for the businesses that depend on this market. But it also testifies to the resilience of these governments regardless of external conditions.

For further reading:

• SLED Contracting Growth Expectations for 2025-26
• How the “One Big Beautiful Bill” Will Affect the SLED Market
• 10 Hotspots in State and Local Government Contracting for 2025