Annually, Deltek analyzes survey responses from hundreds of government contracting leaders on the past year's performance, uncovering insights across the entire government contracting market. The resulting Clarity report is a unique, trusted resource that helps performance-minded businesses identify areas to improve, help set business goals, inform business development strategy, and better understand how they compare to competitors. The study also identifies industry performance benchmarks, impactful market conditions and the current market outlook, including analysis of top challenges impacting business development, project & risk management, finance & financial compliance, manufacturing, contract management & procurement, information technology & security and human capital management.
Several key themes arose in the report that apply to a variety of government contracting sectors, including:
- Optimism for the year ahead: The future outlook is strong, with 62% of respondents expecting revenue growth, despite falling a little short of expectations, according to a slight decline in the Government Contractor Confidence Index (142.8 down from 144.0 last year). Small businesses are naturally a bit more conservative, though just over half (51%) are hopeful for growth and only 8% fear decline. Despite the volatility of the budget process, respondents cite budget appropriations as the top reason for this optimism.
- Technological investment: This year, artificial intelligence and machine learning have become the top technologies prioritized for investment among survey respondents as they look to increase efficiency, reduce operational costs and save time. Over a third of respondents (34%) ranked AI in their top three focus areas, ahead of cybersecurity and business automation. About 80% are already leveraging AI to help optimize internal operations (35%) or are planning to do so in the future (45%). Companies are taking advantage of these new tools to augment, automate, speed, or simplify perennial process optimization goals to help overcome industry challenges.
- Prioritizing diversification: Almost half of respondents (46%) say their company plans to offer a more diversified set of products and services, more than double any other strategy shift. Another 20% are planning to shift current government business toward commercial. Small businesses find themselves at a disadvantage here, though, with fewer able to pursue diversification and more not planning any changes in strategy this coming year.
- Small business challenges: Small businesses saw lower rates of growth overall compared to their larger counterparts. Fewer expect growth next year than larger businesses, though more than half are hopeful for growth in 2024. Additionally, small businesses are slightly less likely to pursue diversification, more likely not to plan strategy shifts, and less able to prioritize investment in AI. However, small business manufacturers are prioritizing automation, perhaps in response to tight labor markets – with more than half (60%) ranking attracting and retaining talent as the top challenge impacting their business for 2024.
- Increased competition creating business development challenges: Increased competition was the top-ranked business development challenge, across businesses of all sizes. Business development professionals continue to feel pressure to make the most of face-to-face opportunities, the second highest-ranked challenge, to both educate and learn from government buyers. In response to these challenges, these teams are increasingly focusing their efforts on more or better opportunity identification (81%), developing pricing-to-win strategies (77%), and exploring teaming opportunities (71%) to increase overall effectiveness.
Kevin Plexico, Senior Vice President of Information Solutions at Deltek commented, "This year, despite some challenges, we still found an optimistic outlook for increased government sales revenue and win rates in 2024. Government contractors are facing challenges when it comes to hiring skilled talent, increased competition for contract opportunities, as well as overall macroeconomic conditions. Most firms are looking to leverage emerging technology, like artificial intelligence, to achieve their business goals and adapt. We're looking forward to seeing how increased adoption might lead to further growth and better business performance."
The full results are now available in the 2024 Deltek Clarity Government Contracting Industry Study. Deltek also hosted an on-demand Clarity webinar that explains more about this industry market study.
About Deltek
Better software means better projects. Deltek is the leading global provider of enterprise software and information solutions for project-based businesses. More than 30,000 organizations and millions of users in over 80 countries around the world rely on Deltek for superior levels of project intelligence, management and collaboration. Our industry-focused expertise powers project success by helping firms achieve performance that maximizes productivity and revenue.
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