Government Contract Awards and Business Stimulus Will Drive the COVID-19 Economic Recovery
As our nationwide shutdown comes to an end, the economy will begin to recover from the COVID-19 pandemic. However, faced with an over 30% drop in U.S. GDP and a broken supply chain, business recovery will not be as simple as turning on a light switch. Businesses will need to overcome new challenges restoring workforces and planning for growth in a new uncertain economy. The banking industry is stressed, and the lack of capital necessary to maintain liquidity through business loans presents additional risks to support sustainable economic recovery. Before the economic shutdown, businesses that focused mainly on B2B opportunities will look for other options and direction to maintain sales and growth. As a result, the U.S. government is currently preparing for an expansive response to the COVID-19 crisis resulting in unprecedented increases in government spending and procurement. Fiscal spending for 2020 COVID-19 related government expenditures is estimated to be USD 13.2 B in addition to USD 600B already planned for 2020. The primary growth industries will include pharmaceuticals, medical devices, construction, IT, Telecom, and clean energy. Government Contractors will play a vital role in the economic recovery, and businesses will shift from B2B to B2G markets. They will be in high demand as government agencies address a backlog of work as well as new initiatives grown out of the COVID-19 recovery plans. This article discusses how companies can prepare for the recovery
Key Government Spend Trends that Will Drive the COVID-19 Economic Recovery
Before COVID-19, the 2020 government spend obligations targeted USD 600B distributed across multiple industries. Although the shutdown stalled progress on awarded contracts, government spending remains on pace to meet or exceed these expenditure targets. Third and fourth quarter spend projections will grow significantly, increasing the demand for government contractors to meet expenditure targets. In addition to the original forecasts, the government will spend an additional USD 13B in the fiscal year 2020 to purchase products and services related to COVID-19 expenditures. The graph below represents 2020 U.S. government spend obligations directly related to COVID-19 recovery listed by industry sectors.
Target expenditures for Drug and medical supplies are USD 7,131 M with construction supporting demand for buildings to help patient surplus. IT and Telecom will support the need for telework and telehealth, and professional services will meet the demand for communications and financial management of the stimulus package. Agencies that will be making purchases include Health and Human Services, Department of Energy, SBA, Centers for Disease Control, and Department of Veterans Affairs.
Understand the Impact of Government Spend Trends to Industry Supply Chains
COVID-19 has disrupted Industry sector supply chains highly dependent on global suppliers that were also impacted by the virus. The healthcare industry has immediate needs for Personal Protective Equipment (PPI) not previously inventoried and sourced based on lean manufacturing principles driven solely on cost control principles. China’s lockdown disrupted the supply for manufactured goods in key sole sourced industries exposing a significant problem with modern supply chains. As a result, global firms will diversify their supply chains in the future, instead of relying only on China. Manufacturing hubs such as Vietnam, Mexico, and India are likely to benefit from that shift. The supply of goods essential to the U.S. national security will be manufactured and sourced by U.S. based companies.
Prepare for the Surge in Demand When the Government Reboots the Economy
As the government leads the U.S. economic recovery, businesses need to prepare for the shift from B2B to B2G government contracting opportunities. As with any business development activity, government contracting takes time to build relationships with purchasing agencies and qualify as government contractors. The following guidelines are helpful to pursue B2G opportunities:
- All government contractors must register with the System of Awards Management (SAM). Registration is free, and businesses must have a DUNS number and capability statement included with their SAM registration.
- Businesses looking to pursue state opportunities must register with the state they will be contracting. Each state has different qualifying criteria, and contractors can check state listings or have consolidated listings emailed to save time.
- All government contract awards have designated budgets or set aside amounts allocated for businesses with special designations. Examples of special-designation companies include small, minority, woman, and veteran-owned businesses. Government contracting education classes are available that instruct how government contracting works and fast track companies looking to pursue B2G opportunities.
- Consider joining a coalition that connects businesses with shared interests to government opportunities. Coalitions bring corporate members, with extensive government contracting experience, and smaller companies offering opportunities to team up as Joint Ventures with other companies to win government contract awards. They are very focused and have relationships with purchasing agencies that can be real assets to smaller companies looking for government contracting opportunities.
The U.S. economy will soon begin to recover from the COVID-19 pandemic. Government agency spending will spearhead the recovery, and businesses need to prepare for a shift from B2B to B2G opportunities. Companies that want to be active in the recovery must adapt to changes in our business environment and position themselves to qualify for government opportunities as the demand for government contractors increases. Many resources available to help prepare for these changes. Companies are encouraged not to act alone but seek help and assistance to address gaps needed to be successful government contractors. Education and coalitions offer expert advice and guidance to match the right opportunities to a wide range of goods and services companies provide in the recovering economy.