Government contractors are far less vulnerable than commercial companies to recessions and the current state of the economy, based on reports of increasing revenues, according to the 16th Annual Government Contractor Industry Survey Highlights Book [pdf].
During the past year, the amount of revenue from government prime contracts grew for 55 percent for those surveyed in the book, while 23 percent experienced no significant change and 22 percent underwent reductions. However, the recent insourcing drive by government agencies has cut into government contracts, with 47 percent of survey respondents reporting they lost employees due to insourcing.
For contracting companies, retention of key personnel who can perform particular duties is often the difference between winning and losing contracts. In many cases, “the government places a higher value on specific personnel working on their contract than it does on the company that holds the contract.” Because of this, contracting firms must offer competitive compensation and benefits in order to attract and keep qualified talent.
However, the current state of the economy has eaten into wage increases in the contracting industry. Respondents reported average wage increases of 2.6 to 3 percent, which continues a downward trend from 3.5 to 4 percent two years ago and 3 to 3.5 percent last year. Health care costs continue to burden contracting companies, as the median health insurance cost as a percentage of labor costs for this year’s survey is 6.1–7.0 percent, compared with median rates of 7.1–8.0 percent in the previous two surveys.
The book also found that when it comes to contract issues, only 26 percent of respondents believe that the government is efficient in resolving these issues while 74 percent consider the government to be slow and inefficient in addressing issues.
