9 Federal Contracting Trends to Watch Out for in 2024

Feb 23, 2024

Every year, key trends shape the federal contracting landscape, and 2024 is no different. Like we did last year, we’ve identified the trends poised to significantly impact federal contracting in the coming months. For contractors, understanding these trends is crucial to navigating potential challenges and capitalizing on the opportunities they present. From the integration of Artificial Intelligence and heightened emphasis on cybersecurity to the expanded use of contracting vehicles, these developments are set to influence the federal contracting sector throughout the year.

Drawing some insights from Deltek’s recent Federal Contracting Trends to Watch in 2024, this blog examines these emerging trends and offers strategies for government contractors to effectively prepare for them. Let’s get started!

What are the top Federal Contracting trends for 2024?

More Small Business Opportunities

Overview

The Biden Administration is urging government agencies to enhance contracting opportunities for small businesses, reduce barriers to entry, and expand opportunities for small, disadvantaged businesses. The Small Business Administration (SBA) will focus on improving performance monitoring and reporting for 8(a) participants and cracking down on fraud. The Biden-Harris Administration has set a target to boost annual spending on small businesses, including raising spending goals and broadening programs to support small businesses in federal contracting. Federal spending on small business set-aside contracts, particularly for Small Disadvantaged Businesses (SDBs), is rising. Additionally, adjustments to small business size standards mean that many medium-sized businesses now qualify as small, creating more chances for contractors to compete for small business contracts. If you are a small business or believe you may now meet the criteria, we encourage you to explore increased business opportunities in 2024

How to Prepare?

As we move into 2024, it’s crucial for government contractors to update and refine their strategies for a profitable year. Ensure your registrations and certifications, such as SAM, SBA profile, and any small or minority-owned business certifications, are up to date. Use advanced market intelligence and data analysis to identify new opportunities, focusing on those reserved for businesses like yours. Understand the government’s buying cycles for a competitive edge. Improve your marketing to enhance visibility with government buyers, including updating your website, engaging in email campaigns, and leveraging social media. Building strong relationships with key stakeholders, prime contractors, and industry peers through networking events and webinars is also essential.

Streamlined Procurement Processes

Overview

In 2024, the competitive contracting environment will be influenced by the consolidation of contracts, the impact of category management, and the effects of best-in-class contracts. Additionally, concerns about small businesses’ accessibility and the influence of the White House’s Better Contracting Initiative (BCI) will also shape the competitive landscape. There is expected to be a significant increase in investments channeled through existing indefinite delivery, indefinite quantity vehicles (IDIQs), and the development of new ones to bring in new contractors actively. This is driven by the urgent need to acquire advanced solutions quickly and efficiently within a tight purchasing timeframe for the remaining IDIQs. Federal buyers will seek solutions and convenient methods to access them. Various GWACs, IDIQs, and BPAs will be released this year. This list includes PACTS III, SEWP VI, ALLIANT 3, CIO-CS, ITES-4S, etc. These contract mechanisms will allow contractors to sell to federal agencies more effectively.

How to Prepare?

Businesses looking to expand their federal contracting sales should keep up with the market and familiarize themselves with new resources to give them an advantage over their competitors. In a highly competitive environment, in-depth knowledge of the government market can provide a competitive edge, and early preparations from capture to contract release will pave the way for contract award. Contractors must stay updated, familiarize themselves with these contracting mechanisms, and build robust teams to apply for these contract vehicles.

Emphasis on Cybersecurity

Overview

In 2024, there is expected to be heightened regulatory oversight at both federal and state levels, focusing on promoting timely and comprehensive disclosure of security threats and preparedness. The tech industry will prioritize integrating security as a fundamental aspect of the development process. Federal agencies and state authorities are increasing pressure on businesses and critical infrastructure providers to share intelligence and report incidents to prevent the proliferation of malicious threats. In the aftermath of the SolarWinds and Colonial Pipeline cyberattacks, federal authorities have initiated efforts to share intelligence and gather information about data breaches and attacks, aiming to help organizations better prepare for threat activity and prevent data theft or operational disruptions.

The increased cybersecurity oversight includes a critical upgrade from CMMC 1.0 to CMMC 2.0. In the comments phase, this upgrade will be pivotal for Department of Defense contractors who must comply with CMMC 2.0 guidelines to work with DoD.

How to Prepare?

Government contractors need to adapt to the evolving threat landscape and prioritize cybersecurity. Collaboration with the Government is crucial for meeting security and privacy requirements. Small business contracts should focus on enhancing defensive capabilities and deploying effective cyber solutions. Staying updated on cybersecurity regulations and forming a skilled proposal team is essential. Defense contractors should be prepared for the thorough CMMC 2.0 process and address compliance gaps with NIST 800-171.

Increased Embrace of Technology

Overview

As we approach the beginning of a new year, the transition into 2024 reveals the upcoming transformation of blockchain technology, which is set to redefine its influence across various industries. Significant advancements will mold the blockchain landscape in the coming year, steering it toward maturity and impacting multiple sectors. Examining the present and future influence of AI/ML in federal contracting reveals several emerging trends, including the widespread adoption of Machine Learning Operations (MLOps), the emphasis on Responsible AI, and the establishment of sustainable AI practices. The AI sector has made remarkable advancements, with revolutionary tools like GPT and other Large Language Models transforming text analysis. The U.S. government uses big data analytics to analyze large data sets and uncover hidden patterns, correlations, business intelligence, trends, and user preferences. The insights gained from this process are being used to enhance public policy decision-making, identify efficiencies, improve service delivery and public safety, and recover lost revenue for federal, state, and local governments. The government’s focus on modernizing its data analytics and warehousing capabilities is evident through initiatives such as the Federal Data Strategy and the AI Executive Order. The Federal Government has planned to use AI across various sectors, including healthcare, transportation, cybersecurity, and others, and we can expect growth in these sectors.

How to Prepare?

To succeed in the future, organizations must prioritize strategies such as research and development, talent nurturing, AI-driven insights, and adaptable business models. Leaders in AI and IT face the challenge of balancing innovation with responsibility. Understanding federal agencies’ needs, leveraging specialized expertise in IoT, blockchain, or AI, and networking can create opportunities. Data analytics is a powerful tool for success in federal contracting, optimizing costs, and aligning decisions with agency objectives.

Budget Uncertainty

Overview

As of now, none of the 12 appropriation bills for FY2024 have been enacted. To prevent a government shutdown and provide temporary funding, a continuing resolution was passed in September 2023. In January, another continuing resolution was passed, setting new deadlines in March for the FY 2024 bills to be passed by Congress. During the first quarter, agencies are accustomed to contracting under CRs. Interestingly, despite multiple continuing resolutions and two shutdowns, contract spending grew by 25% from FY 2018-2022. This historical trend suggests that the budget for 2024 is expected to increase, as it did in previous years.

How to Prepare?

Government contractors must adapt to budget volatility by staying updated on changes in congressional leadership. They should evaluate the procurement landscape, broaden their customer base, and identify cost-saving methods. Developing connections with decision-makers and providing superior goods/services can help secure ongoing funding. Proactive cooperation and collaboration increase contract opportunities and mitigate the impact of budget cuts.

Inflation Outlook

Overview

Based on the 12-month percentage change in the consumer price index, which is the monthly inflation rate for goods and services in the US, prices rose by 3.4 percent in December 2023 compared to December 2022. As federal contractors navigate through rising costs in goods, energy, and talent, the Federal Reserve anticipates inflation will decline with cautious optimism. Prime interest rates for 2023 were among the highest and even higher than in the 2008-2009 recession period. Recently, the Federal Reserve remarked that they have no plan to increase or decrease interest rates but left the possibility of future rate hikes open. According to a Goldman Sachs survey, 78% of small business owners are concerned about access to capital, while 29% say they can’t afford to take out a loan given current interest rates. In this scenario, alternative financing avenues, whether from private organizations, prime contractors, or the government, will be critical for small businesses in 2024. In addition to these factors, global events such as wars in Ukraine will likely continue to impact supply chain stability and costs in some areas.

How to Prepare?

Government contractors can employ various strategies to navigate high inflation rates. Evaluating and renegotiating contracts with the government, incorporating Economic Price Adjustment (EPA) clauses, and prioritizing cost-type contracts can enhance security and profitability. Cost-cutting measures, supply chain risk mitigation, diversification of offerings, and adapting pricing strategies are crucial. Open communication, market awareness, and adjusting salaries and benefits are also key to retaining talent and staying competitive.

Focus on Supply Chain Resilience

Overview

Supply chain resilience remains one of the key priorities of the federal government. Several key factors play a major role in global supply chain issues that were heightened during the COVID-19 pandemic and later tested during the Ukraine/Russia war. The federal government is working on multiple fronts to ensure resilience in the supply chain. These fronts include the New White House Council on Supply Chain Resilience, Build America Buy America Initiative, Software Supply Chain Security, Hardware Bill of Materials (HBOM) Framework for Supply Chain Risk Management, and Creation of FAR Part 40 for Cybersecurity Supply Chain Requirements. These initiatives aim to increase the scrutiny and reporting requirements and the formalized rules and policies around acquisition and supply chain. Fortunately, there is good news: the conditions of the Global Supply Chain are improving, providing contractors with greater reliability in their supply chains compared to the previous year.

How to Prepare?

Federal contractors need to take robust measures to ensure the resilience of their supply chain. Conducting regular supplier assessments, due diligence, and identifying the risks can help them ensure a continuous supply of products and services. Contractors must create and improve their supply chain risk management plan and ensure continuous updates. Given the latest changes that might occur within the regulations, contractors need to be aware of these changes and adapt accordingly.

Sustainability

Overview

One of the key issues in 2023 was Sustainability, and this year’s Sustainability and Environmental, Social, and Governance (ESG) measures will remain in the government’s key decisions. The Biden Administration’s focus on ESG initiatives will drive additional climate-related policies, regulations, funding, and initiatives. There were some kickbacks from state governments related to the same in 2023, but this issue will remain a main talking point in Federal circles.

How to Prepare

Contractors must develop a sound ESG strategy that would mean understanding and reviewing their carbon footprint and mitigating its levels. This would also include having robust policies and regulation measures within the organization to deal with such issues and meet all applicable reporting requirements. Contractors would also need to consider investing in technologies that can help them improve their ESG performance. This could include advanced analytics solutions allowing them to monitor their operations in real-time.

Workforce Shortage

Overview

Even though the federal civilian workforce has grown, the issues in attracting and retaining talent still remain, and one of the primary reasons for that is the competition between federal agencies and contractors for a pool of candidates. Another issue is the availability of resources trained on the latest tools and technologies. There is a lack of skilled AI workforce, and this issue becomes more serious due to pressures in adapting to AI.

How to Prepare

Government contractors must focus on recruiting, retaining, and retraining top talent. Organizing job fairs and talent recruitment events can help attract a superior pool of candidates. To stay ahead in the evolving job sector, contractors must invest in training their workforce, particularly in areas such as AI and other emerging technologies. Allocating a portion of their budget to retaining and retraining key resources is necessary to maintain market competitiveness. This approach enhances brand value and ensures that talented candidates choose to remain with the organization.

At iQuasar, our dedicated team diligently tracks emerging trends in the federal contracting market. We strive to keep federal contractors well-informed about the latest developments, offering valuable insights to navigate challenges and seize opportunities effectively. We specialize in offering a wide range of services tailored for government contractors. Our expertise includes Proposal Development, Cleared Recruitment, and Government Contracting Consulting Services. With our team of skilled professionals, we are dedicated to guiding you through the intricate market and delivering exceptional solutions in these areas. Book a free consultation with us today to learn how we can assist you succeed in 2024.

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