Federal Contracting Trends for 2023 – Part II

Jun 10, 2023

Part I of the blog: Federal Contracting Trends for 2023 discusses the key challenges and opportunities 2023 has for government contractors.

This blog, the second in the series of “Federal contracting trends 2023” blogs, provides in-depth insights into how government contractors can prepare to meet the challenges and opportunities posed by these trends. Many of the trends in this blog are based on Deltek’s recent Federal Contracting Trends to Watch in 2023 report.

1. A Move Towards Consolidation – GWAC/IDIQ Preference

More and more federal contracts are being consolidated into fewer, larger vehicles. The US government is moving toward consolidation in government contracting for a number of reasons, including cost savings, procurement streamlining, efficiency, decreased administrative burden, and compliance. Contract consolidation, the effects of category management, accessibility problems for small businesses, and agency efforts to boost competition for task orders are all ongoing trends. To stand out (and survive!) in this environment, contractors must leverage their distinguishing strengths to the greatest extent possible. Government contractors should implement comprehensive structures, processes, and tools to ensure they are well-positioned to benefit from and bid on federal contract vehicles such as GWACs and IDIQs.

How To Prepare
To be better positioned to benefit from and bid on federal contract vehicles such as Government-Wide Acquisition Contracts (GWACs) and Indefinite Delivery Indefinite Quantity (IDIQ) contracts, a government contractor can implement the following structures, processes, and tools within its organization:

  • Compliance Management System: Establish a compliance management system to ensure compliance with all relevant laws, regulations, and contract requirements. This may include implementing policies and procedures for compliance with the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS).
  • Proposal Development Process: Establish a robust proposal development process to ensure that you can develop high-quality proposals that are responsive to the RFP’s requirements and compliant with all relevant laws, regulations, and contract requirements. This can include implementing an electronic system for proposal management, which can help streamline the proposal-writing process, track proposal deadlines, and compliance requirements, and ensure that all relevant documentation is easily accessible.
  • Capture Management: Implement a robust capture management process to identify, pursue, and win new GWAC and IDIQ opportunities. This may include researching potential contract vehicles, identifying key decision-makers and stakeholders, and developing a strategy to position the company for success.
  • Contract Management System: Establish a contract management system to ensure it can effectively manage its contracts and comply with all contract requirements. This may include implementing policies and procedures for contract administration, performance management, and close-out. GWACs and IDIQs can be quite complicated to manage. Make sure you are positioned to handle them.
  • Accounting System: Establish an accounting system compliant with the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS) to ensure you can effectively manage your company’s finances and comply with all financial reporting requirements. According to CohnReznick LLP and Unanet Inc.’s 2022 GUAGE Report, in 66% of solicitations from the previous year, adequate accounting systems were frequently or always required.
  • Systems, Certifications, and Clearances: If your company is a small business, ensure that it is properly certified with the Small Business Administration (SBA) and maintains this certification throughout the contracting process. Research the type of contract vehicles your company will most likely bid on. After that, get started on obtaining any necessary certifications such as the International Organization for Standardization (ISO) certifications, Cybersecurity Maturity Model Certification (CMMC), Federal Risk and Authorization Management Program (FedRAMP) certification, and other relevant certifications that are typically required for such contract vehicles.

2. An Emphasis on Cyber Compliance

A number of policies and initiatives to achieve government-wide cybersecurity objectives include compliance requirements for contracted product and service providers. The most significant among these is the long-awaited Cybersecurity Maturity Model Certification 2.0, planned for rollout in 2023. Government sellers in all industries, not just information technology, should closely watch this and numerous other cyber-related policies of the Biden administration.

CMMC seems to be the future of defense contracting, and if Small and Medium Businesses (SMBs) intend to work with the DoD in the future, then preparing for CMMC is important. CMMC 2.0 will be a contract requirement once the rulemaking process is completed. Compliance with CMMC will be essential to sign a DoD contract and to continue performing on it. Even non-DoD contractors must pay attention to it since it may be required or preferred in some civilian contract requirements.

How To Prepare
Getting CMMC-certified will be a long and thorough process, especially for small businesses. To prepare for their CMMC 2.0 certification, government contractors should first assess their current cybersecurity posture and identify gaps between their existing practices and those required by the CMMC framework. They should also review their policies and procedures related to cybersecurity, including access control, system hardening, incident response plans, and data protection measures such as encryption or tokenization. This includes documenting the Plan of Action & Milestones (POA&Ms), documenting the policies and procedures in a System Security Plan, and implementing the required security controls. By taking these steps now, government contractors can ensure they are ready when it comes time for their CMMC 2.0 certification assessment. Organizations should make plans to establish the level of CMMC required, the C3PAO they will hire for the audit, and the estimated hiring needs for their IT departments.

Organizations should also ensure they have a comprehensive inventory of all assets containing sensitive information to secure them against potential threats properly. Finally, they should consider investing in automated tools such as vulnerability scanners or penetration testing solutions to help them identify any weaknesses in their systems before a third-party assessor audits them.

3. Workforce Challenges

Contractors have been dealing with and will continue to be impacted by the effects of the “Great Resignation,” along with increased wages due to inflation. Federal agencies and contractors continue to compete for talent, with both facing challenges in hiring, recruitment, retention, diversity, inclusion, skill development, wage inflation, and the demand for a flexible work environment. As the public sector continues to experience a wave of retirements, agencies will continue to face intense competition for talent. Both agency and business leaders will face similar challenges in hiring, recruitment, retention, diversity, inclusion, skill development, and the demand for a flexible work environment.

How to Prepare
Government contractors should focus on recruiting and retaining talented workers by offering competitive salaries and benefit packages. They should also look into alternative staffing solutions, such as outsourcing or hiring temporary workers to fill gaps in their workforce. Additionally, they should take advantage of government programs such as the Small Business Administration’s 8(a) program, which assists small businesses owned and controlled by socially and economically disadvantaged individuals.

Finally, contractors should strive to stay ahead of the curve by investing in technology that can help them streamline operations and reduce costs. This could include automation tools that allow them to automate mundane tasks or cloud-based software solutions that enable them to access data from anywhere at any time. By taking advantage of these technological advances, contractors can remain competitive while coping with workforce hiccups.

4. Environmental, Social, and Governance (ESG)

The US government is introducing more environmental, social, and governance (ESG) requirements into their contracts. This is part of an effort to promote sustainable practices in the public sector and bring more transparency to the bidding process. The Biden Administration’s focus on Environmental, Social, and Governance (ESG) initiatives will likely drive additional climate-related policies, regulations, funding, and initiatives, including those increasing oversight of contractors’ environmental impact. We anticipate that social and environmental responsibility will play a significant role in evaluating bids. Some notable recent examples are GSA’s upcoming contract vehicles, Alliant 3 and OASIS+, which are expected to include requirements for sustainability-related disclosures per their available draft RFPs.

How to Prepare
The most common form of ESG requirements is sustainability-related disclosures, which compel organizations to report their progress towards achieving targets such as carbon neutrality or reducing hazardous emissions. To meet these requirements, contractors should develop a sound ESG strategy and collect reliable data on their carbon footprint or resource use. They should also review their existing policies and procedures related to sustainability issues and ensure they comply with all relevant regulations.

In addition, contractors should consider investing in technologies that can help them improve their ESG performance. This could include advanced analytics solutions that allow them to monitor their operations in real-time or automation tools that streamline processes and reduce energy consumption. By investing in technology now, contractors can set themselves up for success when it comes time for contract reviews or audits by third-party assessors.

5. Digital Transformation

The modernization of IT capabilities and priorities for digital transformation is receiving more attention from agencies. Cybersecurity, cloud computing, AI and machine learning, 5G communications, quantum computing, blockchain, and customer experience capabilities are some of the technological areas they are paying close attention to. We anticipate that this trend will continue and gain more traction in 2023 as technology becomes a driver for better governance in the US. An important area of focus in this regard is Zero Trust architecture. The federal government wants to approach network and data protection through the Zero Trust paradigm, and various agencies have allocated budgets and resources to this end.

How to Prepare
To successfully navigate this shift towards digitalization, contractors should focus on investing in new technologies that can help them meet their customers’ needs more quickly and efficiently. New entrants to these emerging markets will benefit from this trend if they can capitalize on it effectively.

2023 is shaping to be an exciting and challenging year for government contractors. With new funding sources, expanding compliance requirements, and a focus on small business contracts, it’s important for contractors to stay ahead of the curve. As always, paying close attention to the latest market intelligence is critical for success. iQuasar’s team of proposal writers and managers will help you navigate this complex market by helping you find and prepare compliant proposals in response to federal, state, and local contracting opportunities that fit your business.

Part I – Federal Contracting Trends for 2023

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