Impending Recession: What Government Contractors Need to Know

Nov 22, 2022

According to the Bloomberg Economics forecast model, there is a 100% probability of an economic recession in the United States in the coming year. This downturn is situated within the larger context of the downturn in the world economy. The International Monetary Fund (IMF), in its latest Global Financial Stability Report (GFSR), has noted that the global economic outlook has deteriorated significantly since the last report in April 2022.

A recession is never good news, and these projections have caused some anxiety among Government Contractors. But is the outlook for the upcoming year that negative? In this blog, we examine the Government’s projected spending for the fiscal, data from the 2008 recession, the largely “recession-proof” nature of Government business, and discuss why Government Contractors should remain hopeful and optimistic about the future.

What Government Contractors Need To Know

  • Government Spending is Stable and Growing: Regardless of the state of the economy, government agencies still need the supplies and services that keep them going. The Office of the President published its budget request with $1.582 trillion in discretionary funding for FY 2023. Other federal agencies have also published their budget requests. The government is a potential customer operating with a larger size spending budget and will always be able to buy, recession or not. Moreover, the government’s spending budget often tends to increase during a recession, as steps are taken to fiscally stimulate the economy. According to the experts at Deltek, Federal contract spending has continued to remain stable or grow in many sectors. Therefore, getting involved in the government market makes perfect business sense, more so in a recessionary environment.
  • Government Business Remains Shielded from Recession: The conventional wisdom is that Government business tends to remain shielded from the worst impacts of an economic recession. While the commercial sector of the economy may suffer from major business disruption, financial losses, and employee cutbacks, government contracting remains a growth industry even under recessionary conditions. This is so because, during a recession, the government typically steps in to revive the economy by investing in business and community development projects, including education, communication, and construction projects. This increases economic activity and government business opportunities – here, government contractors can benefit by participating in the bidding process.
  • Evidence From the 2008 Recession: Many companies that weathered the 2008 financial crisis did so by leveraging these government contracts. Data from the past shows that despite the private sector’s fiscal struggles in 2009, government contractors did fairly well. Despite the recession, Grant Thornton LLP’s 15th Annual Government Contractor Survey found that half of the nation’s government contractors reported increased revenues from federal government contracts.

In this time of economic uncertainty, small or struggling businesses can still pursue government contacts to stabilize themselves. Winning a government contract could be the difference between a small business staying afloat or having to close down for good. Businesses that recognize and capitalize on government contracts won’t just survive this economic storm; they will thrive and emerge even stronger. For government contractors, the key is to stay optimistic and seek new government opportunities to create revenue in this environment.

It’s critical to follow expert advice when considering what opportunities to pursue. With an expected recession looming, whatever direction you choose, remember that now is the time to act. Our team of professionals here at iQuasar can help you find the right opportunities for your business and develop compliant and high-quality RFP responses to win government contracts.

Talk to our Expert today!

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