Federal Contracting Trends to Expect in 2021

While the COVID pandemic defined 2020 for government contractors and everyone else, I have hope that 2021 will mark a return to normalcy and growth for this sector. Federal contracting will still feel the effects of the pandemic in the year ahead, but other issues are on the horizon for our now $600 billion industry. 

Here are what I predict will be the main trends and headlines to watch for in 2021:

Employee Recruitment From Lower Cost Areas: Related to the increase in remote workers due to COVID-19, federal contractors can now recruit for staff from across the United States who do not necessarily need to live in expensive areas like Washington D.C. The lower cost of living in other locations could result in lower salaries, which in turn will allow for more competitive pricing.

Large Companies Will Reach Out to Smaller Contractors for Access: Larger contractors will increasingly reach out to smaller businesses for access to set aside contracts. This is due in part to increased emphasis on HUBZones, women-owned small businesses, economically disadvantaged women-owned small businesses and other set-aside categories.

Questioning the Need for Office Space: With the successful and rapid rise in remote work, many companies are questioning the need for physical office space. Even if social distancing restrictions end in the months ahead, there will likely be a lot more remote work arrangements in 2021 and beyond. This development could have an impact on indirect rates thereby potentially pushing down pricing levels.

Figuring Out How to Make Introductions: Getting new business is always a challenge—especially for small-and-mid-sized contractors. Federal contractors will increasingly need to think about new ways to get introductions to new agencies. This will be a major theme in 2021 as in-person networking opportunities may continue to be limited by the realities of COVID.

Increasing Need for Best-in-Class Contracting Vehicles: For some time now, the federal government has been pushing agencies to access best-in-class governmentwide acquisition contracts to increase their buying power. In general, this has been a positive for mature small businesses and should continue to expand in the coming year.

Of course, other issues such as the continuing rise of teaming agreements, the availability of contracts to smaller companies and the need for a more employee-centric culture to attract workers will make headlines as well. 

While the impact of COVID will still be felt in 2021, federal contracting will hopefully move back to a more traditional dynamic and continue to expand, adapt and respond to the realities of our sector. The next twelve months will certainly be interesting for everyone.

Walter Barnes III is the president and founder of PM Consulting Group