How bad was 2011? Contractors issue a collective ‘whew’ as the year ends

Just six weeks into fiscal 2012 and federal contractors are looking back at a topsy-turvy fiscal 2011 that was dominated by turbulent congressional battles over continuing resolutions and the debt-ceiling debate.

With fewer dollars available for contracts and new purchasing and task order competition rules going into effect, no wonder the word “uncertainty” popped up often in a canvass of federal contracting executives.

However, most executives said they were pleased with their results in fiscal 2011.

“I wouldn’t necessarily use a term like frenetic,” said Mike Wilson, president of ITT Information Systems, when asked to describe the year. “I would say cautious because we’re in a period of uncertainty.”

“It was not a terrible year, but there was definitely some budget pressure and some competitive pressure,” Wilson said.

“The doom and gloom is always overamplified because the mission requirements aren’t changing that much,” he said. “But I think the intensity of the spotlight on a premium on performance is not going to change.”

Art Richer, president of immixGroup, compared fiscal 2011 to 2009 when the federal budget also became law late in the year, which changed a lot of the dynamics of buying technologies.

Agencies were “kind of forced to make decisions here towards the end of the year and certainly in their capital expenditures and how they were going to buy,” he said. This past fiscal year was quite different, he added.

“We saw a little bit of a soft patch here from December through August,” Richer said. But as agencies put some of their plans into effect in July, August and September, sales started to pick up, he said.

The biggest problem for contractors was “the uncertainty of what’s going on and not having a clear line of sight into how the budget issues get resolved,” said Kevin Parker, president and CEO of Deltek Inc., a provider of enterprise software and information solutions to government.

“We know of some customers that had very successful years,” Parker said. “And if they’re in the right agency with the right contract vehicle, they feel pretty good about their prospects for the future. On other occasions, people have lost contracts or contracts have been delayed and they’re feeling a great deal of pressure,” he added.

Parker said people are looking for business development opportunities and are focused on understanding what opportunities there are and how to compete for them effectively. “That is almost a universal theme that we’ve seen,” he said, citing intelligence, cybersecurity, and training and development of resources, as the top three areas of interest.

“I think people would really appreciate some certainty and some direction so they’d know how to plan,” he said. “That leads back to the business development activities and staying hypercompetitive on proposals, and making sure you don’t miss any opportunity at all.”

Despite the contentious issues and uncertainly, even small businesses experienced growth in fiscal 2011.

“We’ll do shy of $70 million in [government] revenue this year. We started from a base of $20 million two years ago so we’ve grown pretty substantially,” said Joe Moye, president of Capgemini Government Services, a relative newcomer to the federal market.

Nevertheless, he called fiscal 2011 a difficult year.

“It was difficult in the sense that we’re not achieving the growth we had hoped, but we’ve still grown 25 percent,” he said.

Because Capgemini Government Services is part of a much larger company, it does not operate with Small Business Administration small-company advantages. Therefore, company has had to work twice as hard to be successful in winning federal contracts and getting on the GSA Schedule during the past few years, Moye said.

The congressional battles over the continuing resolutions has had more of a negative effect on the company’s bottom line than the budget constraints did because “when you’re in growth mode versus sustain mode, [as we were] we didn’t have all the contracts that were just going to continue to feed us. So it hurt our growth a little bit,” Moye explained.

URS Corp.’s federal services business also continued to grow in 2011, especially in the first half of the year, said company President Randall Wotring.

Overall, he said, URS had a good year despite the budget uncertainties and delays caused by continuing resolutions and the debt-ceiling debate.

“That’s not new news. I believe that all the federal service providers are claiming the same thing,” Wotring said.

“But from our standpoint, frankly, our pipeline of opportunities that we’re able to address has increased nicely so we’re happy about that,” he said.

Darryl Britt, president and CEO of Apprio Inc., a government health care IT and emergency response management services provider, said, “In general, I think it was a decent year,”

Britt acknowledged that the health care and emergency response sectors haven’t felt the negative effects of the budget uncertainties as other sectors have. “We’re a smaller firm so I don’t think we felt the impact and I don’t think the industry overall has felt the impact of the budget [issues],” he said.

He added the electronic health records sector “is probably one of the, if not the, best sector in the federal market.”

The small, 13-year-old company has maintained a 50 percent growth rate for the past three years, including fiscal 2011, Britt said.

About 70 percent of Apprio’s government business comes from the Health and Human Services Department with the remainder from the Veterans Affairs and Defense departments, and FEMA.

“From our perspective,” he said, “[the year] was as expected and obviously I think that’s relatively good numbers.”

Apprio’s emergency response sector also did well in fiscal 2011, he added, mainly as a result of the summer tornados in Joplin, Mo., Hurricane Irene and Tropical Storm Lee, and the rare earthquake in central Virginia.

However, no one doubts there will be new storms – natural and manmade – in this fiscal year too.