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New federal spending stimulates competition

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Businesses historically look to the government marketplace when the economy weakens, and $787 billion in planned federal stimulus spending only sweetens the venue, said Ray Bjorklund, senior VP-chief knowledge officer at market research company FedSources. He spoke to BtoB about the competition for federal dollars. BtoB: What do marketers need to understand about the federal market? Bjorklund: The government market is very attractive because of its size. It becomes even more attractive with serious economic malaise. Because this is such a severe economic situation, companies that have little or no experience in working with the public sector may find they're up against very tough competition. It's an enormous market. The federal government spends about $550 billion a year on contractors, whether it's buying laptop computers or aircraft carriers. It's a wide range of interests, and the government will continue to spend a lot of money on contractors. But even with the surge of stimulus spending, that spending is not going far enough to correct the slight decline we've seen in contract spending over the past few years. We're forecasting 2009 and 2010 to decline by double digits. Stimulus spending is helping to stabilize that a little bit, but in the next year or two we're seeing probably a percentage point or two of growth. BtoB: Who is pursuing the public sector? Bjorklund: We're starting to see companies coming out of the woodwork that are relatively small that might have something special to sell. We're also seeing, large multinational corporations trying to figure out how to realign their businesses to have a better relationship with the federal government. It shows how severe the recession is. BtoB: Where do marketers need to be positioned if they want to compete for stimulus spending? Bjorklund: Companies [are] waiting for stimulus money to come down the pike. It's going to be spent on existing programs and contracts, and spent quickly because that's the intent. By the end of September, the government is to have spent on federal contracts $20 billion additional. We're telling companies, if you're positioned now with an existing contract, you're probably OK; but, if you're not already there, you're probably going to miss out. —C.W.
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