Opinion: surviving the coming downturn in contracting.

One of the benefits of getting old and working in the same industry for over 37 years is that you see the recurrences of events. The simple fact is our involvement in Iraq is going to decrease and therefore the spending will decrease. Our involvement in Afghanistan will increase, but it will not off-set the drop in Iraq spending. A new administration will have different priorities. Since the Democrats won both Congress and the presidency, we will have wholesale priority changes.

Couple all this with our current financial crisis and an already huge deficit, and government contracting is going to shrink over the next few years. We have seen this happen before. Now is the time to check your company's financial condition and prepare to weather the downturn. I can guarantee you that some of you are working for companies that will be going out of business over the next couple of years.

There are two things your company can do to ensure its survival and maybe even enable it to continue to grow. First, you need to make sure your financial house is in order. Your spending has to be under control and, most importantly, plans must be in place to ensure that your financial obligations can be down-sized along with your revenue. One of the most important of these is property leases. If you lose a contract, can you get out of the lease?

That was the doom and gloom. In major downturns we have had clients not only survive but also grow successfully. The companies who do their homework and preposition themselves on upcoming procurements will continue to have higher probabilities of winning the contracts and the work. If you are going to continue winning those task orders and contracts, you are going to have to conduct business development better than your competitors. In downturns the competition only gets harder and companies work harder to win, because there are going to be fewer opportunities. You are also going to see companies who you do not normally compete with show up in your market space. You are going to see more large companies going after smaller contracts.

It is often said that the federal government marketplace is recession-proof, and in many ways that is true. That does not mean it is untouched by recession, however. The federal marketplace for contractors is very sensitive to changes in government spending priorities. That means the DOD budget will shrink and the civil side of government will increase, but overall the pie is going to shrink. I would expect this to be a very significant down-sizing. The government is running out of money!

Doug Allston can be reached at [e-mail] or 703-627-5820.

By Dong Allston, President

Advantage Consulting Inc.