More firms, less work

I downloaded a ton of contracting data from this morning.  I thought I'd share some of the quickie findings this week as I'm able to sort through it.

My machine started cooperating after getting over the shock of trying to swallow 180K lines of data. We worked out our differences then took a closer look at management consulting contracts (NAICS, 541611 for anyone playing along at home) dating back to 2008.

No one could forget the American Recovery and Reinvestment Act (ARRA) stuff and, more recently, sequestration. Those high and low water marks in 2008 and 2013, respectively, actually make for good book ends for this analysis.  In 2008, management consulting contracts were at a high of 76,000 totaling nearly $16 billion.  Every year after 2008 was less. It won't be any surprise that last year, 2013, was the lowest with 42,000 contracts for $9 billion.

It gets a bit more interesting as you start to look at the firms entering and exiting the federal market. In any given year, there are about 4600 firms with active federal consulting contracts.  Of those, however, only 969 had a contract in every year since 2008-- indicating the depth of involvement, interest, and/or dependency on federal work.  That leaves more than 9000 firms who dabble, jump in as they see an attractive opportunity, or have moved on to greener pastures.  That's a lot of fluidity in the competition!

Another interesting point is that the declining total budget doesn't seem to be a deterrent for new starts.  In the last 5 years, new firms entering the market-- and staying (data shows they won a contract in each of the subsequent years after their first appearance) has increased significantly. The chart below shows the overall decline in contract value and the increase in new firms.

contract summary.jpg

I think the numbers back up what we've all sensed-- that there are a lot of new businesses forming.  My guesses in Growing From Big to Small were a wee bit off :)  While exciting, its clear that competition will be stronger than ever. Tomorrow, I'll take a look at a little more depth on the types of projects trending up and out and share any insights on the nature of these businesses.