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STATE & LOCAL PROCUREMENT SNAPSHOT/// Q1 2016

2©2016 Onvia, Inc. All rights reserved.

ONVIA STATE & LOCAL PROCUREMENT SNAPSHOT - Q1 2016

Onvia’s database shows that procurement activity in bids and RFPs increased by 2.7% in Q1 ‘16. This is the third quarter in a row of increasing volumes, with a rate of change consistent with the historical average for rising quarters. The current rate of expansion continues the positive trend from last quarter and points to a more sustainable pattern of growth in 2016.

Results by Industry

AEC (Architecture/Engineering/ Construction), up 3.1%

Business Services, up 5.0%

IT/Telecom, up 1.9%

OMT (Operations/Maintenance/Transportation), flat -0.3%

Results by Agency Type

Education, up 6.2%

Local agencies, up 1.5%

State agencies, up 4.1%

Top Market SegmentsLarger gains in the diverse Business Services group reflects increases in healthcare and educational products and services. Among the levels of government, faster growth in K-12 education is driven by increased funding and demand for facilities.

Infrastructure Growth Continues At 3.1% growth, AEC is showing continued strength after last quarter’s 4.0% pace, indicating that as agencies have grown their total volumes, they made sure that infrastructure contracting kept pace.

Further Support for Growth A variety of sources are also suggesting modest growth in 2016 for the SLED market. For example, NASBO reports that 43 out of 50 state governments enacted general fund budget increases for fiscal year 2016. As Onvia has noted, these sources support a scenario of growing agency revenue and increasing needs partially offset by continued budget pressures such as underfunded pensions and Medicaid that can moderate the size of any increases in spending.

Guest Article: Dan White, Senior Economist Moody’s AnalyticsWhite discusses how funding for standard government services in the future will be constrained, resulting in more innovation and collaboration with the private sector.

Market Snapshot

MARKET SNAPSHOT

In the first quarter of 2016, government SLED (State, Local and Education) contracting opportunities had a positive rate of increase of 2.7%. While slightly below last quarter’s level, this result continues the trend of increasing contract volumes and supports an expectation of modest growth for 2016.

Annualized Rate of Change by Quarter

+2.7% Q1 ‘16

+4.6% Q4 ‘15

+0.3% Q3 ‘15

-0.8% Q2 ‘15

Change in Market Opportunities

123,961Q1 ‘15

127,324Q1 ‘16

OPERATIONS/MAINTENANCE/

TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES

ARCHITECTURE/ENGINEERING/

CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION

http://www.nasbo.org/publications-data/fiscal-survey-states/fiscal-survey-states-fall-2015

http://www.onvia.com/blog/expectations-for-contracting-in-2016-part-3-will-the-market-continue-to-improve?utm_source=premiumcontent&utm_medium=whitepaper&utm_campaign=Q116SLED


ONVIA STATE & LOCAL PROCUREMENT SNAPSHOT - Q1 2016 MARKET SNAPSHOT

BIDS & RFPs

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

SLED Project Counts Over Time

Onvia’s database shows clear seasonality trends in the SLED market based on eight trailing quarters of activity. Because of seasonality, we measured growth in competitive bids and RFPs by comparing same quarter year-over-year activity.

Q1 ‘16 saw an increase of 2.7% versus the same quarter last year. This growth rate is slightly lower than last quarter’s rate of 4.6% but is in line with typical growth rates reported in this series since early 2014.

150,000

120,000

90,000

60,000

30,000

20162014 2015

Q1 ‘15

Source: Onvia project database of state, local and educational agency contracting activity

Q1 ‘16+2.7%



Industry SnapshotINDUSTRY SNAPSHOT

We looked deeper into activity by industry. The following charts show annual rates of change for bid & RFP activity each quarter compared to the same quarter the previous year. Growth rates improved in Q1 ‘16 for most major industries.

Rate of Change

Industrial Supplies

Operations & Maintenance

Transportation/Vehicles

Sub-categories:

GROWTH RATES IN BIDS/RFPs BY QUARTER (vs previous year same quarter)

Rate of Change

Architecture/Engineering

Construction & Supplies

Water/Energy

Sub-categories:

Business Services Rate of Change

Educational Services

Financial Services

Food Services

Healthcare

Office Equipment

Professional Services

Public Safety

Sub-categories:

Bids & RFPs(Q1 ‘15 to Q1 ’16)

IT/Telecom Rate of Change

Consulting

Hardware

Software

Wireless/Telecom

Sub-categories:

1.9%


5.0%


3.1%


-0.3%OMT

AEC (ARCHITECTURE, ENGINEERING CONSTRUCTION)

(OPERATIONS, MAINTENANCE, TRANSPORTATION)

Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16

-5.0%

-10.0%

-15.0%

10.0%

5.0%

0.0%

15.0%

Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16

-5.0%

-10.0%

-15.0%

10.0%

5.0%

0.0%

15.0%

Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16

-5.0%

-10.0%

-15.0%

10.0%

5.0%

0.0%

15.0%

Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16

-5.0%

-10.0%

-15.0%

10.0%

5.0%

0.0%

15.0%



Industry Detail by Sub Category

INDUSTRY DETAIL BY SUB CATEGORY

Note: The four larger industry groups shown earlier were tracked at the project category level; due to some projects being categorized into more than onesubcategory and some projects not classified into subcategories, the sum of the subcategories may not equal the counts of the overall category. Category growth rates may not be fully consistent with the rates of subcategories.

% ANNUAL CHANGE IN BIDS & RFPS Q1 ‘15 VS. Q1 ‘16

IT/TELECOM

15.0%

10.0%

5.0%

0.0%

-5.0%

-10%

Consulting/Network Consulting

Hardware Software Wireless/Telecom Educational Services

Financial Services

Food Services

Healthcare Office Equipment

Professional Services

Public Safety

WIRELESSWATER & ENGERYTRANSPORTATIONSOFTWAREPUBLIC SAFETYPROFESSIONALO&M

OFFICE EQUIPMENTIT HARDWARE IS CONSULTINGINDUSTRIALHEALTHCAREFOOD SERVICESFINANCIALEDUCATIONCONSTRUCTIONARCHITECTURE


OFFICE EQUIPMENTIT HARDWARE IS CONSULTINGINDUSTRIALHEALTHCAREFOOD SERVICESFINANCIALEDUCATIONCONSTRUCTIONARCHITECTURE WIRELESSWATER & ENGERYTRANSPORTATIONSOFTWAREPUBLIC SAFETYPROFESSIONALO&M




BUSINESS SERVICES

15.0%

10.0%

5.0%

0.0%

-5.0%

-10%













ARCHITECTURE/ENGINEERING/CONSTRUCTION

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

Architecture/Engineering Construction & Supplies Water & Energy






OPERATIONS/MAINTENANCE/TRANSPORTATION

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

Industrial Supplies Operations & Maintenance Transportation/Vehicles






6.4%

0.2%

11.7%

-5.5%

6.3%

-1.4%

-5.3%

1.5%

3.0%5.2%

11.5%

5.4%

1.0%

6.5%

-2.5

2.8%

-1.0%



Agency SnapshotAGENCY SNAPSHOT

We examined bid/RFP volume by level of government. As the charts below indicate, annual rates of change in Q1 ‘16 are positive for state, local and education agencies.

Education Rate of Change

Community Colleges

K-12 School Districts

Sub-categories:

Local Rate of Change

Cities

Counties

Towns

Special Districts

Sub-categories:

State Rate of Change

State Agencies

Universities

Sub-categories:

Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16

-5.0%

-10.0%

-15.0%

10.0%

5.0%

0.0%

15.0%

Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16

-5.0%

-10.0%

-15.0%

10.0%

5.0%

0.0%

15.0%

Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15 Q2 ‘15 Q3 ‘15 Q4 ‘15 Q1 ‘16

-5.0%

-10.0%

-15.0%

10.0%

5.0%

0.0%

15.0%

GROWTH RATES IN BIDS/RFPs BY QUARTER (vs previous year same quarter)


4.1%


1.5%


6.2%




TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION

Agency Detail by Sub Category

AGENCY DETAIL BY SUB CATEGORY

% ANNUAL CHANGE IN BIDS & RFPS Q1 ‘15 VS Q1 ’16

To provide further insight into each of the three larger agency categories, we broke out rates of change in projects for the current quarter by major industry sectors to highlight general areas of expansion and contraction taking place within each type of agency.

The diverse Business Services industry group, which includes sectors like healthcare, social services and educational services projects, was the growth leader at the state and education levels of government. AEC, including construction and design, was strong in education similar to last quarter — driven by a combination of demand for new schools as well as renovations and expansions for classrooms, STEM labs and other needs. IT, driven by software and consulting projects, was strongest at the state level, pointing to a continued focus on modernization and efficiency.

LOCAL GOVERNMENT RATE OF CHANGE EDUCATION RATE OF CHANGE

STATE GOVERNMENT RATE OF CHANGE

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

AEC Business Services IT/Telecom OMTOPERATIONS/MAINTENANCE/

TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION

7.0%

2.6%

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

AEC Business Services IT/Telecom OMT

2.5%1.1%

-1.3%

15.0%

10.0%

5.0%

0.0%

-5.0%

-10.0%

AEC Business Services IT/Telecom OMT

6.9%

1.4%

-2.3%

12.5%


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION


TRANSPORTATION

IT/TELECOM

BUSINESSSERVICES


CONSTRUCTION

1.0%

8.2%

2.9%


ONVIA STATE & LOCAL PROCUREMENT SNAPSHOT - Q1 2016 SPECIAL FEATURE

Special Feature: New Fiscal Reality is Ripe for More Public-Private Crossover

Coming out of the Great Recession, government agencies are finally ridding themselves of cyclical budget pressures, but are in short order being burdened by long-term structural issues reaching a critical mass. Revenue collections are no doubt improving, and in most cases surpass real pre-recession peaks. However, discretionary government spending, as well as hiring, are being constrained by mandatory pressures.

The 3 Top Pressures on Budgets

Important services that we most readily associate with government and government jobs, like education, public safety and transportation, are being crowded out by several factors including a need for higher reserves, underfunded pensions and skyrocketing Medicaid costs. Unable to borrow for general operations, state and local government budgeting is a zero-sum game. Every dollar spent on reserves, pensions or Medicaid is a dollar not spent on construction, police or in the classroom.

are forced to provide the same services with less resources.

Reserve Funding: State Agencies Leading the Charge

The first, and most temporal, of these structural forces is the lack of adequate reserves. Long-term changes in state and local government fiscal structures have made public budgets more sensitive to changes in the business cycle than ever before. One of the reasons the Great Recession was followed by a slow recovery was the inability of most states and local governments to remain stable, let alone act in a counter-cyclical manner. As revenues declined and mandatory spending ballooned during and after the recession, most agencies found themselves unprepared for any downturn, let alone one the magnitude of the Great Recession. This caused most to implement deep cuts or tax increases at times

State, local and education (SLED) governments will face heightened budget pressures for the foreseeable future but for contractors, this will bring opportunities for partnering.

By: Dan White, Senior Economist Moody’s Analytics

Reserve Funding: State Agencies Leading the Charge

Underfunded Pensions: State and Local Agencies Seeking Long-Term Solutions

Increase in Medicaid Budgets: The Biggest Challenge

“To ensure that an adequate amount of public services are rendered, state and local governments will have to rely on innovation and collaboration with the private sector to make things happen.”

Structural forces will continue to limit the pace of discretionary spending in the years to come, but also create new opportunities for public-private cooperation as policymakers



Underfunded Pensions: State and Local Agencies Seeking Long-Term Solutions

States and local governments face growing imbalances in their pension systems. While hyperbolic headlines have garnered a lot of attention about a handful of governments, most public pension funds are not in any immediate danger of insolvency. They do, however, face strong demographic challenges in that fewer workers will be supporting a larger number of retirees in the years ahead. Thus, even states and local governments who have been diligent with their post-employment benefits will be paying more money into their pension funds.

For those states who have been less diligent, the years ahead will be spent paying down the large unfunded liabilities that have already been accrued. This has proven difficult for those already grappling with tight budgets, and has been a key factor in the amount of late or last minute state budgets in fiscal 2016. These are long-term problems in need of long-term solutions, and the length and ferocity of budget debate in many of the most troubled states and municipalities reflects that reality.

Increase in Medicaid Budgets: The Biggest Challenge

While the need for higher reserves and underfunded pensions play a big role in crowding out important services, no influence has done more to upend the zero-sum budget game than Medicaid. In the last 30 years Medicaid has risen from 9.9% of state budgets to 19.1% today, increasing faster than any other state government program. As program spending accelerates at a faster rate than tax revenues, that share of total spending will only increase at the expense of other important programs.

The most optimistic of those projections, from the Centers for Medicare and Medicaid Services, expects state spending on Medicaid to grow at more than 6% annually from 2016 through 2023. For context, state tax revenues historically grow at just over 5% per year.

That creates a gap in funding of more than 1% per year that must be filled by money that would otherwise go to areas like teachers, police officers or construction projects. Using other less sanguine forecasts, including our own, that gap may be as wide as 2%-3%.

their economies could least absorb them, exacerbating an already weak national recovery.

States in particular have taken notice of this weakness in their fiscal positions, and a number are taking steps to address their lack of reserves through volatility and stress testing. A study Moody’s Analytics performed testing state fiscal positions found that the average state would need roughly 8.5% of their annual spending put away in reserve to survive a moderate recession for one year without having to cut spending or raise taxes. In fiscal year 2016, states in the aggregate budgeted less than 5% of their spending to reserves when controlling for the large permanent funds in Alaska and Texas.

While this gap does not necessitate a wholesale saving spree by all governments in the next fiscal year, it underlines the fact that states and local governments will devote more resources to testing and filling reserve funds in the run-up to the next recession, whenever that might be.



This includes more contracting and public-private partnerships in helping to stretch the public dollar further, while still providing necessary public services to residents.

In many ways, the ability of state and local governments to provide vital public services to their residents will depend on the ability of the private sector to offer innovative solutions. Vendor and contractor assistance to help facilitate those efficiencies in transportation, healthcare, public safety, and IT, just to name a few, will be a key factor in determining which governments are the most successful and which communities are the most livable.

Contractors Can Help Facilitate State and Local Efficiency Gains Through Public-Private Partnerships ABOUT OUR GUEST

CONTRIBUTOR:

Dan White is a Senior Economist at Moody’s Analytics, responsible for coordinating government consulting and regional economic research with an emphasis on fiscal policy. He regularly presents to clients and conferences, and has been featured in a number of print, radio, and televised media outlets, ranging from the Wall Street Journal to National Public Radio. He also has the pleasure of working closely with a number of governments in a consulting role.

Dan White Senior EconomistMoody’s AnalyticsTwitter: @DanWhiteEconE-mail: [email protected]

“Even in those states and local governments best positioned to handle the fiscal challenges before them, policymakers will continue to have to innovate ways to do more with less.”

There is no question governments have already been forced to make gains in staff productivity and efficiency — for example, state governments employ fewer workers per capita than they have in more than 30 years while they spend nearly 175% more real dollars per-capita than they did 30 years ago given increased needs. But further gains will be needed to address these three budget pressures, which is where the private sector can help.

The new fiscal reality facing state and local policymakers is one in which traditional government services make up a much smaller share of overall spending. To ensure that an adequate amount of public services are rendered, state and local governments will have to rely on innovation and collaboration with the private sector to make things happen.

http://www.economy.com

https://twitter.com/danwhiteecon

mailto:Daniel.White%40Moodys.com?subject=


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Disclaimer:

The information contained in this Onvia publication has been obtained from publicly available federal, state and local

government data sources. These data sources are reviewed and updated periodically to better reflect activity in the public

sector. Fluctuations in bid and RFP volumes due to source changes are generally not material enough to affect research

findings, but may be material in some instances. Onvia disclaims all warranties as to the accuracy, completeness or

adequacy of such in formation. The views and opinions expressed in this publication are those of Onvia’s research

organization or contributors and are subject to change.

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STATE & LOCAL PROCUREMENT SNAPSHOT/media/files/onvia_state_and_l… · architecture constructioneducation financial food services healthcare industrial is consulting o&m it hardware