FY 2018 Opportunities
for Small Businesses
April 2018
Director of Government Contracts Research, BGOV
Executive Director, NACA
President, National 8(a) Association
Program Manager, NCAIED
2Executive Summary
Long-term spending trends are positive
• Most agencies are seeing a multiyear rise in contract spending
• Set-aside spending, usually flat during downturn, is rising in lock-step with year-over-
year spending increases
Spending in fiscal 2018 has matched the president’s fiscal 2018 budget priorities
• Most agency spending amounts align with the president’s request
• Defense agencies accelerated spending; nondefense agencies cut back spending
Congress wanted to spend much more money on:
• Specific defense programs such as weapons and upgrades, readiness support, and
upgrades to existing IT systems
• Nondefense agencies, but no detailed plans beyond border security and infrastructure
How to spend it?
• Use of multiple-award contracts
• Small-business spending
Fiscal 2019 outlook
• Budget caps already raised, but president doesn’t have to request or spend up to them
Market primed for growth in fiscal 2018 and 2019
3
Federal Spending to Rise for Third Straight Year
In fiscal 2017:
• Defense spending rose by
$25 billion, or 8.1 percent, to
$331 billion
• Civilian spending rose by
$9 billion, or 5.4 percent, to
$181 billion
No two-year losers:
• The few large civilian agencies
that saw declines in 2017 –
Treasury, Transportation,
Commerce, Interior, and EPA –
had banner years in 2016
Fiscal 2017 was the best year since fiscal 2012
Source: Bloomberg Government
$167 $189
$161 $153 $150 $156 $160 $171 $181
$387 $372
$380 $369
$316 $291 $282 $306
$331
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Civilian Defense
Obligations in billions
4
Set-Asides Continue Uptick in Annual Spending
In 2017:
• Women-owned set-aside spending
rose by $276 million, or 62 percent,
to $718 million
• Veteran-owned set-aside spending
rose by $1.2 billion, or 19 percent,
to $7.3 billion
• Indian Small Business Economic
Enterprise spending rose by
$18 million, or 28 percent, to
$85 million
While large categories dominate, recent trends portend shifting future
Note: Categories are aggregates of sole-source and competitive programs. For example, “veteran owned” includes set aside and sole-source service-disabled
veteran-owned small business spending, as well as sole-source and set-aside veteran spending. Values less than $2 billion are unlabeled.
$23.9 $28.6 $28.1 $30.0 $30.0
$34.2 $34.8 $40.0
$43.8
$17.9
$18.8 $17.4 $16.6 $14.7
$17.1 $16.7
$17.4 $17.1
$3.2
$4.8 $4.7 $4.8
$4.6
$4.9 $5.0
$6.1 $7.3
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
Small business set-aside 8(a)
Veteran owned HUBZone
Women owned Other
Obligations in billions
Source: Bloomberg Government Contracts Intelligence Tool
5
Most Agencies Have Spent Less in Fiscal 2018
Note: Defense Department contract data is reported with a 90-day delay. Values shown compare first fiscal quarter for defense and first half for all other agencies.
Defense contract spending up in first quarter; most civilian agencies down in the first half
DOD outpaces nondefense agencies such as USAID and Energy, which may be
experiencing repercussions from planned cuts in fiscal 2018 budget request
$4.5-$2.3
-$4.1-$1.2-$0.9
$1.3-$0.4
$0.2-$1.2
$0.2-$0.2
-$1.1-$0.6
$0.1$0.1
$0.0$0.1
$0.0$0.0
Defense
Energy
Veterans
HHS
NASA
Homeland
Justice
Transportation
State
USDA
GSA
Treasury
USAID
Commerce
Education
Interior
Labor
EPA
SSA
Dollar change in obligations, year-over-year
7%-17%
-32%-13%-11%
22%-13%
11%-35%
12%-7%
-39%-28%
8%11%
-3%26%
-3%-3%
Defense
Energy
Veterans
HHS
NASA
Homeland
Justice
Transportation
State
USDA
GSA
Treasury
USAID
Commerce
Education
Interior
Labor
EPA
SSA
Percent change in obligations, year-over-year
6
Higher Budget Caps Signal More Spending
Fiscal 2018 Budget CapsBudget authority in billions
This change creates an enormous
tension between year-to-date spending
and goals for the entire fiscal year
Budget authority in billions
This change provides the illusion of
stability in budgets and contracting. The
president does not have to request to
these levels, but such new limits were
previously a floor, not a ceiling
Congress raised fiscal 2018 and fiscal 2019 caps on discretionary budgets prior to omnibus
Source: Bloomberg Government
New Old Change
Defense $629 $541.9 + $79.9
Nondefense $579 $515.7 + $63.3
Fiscal 2019 Budget Caps
New Old Change
Defense $647 $562 + $85
Nondefense $579 $529.1 + $67.9
7
Agencies Far Behind in Spending
Congress provided many agencies additional funding not requested by the president
Notes: Defense Department contract data is reported with a 90-day delay.
Values shown compare first fiscal quarter for defense and first half for all other agencies.
Agency
FY18
appropriation
Change
from request
Change
from FY17
Appropriations
percentage change
from FY17
YTD Obligation
Change, FY17 to
FY18
Commerce $11.1 $3.3 $1.9 17% 8%
Energy $34.5 $6.7 $3.8 11% -17%
HHS $177.1 Unavailable $16.0 9% -13%
Homeland $47.7 $3.7 $5.3 11% 22%
HUD $42.7 $11.3 $3.9 9% -8%
Interior $13.1 $2.5 -$0.9 -7% -3%
Justice $30.3 $2.0 $1.4 4% -13%
NASA $20.7 $1.6 $1.1 5% -11%
NSF $7.8 $1.1 $0.3 4% 3%
State $54.2 $13.5 $3.4 -6% -35%
Transportation $86.2 $11.1 -$10.0 12% 11%
USACE $6.8 $1.8 $0.8 12% 31%
8
Spending Booms at the End of Year
2017 was an average year
Fourth quarter is by far when
most of the money is spent
• Defense spent one-third of its
annual obligations in the fourth
quarter of fiscal 2017
• Civilian agencies spent 35
percent of its annual obligations
in the fourth quarter of 2017
Slowest quarter
• Defense spent 21 percent of its
annual obligations in the first
quarter
• Civilian agencies spent 19
percent of its annual obligations
in the second quarter
Yet, even in a normal year, it is extremely hard to predict fourth quarter obligations
$68.7 $77.3 $74.8
$110.6
$39.2 $35.1 $42.8
$63.5
Q1 Q2 Q3 Q4
Defense Civilian
Obligations in billions, fiscal 2017
Source: Bloomberg Government Contracts Intelligence Tool
9
Spending Trends and Cycles Are Predictable
Patterns emerge, but aren’t precise enough for market sizing
Source: Bloomberg Government
Fiscal quarters end on high notes
• June and September spending is 80
percent higher than prior months
• December and March spending is 45
percent higher than prior months
The fourth-quarter “race to the
finish” starts as a marathon, but
ends as a sprint on the last day of
the year
$19 $23 $27 $23 $21
$33
$20 $20
$35 $30 $28
$52 $14 $8
$18
$12 $10
$13
$10 $11
$22
$13 $17
$33
Oct. Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sept.
Defense Civilian
Obligations in billions, fiscal 2017
$5.7 $7.2 $10.3
$20.7
$7.8
$4.0 $4.8
$6.8
$10.8
$6.9
Sept. 1-7 Sept. 8-14 Sept. 15-21 Sept. 22-28 Sept. 29-30
Defense Civilian
Obligations in billions, September 2017
10
Agencies Buy More I.T & Services Later in Year
Civilian AgenciesShare of spending by category in fiscal 2017
Substantial increases in share of spending across most categories
Notes: Uses definitions of information technology, professional services, and facilities and construction provided by the General Services Administration
Defense DepartmentShare of spending by category in fiscal 2017
13.3%
18.2%
13.6%
17.7%
22.7%
18.3%
InformationTechnology
Professional Services Facilities andConstruction
First half of fiscal year Second half of fiscal year
7.7%
10.5%
8.0%10.2% 10.9%
12.9%
InformationTechnology
Professional Services Facilities andConstruction
First half of fiscal year Second half of fiscal year
11
Most of the Market Ahead for 8(a) and WOSB
8(a) spending in 2017 Dollars in millions
USDA and State have greatest share of spend left to the second half of year
Women-owned business spending in 2017Dollars in millions
$216
$166
$152
$287
$270
$288
$521
$566
$676
$5,546
$351
$403
$465
$427
$528
$827
$692
$915
$1,435
$10,923
0% 20% 40% 60% 80% 100%
VA
DOJ
USDA
GSA
DOT
DOS
NASA
DHS
HHS
DOD
First Half Second Half
$190
$136
$233
$139
$278
$332
$556
$570
$642
$5,685
$345
$471
$390
$517
$430
$424
$618
$1,218
$1,363
$9,599
0% 20% 40% 60% 80% 100%
DOC
DOS
DOT
USDA
DOJ
VA
NASA
DHS
HHS
DOD
First Half Second Half
12
Set-Aside Spending is Concentrated at Year End
SDVOSB spending in 2017 Dollars in millions
HHS leaves 75% of SDVOSB to second half; many HUBZone agencies with 80% ahead
HUBZone spending in 2017Dollars in millions
$22
$79
$48
$50
$60
$53
$145
$210
$165
$1,823
$139
$141
$204
$223
$216
$231
$257
$367
$463
$3,710
0% 20% 40% 60% 80% 100%
DOI
GSA
DOC
USDA
HHS
DOS
NASA
VA
DHS
DOD
First Half Second Half
$58
$85
$140
$113
$155
$180
$197
$349
$1,595
$4,080
$161
$207
$152
$354
$321
$299
$306
$712
$3,605
$6,981
0% 20% 40% 60% 80% 100%
USDA
DOT
GSA
HHS
DOS
DOJ
NASA
DHS
VA
DOD
First Half Second Half
13
Energy Department Details
FundingBudget authority in millions
13 percent fiscal 2018 funding increase counters 18 percent spending decline at NNSA
Source: Bloomberg Government
Agency Bill
Vs.
FY
2017
Vs.
request
%
Change
National Nuclear
Security
Administration
$14,669 $1,731 $738 + 13%
Energy programs $12,918 $1,634 $5,407 + 14%
Environmental
and other
defense activities
$6,828 $76 $445 + 1%
Power Marketing
Administration$105 ($2) $0 - 2%
ContractingObligations in millions
Agency
First
half of
FY17
First
half of
FY18
First
half
change
%
change
Nuclear Security &
National Nuclear
Security
Administration
$6,746 $5,518 -$1,228 - 18%
Undersecretary for
Science$3,402 $2,646 -$756 - 22%
Undersecretary for
Management &
Performance
$3,215 $2,889 -$326 - 10%
14
Commerce Department Details
FundingBudget authority in millions
Four percent fiscal 2018 funding increase counters 13 percent spending decline at NOAA
Source: Bloomberg Government
Agency Bill
Vs.
FY17
Vs.
request
%
change
National Oceanic
and Atmospheric
Administration
$5,909 $234 $1,139 + 4%
Patent and
Trademark Office$3,500 $270 $0 + 8%
Census Bureau $2,814 $1,344 $1,317 + 91%
National Institute
of Standards and
Technology
$1,199 $247 $474 + 26%
ContractingObligations in millions
Agency
First
half of
FY17
First
half of
FY18
First
half
change
%
change
National Oceanic
and Atmospheric
Administration
$646 $563 -$84 - 13%
Patent and
Trademark Office$457 $459 $2 0%
Economics and
Statistics
Administration
$201 $361 $160 + 79%
National Institute of
Standards and
Technology
$59 $69 $10 + 17%
Office of the
Secretary$44 $39 -$5 - 11%
Bureau of Industry
and Security$7 $7 -$1 - 8%
15
State Department Details
FundingBudget authority in millions
Widespread spending cuts countered by additional funds to many programs
Source: Bloomberg Government
Agency Bill
Vs.
FY17
Vs.
request
%
change
Global health
programs$8,690 ($35) $2,210 0%
Security
assistance$7,602 $1,180 $1,700 + 18%
Diplomatic &
consular$5,744 ($403) $461 - 7%
Development
assistance$3,000 $5 $3,000 0%
Embassy
Security$2,243 $1,125 $1,101 + 101%
International
organizations$1,786 ($30) $617 - 2%
ContractingObligations in millions
Agency
First
half of
FY17
First
half of
FY18
First
half
change
%
change
Undersecretary for
Management$2,662 $1,431 -$1,231 - 46%
Undersecretary for
Political Affairs$459 $501 $42 + 9%
Undersecretary for
Civilian Security,
Democracy and
Human Rights
$295 $275 -$20 - 7%
Undersecretary For
Arms Control and
International
Security
$43 $35 -$8 - 18%
Undersecretary for
Public Diplomacy
and Public Affairs
$24 $23 -$1 - 6%
16
Major Small-Business MACs• Agencies will likely continue to satisfy requirements using many of the same multiple-award
contracts that have been used since fiscal 2013
• Some existing vehicles such as Alliant SB, Seaport-e, VA-T4, and others are being eclipsed by
follow-ons
IT 70 - Schedule 70: General Purpose Commercial Information Technology Equipment, Software, and Services; PSS – Professional Services Schedule; SEWP - Solutions for
Enterprise - Wide Procurement; OASIS - One Acquisition Solution for Integrated Services; DLS Logistics Special Ops - DLA Special Operational Equipment Tailored Logistics Support
Program IDIQ; CIO-SP3 SB - Chief Information Officer - Solutions and Partners 3 Small Business; AMCOM EXPRESS - Army Aviation Missile Command Expedited Professional and
Engineering Support Services; T4-NG - Transformation Twenty - One Total Technology; Schedule 84 - Total Solutions for Law Enforcement, Security, Facilities Mgmt, Fire, Rescue;
NETCENTS-2 SB - Network Centric Solutions 2: Products (Small Business); Army R23G - Rapid Response Third Generation; eFAST - Electronic FAA Accelerated and Simplified
Tasks; ARMDEC PIF - Aviation and Missile Research, Development, and Engineering Center Prototype Integration Facility; EIS - Enterprise Software Initiative; Schedule 65IIA:
Medical Equipment and Supplies
$0 $5 $10 $15 $20
Schedule IT-70
PSS
SeaPort Enhanced
SEWP V
8(a) STARS II
SEWP IV
Alliant SB
OASIS SB
DLA Logistics Special Ops
CIO-SP3 SB
AMCOM EXPRESS
VA-T4
Schedule 84
NETCENTS-2 SB (Products)
Army R2-3G
FirstSource II
FAA Efast
AMRDEC PIF
DoD EIS
Schedule 65IIA
2013 2014 2015 2016 2017
Dollars obligated, in billions, by fiscal years.
17Conclusion
Long-term spending trends are positive
• Most agencies are seeing a multiyear rise in contract spending
• Set-aside spending, usually flat during downturn, is rising in lock-step with year-over-
year spending increases
Spending in fiscal 2018 has matched the president’s fiscal 2018 budget priorities
• Most agency spending amounts align with the president’s request
• Defense agencies accelerated spending; nondefense agencies cut back spending
Congress wanted to spend much more money on:
• Specific defense programs such as weapons and upgrades, readiness support, and
upgrades to existing IT systems
• Nondefense agencies, but no detailed plans beyond border security and infrastructure
How to spend it?
• Use of multiple-award contracts
• Small-business spending
Fiscal 2019 outlook
• Budget caps already raised, but president doesn’t have to request or spend up to them
Market primed for growth in fiscal 2018 and 2019