Report: Contracting Boom Will Be Short-Lived Federal contracting, a safe harbor in tough economic times, will slow dramatically after 2010, according to an analysis of President Obama’s budget proposal. The spike in spending under the economic stimulus act “is going to go away,” said Ray Bjorklund, chief knowledge officer for the consulting firm FedSources in McLean, VA. He estimates available federal contract opportunities will peak this year at $617 billion, but will fall by nearly 9% by 2011, with only small increases after that. “It gets worse before it gets better,” he wrote in his budget forecast. Pressures of the federal budget deficit, plus a shift of spending priorities from defense to domestic programs and the Obama administration’s insourcing push, will combine to shrink the federal market, Bjorklund said at a June 2 briefing. “For contract services in general, it’s going to be a downer,” he added. The president’s domestic priorities—education, healthcare reform and energy independence—will generate more grants than federal contracts, according to the analysis. FedSources says energy initiatives will produce the greatest number of new contract opportunities, with healthcare reform a distant second. Most federal education spending is channeled through grants to state and local governments. The administration’s insourcing push will eliminate tens of thousands of contractor jobs, but Bjorklund said some contractors will remain temporarily because the federal government takes so long to find and hire new employees. Insourcing also creates some opportunities for contractors in such fields as recruitment, training, human resources and even office furniture and supplies. At the same time, many new companies are moving into the federal market for the first time, driven by the recession and the lure of stimulus contracts. Bjorklund said about 14,000 new firms registered in the Central Contractor Registration during one six-week period this year. “It is an increasingly crowded playing field [with] more companies competing for fewer dollars,” he warned.