Spending Cuts Ahead, But the News Is Not All Bad Sure, the federal market is roiled by uncertainty and budget cuts, but, hey—it’s more stable than the stock market. That message comes from researcher Kevin Plexico of Deltek at the company’s annual FedFocus conference. “We’ve just come off of 10 years of marching up discretionary spending. Now we’re heading into a period of who-knows-how-long of marching down discretionary spending,” said Plexico, Deltek’s senior vice president of research and analysis, according to the company’s blog. As Congress debates steep spending cuts, Plexico said there are some opportunities for growth in the IT market: Health IT. Deltek analysts see a particularly strong opportunity for companies that can help agencies save money on health care. “When you look at discretionary spending on healthcare, VA spending is going up, Department of Defense spending is going up, and Department of Health and Human Services spending is going up,” Plexico said. Energy research and development. While some of the hype has abated, Plexico said the government is still investing in buildings, especially outside the National Capital area. “Federal agencies are doing more spending in certain regions,” Plexico said, “so one thing you might consider is how to grow regionally.” Cybersecurity. Plexico forecasts a rise in spending in 2012 because of evolving threats and the need to secure information used by an increasingly mobile workforce. Deltek Chief Knowledge Officer Ray Bjorklund said the changing IT market will inevitably produce winners and losers. “The IT market is still in good shape, and you’re still going to see some kind of growth for at least the next couple of years, but it is ‘depressed growth.’ Some companies have technologies that aren’t going to fit.” Bjorklund warned that contractors should expect smaller contracts and fewer contracts, “with not as many dollars to go around.” Plexico said changes in how the government spends money may affect contractors as much as budget cuts. He cited a move from cost-based to fixed-price contracting; pressure to meet small business goals, because so many agencies are not doing so; and an increasing trend toward large task-order contracts. “If you’re not on the right vehicle,” he said, “your opportunity to do business with an agency is effectively reduced.” Plexico said task order contracts require significantly different proposal processes. “You’ve probably felt the pain, if you’re on one of these, of the faster cycle. In a task-order environment, if your business development people aren’t deeply embedded in an agency, then task orders are probably coming out with little warning.”