Who Says The Federal Market Is Shriveling?

Arrows upward with dollar sign

Federal contracting might be leveling off, or not, because of the government’s reaction to its fiscal situation. But that doesn’t mean the industry lacks dynamism or offers no opportunities for growth.

I studied the list of the 50 fastest growing Washington area companies compiled by the Washington Business Journal. In the one-sentence descriptions, I found 24 who identified themselves as federal contractors. Subtracting out the two largest on the list – and more about them in a moment – I calculated the 22 others had combined sales of $1.14 billion in 2011. Their average compound growth rate over three years hit 73.5 percent. Many started from a very small base so a triple or high-double digit rate of growth may represent small dollars.

Nevertheless, the list shows that military platforms with decades-long, multi-billion-dollar programs behind them aren’t the only way to make a living in the federal market. Many of the companies on the fast-growth list provide program management and IT support – so-called body shops – and others provide management consulting and software development. That’s the kind of bread-and-butter work that, I believe, will never significantly fade away from government opportunity.

Sure, if you are building aircraft carriers, whether the Congress ultimately decides to fund 11, 12, or 13 at a couple of billion dollars apiece, you may or may not grow. But there is no agency, certainly no civilian agency, with enough manpower to complete its mission without sustained contractor support.

Now, about those two companies I left off. Carahsoft had 2011 sales of $1.07 billion and three-year growth of 35 percent. ImmixGroup reached $785.9 million and compound growth of $38.2 million. Both companies resell technology products to the federal government with supply letters from multiple manufacturers, and they have very different strategies for doing so. (I should point out that ImmixGroup is a client of mine.)

The lesson with Carahsoft and ImmixGroup is this: Even within established, prosaic functions like reselling, creativity and a close ear to changes in technology and government can produce growth. That growth may come at the expense of older players with more traditional strategies. But business works that way. I always cite Starbucks – who ever thought the world needed another place to buy a cup o’ coffee?

The list shows that preference programs can help businesses get started, but they are not strictly necessary. On the Federal Drive one morning last week we spoke to Sharon Virts Mozer, the president of FCI Federal, which had $33 million in 2011 sales following three years’ compound growth of 154 percent. The growth rate is the fourth highest on the list of 50.

Virts Moser told us she expects her body-shop, support services company to double again this year. And, she says, she didn’t launch it 20 years ago in an official disadvantaged category. About 10 years ago she changed the company from being a business-capture consultant for systems integrators to a service company doing business directly with the government. Her strategy is based in part on finding work in fee-for-services work. That is, work which doesn’t depend on appropriations but instead is paid for by fees either from the public or other federal agencies.

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About the author

Tom Temin has written 486 posts for Fedinsider.com

Thomas R. Temin - Editor in chief of FedInsider and brings 30 years of publishing experience in media and information technology. Tom is also co-host of The Federal Drive with Tom Temin and Amy Morris, a weekday morning news and talk program on WFED AM 1500 in Washington D.C.

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