Government contracting is a dynamic industry that heavily depends on the constantly changing requirements of the federal government. Federal markets are constantly evolving—and as a government contractor, it’s vital to catch on to the emerging sectors to leverage growth prospects in fields experiencing increased demand.
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5 Emerging Federal Markets and Government Contracting Opportunities in 2024
The government’s priorities, commitments, and objectives determine emerging federal markets and sectors. Some of the most common factors influencing development in federal markets are boosting economic growth rates, providing robust job growth, maturing financial institutions, and initiating comprehensive investment strategies across various portfolios.
Consequently, setbacks also play a huge factor in emerging markets. Resolving these challenges changes government priorities, thus leading to a shift in market trends. These setbacks may include global events, such as the COVID-19 pandemic, the global financial crisis, a high inflation rate, a stagnant labor market, and emerging market currencies in the global economy.
Take a look at the sectors currently on the rise and potential opportunities where government contractors can deliver their range of solutions.
1. Digital transformation for all federal, state, and local functions
Many federal agencies call for digital transformation—and for a good reason. Approximately 80% of federal agencies’ $100 billion IT budget goes to maintain existing systems. It’s a ridiculous amount, considering these systems are not up to date with technologies and requirements. That said, many agencies call for digital transformation to replace old tech with more modern equipment.
In 2021, President Biden allocated a portion of the pandemic relief stimulus to the Technology Modernization Fund (TMF). A significant challenge to this initiative, however, is that the speed of IT modernization does not match the annual appropriation process. It hinders digital transformation across 24 major federal agencies, each with its unique needs to address.
Digital transformation opportunity: Leverage AI and ML
Government contractors can look into offering artificial intelligence and machine learning (AI/ML) for the federal government. It is an adaptable technology that can be easily modified based on the existing requirements of federal agencies. AI/ML addresses the major hindrance of adapting and matching the speed of the government’s digital transformation efforts.
To ensure uniformity across AI/ML-enabled federal agencies, President Biden released an Executive Order (EO) on “Safe, Secure, and Trustworthy Artificial Intelligence” in the fall of 2023. The EO outlines AI safety, security, and data privacy standards that government contracts must follow when offering AI/ML information technology solutions.
Related article: 5 Cloud Computing Companies Surging the Digital Storm in 2023
2. Autonomous systems adaptation in the military landscape
Autonomous systems in instruments, technologies, and fleets have greatly improved the defense sector, enabling fewer crew members, remote operations, and systems maintenance. However, these systems can be susceptible to decryption and hacking, leaving crucial information vulnerable. In fact, government contractors that handle sensitive information experience 61% of threats coming from Asia-Pacific and Near-East regions, which are within China’s geographical region.
Even more alarming, the information at risk of compromise is designated with various levels of security clearance from the Department of Defense. These kinds of threats spark heavy concerns as the DoD works toward strengthening the defense capabilities of the U.S. through its collaborative alliances with Australia, the U.K., and other allies and partners.
Autonomous systems opportunity: Enhancing cybersecurity measures
Following major data breaches manifesting vulnerabilities in the digital defense landscape, federal markets have implemented several measures and countermeasures to boost cybersecurity. As much as having autonomous systems provides exceptional strategic advantages, what makes them cutting-edge are their cybersecurity features.
The government recently issued Federal Acquisition Regulation (FAR) clauses and an EO on “Improving the Nation’s Cybersecurity,” which are new policies aiming to strengthen and implement cybersecurity initiatives. These policies present an opportunity for government contractors to offer data security, privacy, and protection solutions against malware attacks and hacking.
Related article: Digital Defenders: 7 Major Cybersecurity Leaders
3. Sustainability-focused development across all industries
Climate change is an ever-present challenge for all nations, especially for advanced economies such as that of the United States. Climate-related risks can cause supply chain disruptions, financial vulnerabilities, and possible litigation. Over the last few years, federal markets have spearheaded sustainability-centered development to prevent or mitigate the effects of climate change.
Federal agencies are looking into developing and improving cutting-edge technologies to closely monitor weather patterns and prepare for calamities caused by climate change. Multiple expansion efforts also focus on checking and responding to natural disasters, including wildfires, droughts, earthquakes, tsunamis, hurricanes, and floods.
Sustainability opportunity: Initating 100% clean energy generation programs
The General Services Administration is initiating to power its 253,000 buildings with 100% renewable energy by 2025. Low-carbon construction materials are also required for new construction. Similarly, the Army released a strategic plan for FY2023 to FY2027 to complete three carbon-free power generation projects, use electric charges on the field, and utilize microgrids on bases.
Government contracting opportunities to fulfill these initiatives are present not only in the energy sector but also in construction, defense, and health care. To further prove its commitment to sustainability, the government now requires large and mid-sized federal contractors to report their greenhouse gas emissions, which President Biden announced at COP 27 in Egypt.
4. Financial stabilization in components of the economy
Although the COVID-19 pandemic has been controlled for the most part, federal markets have been changed forever by the health crisis. To adapt to these changes and their lasting effects, the supply chain and manufacturing sector, the labor market, and, most especially, the financial industry appeal for the federal government to amend existing policies.
Policy changes are vital to bolstering economic resilience and financial stabilization amid adverse global events. Some of the changes already set in place by the government include increasing government spending, employing central banks’ asset purchase program, and supporting liquidity from banks and financial firms, such as the World Bank and the International Monetary Fund.
Financial stabilization opportunity: Prioritizing small businesses and contractors
The Biden-Harris administration set the goal of increasing annual spending on small businesses, amending current policies, and expanding programs, such as Small Disadvantaged Businesses (SDBs), to help them compete against larger contractors. After all, while all types of businesses suffered losses from the pandemic, it’s small businesses that suffered the most damage.
SDBs give small businesses more opportunities to win government contracts. Previously recognized medium-sized businesses can also take advantage of the program due to modifications in enterprise classification. Ultimately, stimulating development across all enterprises directly affects employment growth for professional and business services, domestic demand for local businesses, and more.
Also read: U.S. Federal Budget Process Full Guide
5. Global supply chain organization for goods and commodities
The global pandemic has disrupted a once-established supply chain of federal markets. Global economic activity has been slow to recover, which has greatly affected the availability, price, and supply of essential products and services. Fixing a disorganized chain of operations can take a long time, especially as it simply can’t return to how it was before.
Moreover, global supply chain environments have changed drastically due to global events, conflicts, and alliances, such as the War in Ukraine, the Hamas-Israel War, and increasing tensions between Taiwan and China. These global affairs make organizing the already disrupted global supply chain operations even more difficult.
Global supply chain opportunity: Revitalizing the domestic market demand
As evidenced by the effects of the global pandemic, the global supply chain can be unpredictable, even if it’s the most convenient and affordable way to secure commodities. One of the best ways to combat this unpredictability is to revitalize domestic market demand to ensure a consistent supply of essential products and services. This way, the supply remains relatively unaffected despite global turmoils.
The federal government has passed several Executive Orders to rebuild the domestic manufacturing sector. They place emphasis on the domestic production of proudly American-made goods and services. Government contractors that have their operations centered within the U.S. and its territories can be key players in revitalizing domestic demand and ensuring a systematized supply chain.
Join conferences, forums, and summits, such as the 2024 Space Summit and the 5th Annual Artificial Intelligence Summit, to learn more about emerging federal markets and leverage these opportunities as a government contractor.