SPI Insights

What to expect in 2019

Looking back – 2018 brought both turmoil and innovation to government contracting. A string of cyber-attacks, such as the ransomware attack on Atlanta, left public officials focused on increasing cybersecurity. Hurricane Florence in North Carolina and fires in California brought resilience and climate change to the forefront of many agendas. Start-up and disruptive new offerings radicalized the transportation market as motorized scooters and autonomous vehicles forced transportation planners to re-think options. 2018 was a year of change.

However, as Q4 comes to an end, government officials and contractors alike are shaking off the past and setting their sights on 2019. Undoubtedly, there will be new changes, more innovation and other disruptive trends but, there will be an abundance of upcoming opportunities.

Here’s some interesting data about the state, local and education (SLED) market sectors:

• The largest number of procurements in SLED procurements in 2018 fell into categories related to construction, operations and professional services. Those industry sectors will continue to see significant contracting opportunities in 2019.
• The federal government recently rolled out programs that provide new funding to state and local entities, but alternative funding will likely be required for large projects.
• Environmental, water and architecture may join a list of the fastest growing SLED markets.
• Contracting opportunities related to technology will come from every governmental jurisdiction.
• New funding from the federal level of government will be available for education security.
• Opportunity Zone designations now provide incentives for private-sector investments in public projects. Government officials whose regions fall into this category could not be happier about the incentives.
• Cybersecurity and supply chain security will continue to be top-of -mind issues.
• Infrastructure may finally get the focus of Congress in 2019. At least the promises are rampant. In 2018, 64 of the 73 candidates running for governor across the country made infrastructure reform central to their platform.
• The U.S. is currently investing only 50 percent of what it spent on transportation infrastructure 50 years ago. The nation’s crumbling infrastructure situation has moved from significant to critical. If not reversed, the country is expected to lose $4 trillion in gross domestic product (GDP) by 2025. That could cancel out 2.5 million jobs. Transportation will be better funded in 2019.
• Indiana has dedicated $1 billion for infrastructure projects in 2019 and other state leaders have indicated they will not wait for Congress to act on infrastructure. Funding will be obtained from outside sources if necessary.

Problems and issues that concern public officials always generate opportunities for contractors. Here are a few to monitor.

Sustainability:

In the 18 months since the U.S. withdrew from the Paris Climate Accord, the nation has seen 28 major weather-related disasters. Government budgets cannot accommodate the multi-million-dollar price tags that disasters guarantee and federal funding is never 100 percent adequate or quick. No matter what Congress does, state and local governments will continue to make sustainability a top priority in 2019. But much of the needed funding is expected to come from outside sources.

This month, Minneapolis passed a sustainability plan that calls for a $40 million investment over time focused on reducing the effects of climate change.  Meanwhile, smaller cities such as Hermosa Beach, in Los Angeles County, California – which is currently seeking grant funding to promote resilient and sustainable infrastructure – are all looking for ways to launch initiatives that will result in sustainability. 2019 will bring a wave of new projects related to all types of infrastructure. Interest in finding funding and encouraging private-sector collaboration is so significant, many public entities are willing to accept unsolicited proposals.

School Safety

The March for our Lives movement forced media and government to focus on school safety.  As a result, procurements focused on hardening schools and improving security can be expected. Common safety procurements will include video surveillance systems, safety audits, entryway configurations, sensors, artificial intelligence (AI), facial recognition and enhanced communication systems. The Departments of Justice, Education and Health and Human Services will issue $2.3 billion in new funding for threat identification, mental health, training and school safety programs. The Florence One School Board in South Carolina will issue a $198 million districtwide bond measure in February for school safety upgrades. Similarly, Moravia Central School District in Auburn, New York, has set aside $10 million for the first of three phases of safety improvements.  Public attention on school safety in 2018 will turn into tangible funding and projects in 2019.

IT Modernization

At the federal level, agencies will continue to ramp up IT modernization efforts in an attempt to meet the October 2020 Data Center Optimization Initiative deadline. At the local level, public officials are scrambling to move data to the cloud and protect networks from cyber breaches. State agencies must replace old legacy systems and IT funding will be available for shared services, agile development, software, data center consolidation, big data, AI, and the Internet of Things (IoT).  Baltimore, Maryland, has many IT modernization projects planned for 2019 and plans to increase IT spending from $65 million to between $128 million and $156 million annually by 2023.

Without doubt, 2019 will be a busy year for both procurement officials and government contractors.

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