Financial experts and analysts recognized a slowing trend in the growth of State, Local, and Educational (SLED) contracting opportunities in 2014. The 2015 forecast calls for mixed results, with the improvement of larger-growth drivers and growing technology niches tempered by stiffer competition for smaller vendors at the mercy of cooperative contracts.
One of the more interesting trends in recent years is the spread of IT solutions into traditionally low-tech areas. This movement has proven lucrative for technology providers while strongly benefitting the buyer. Examples of historically low-tech markets include law enforcement, education, and road infrastructure. Social issues have exacerbated the demand for technology solutions. For example, use-of-force concerns in police departments have prompted the introduction of officer-mounted cameras that can be clipped to an officer’s lapel. School bus violence and bullying have spiked school districts’ purchase of digital bus surveillance cameras. Other areas in which education buyers are looking to ramp up technology contracting activity are through solutions including the issuance of student laptops, tablets, or Chromebooks. The technology trend in schools does not stop there, as online resources and training are efficient alternatives to expensive textbooks and onsite faculty trainers. In road infrastructure, Intelligent Traffic Systems can maximize efficiency on overtaxed, high-traffic roadways by coordinating traffic signals and reducing congestion. Vendors that specialize in this sort of technology solution find themselves in a favorable position in 2015.
Firms providing construction, architecture, or other infrastructure-related companies also stand to have a strong 2015. This trend is likely to materialize more out of necessity than choice, as the condition of bridges, roads, overpasses, and buildings continues to degrade at an accelerated level. Some of these cities have severely depleted funding that barely allows for routine maintenance, much less new construction or additions. Fortunately, increased state tax revenue and greater bond income should also stimulate some spending activity in this area (the American Society of Civil Engineers estimates $3.6 trillion is needed by 2020 to bring America’s roads and bridges up to an acceptable level. While it is unlikely that precise amount will be applied to infrastructure construction, experts predict an uptick in spending estimated at 18% over 2014.
Despite modest overall growth projections, smaller firms will face stiffer competition for fewer bids. This has a familiar ring to it in all government circles, from the Federal government down. In a universal trend to consolidate and cut costs, agencies are making a move toward cooperative purchasing. Cooperative purchasing means that a specific, established “lead agency” offers a negotiated contract for joint-use with other agencies. In such an arrangement, agencies still reeling from recession-era layoffs can cut both costs and time. On the other hand, smaller vendors are driven to the perimeter and may experience greater difficulty as they are forced to compete directly with larger vendors over a smaller number of contracts.
Overall, the chances for prosperity in 2015 depend, as always, on the vendor’s niche and capacity to remain competitive. While experts largely agree on the likelihood of recovery from 2014 slowdown, there are limiting factors that may temper the improvement for smaller businesses. For example, a mid-sized, established IT vendor has a brighter outlook than a small, younger business that has not traditionally marketed well. As 2015 proceeds and SLED agencies pick and choose their preferred solutions, time will tell if these trends indeed pan out.