News & Events

Trending: Shorter Duration Contract Awards


On recent earnings calls over the past few weeks, several Government Technology Solutions companies, including Booz Allen Hamilton (“Booz”), ManTech International (“ManTech”), and Science Applications International Corporation (“SAIC”) discussed the current contracting environment and more specifically a trend towards shorter-duration contract awards.  As Booz noted, “…[they] continue to see clients award work in shorter durations.  On average, periods of performance are running about [a half] month shorter than at this time last year.  The robust award activity associated with work to be performed in 12 months or less provides better visibility in the near term.  These trends, however, reflect [their] clients’ reluctance to commit funds for longer periods of time.”

Digging further into this trend, we analyzed approximately 8,500 contracts solicited and released between GFY2013 and GFY2014 year to date across the civilian and defense marketplace.  We found contracts released during GFY2014 have, on average, shorter periods of performance than contracts released in GFY2013.  Select agencies demonstrating this trend include the Departments of Homeland Security, Interior, Justice, and Transportation, as well as the General Services Administration.  Of these five agencies the decreased duration of awards varied anywhere from the three to eight months.

Exceptions to this trend were seen in “priority” agencies with strong funding such as the Departments of Health and Human Services (“HHS”) and Veterans Affairs (“VA”), where longer-term contracts and vehicles are still being solicited and awarded, as previously discussed in A Summer of (Contracting) Opportunity.  On average, periods of performance for contracts released by these agencies during GFY2014 are three months longer than those released during GFY2013.  Additionally, contract duration has remained relatively steady in other departments, such as the Department of Agriculture and the collective Defense departments throughout the analyzed period.

Shorter-duration awards can impact M&A activity and influence value.  Traditionally, the longer term nature of government contracting has attracted investment to the sector, and for existing players, greater contract visibility would enhance value.  As contract terms shorten and visibility is clouded, contractors with a presence in “priority” markets, in which shorter-term duration contracts are less prevalent, may become more attractive assets given their relative backlog and more consistent cash flow opportunities.