2014 Government Market for Manufacturers
February 25, 2014
Amid a generally stronger economy and higher consumer confidence, public-sector agencies are earning higher tax revenues. Governments at all levels will be replenishing their coffers, and that will lead to greater agency spending in 2014. This bodes well for businesses that sell to the government sector, as demand from office furniture to batteries, and especially information technology, will ramp up.
“Barring unforeseen crises,” said Greg Fischer, mayor of Louisville, Ky., “I anticipate that in 2014, cities will see an increase in property assessments, lower unemployment, and an increase in consumer confidence, resulting in increased consumer spending. These economic events should allow for cities to experience an increase in revenues.”
On the fiscal front, government purchases of goods and services will reach $3.19 trillion in 2014, up from $3.13 trillion in 2013, according to Lexington, Mass.-based economic forecaster IHS Global Insight. State and local government purchases of goods and services will total $1.92 trillion this year.
Voter approval this past November of significant bond packages for school and infrastructure improvements will lead to an uptick in public sector construction and building projects, predicted Clint Pechacek, contract specialist at The Cooperative Purchasing Network (TCPN). Houston-based TCPN assists public agencies and nonprofits in maximizing the benefits of national leveraged pricing.
Furniture buying trends also were very strong in the third and fourth quarters of 2013. "There appears to be a pent-up demand for furniture in the public sector, as agencies are upgrading their offices to more of a shared work environment, similar to what many private-sector organizations have done over the past few years,” Pechacek noted. He said chairs and seating is the area that is seeing the largest uptick in demand.“Many agencies also continued to invest in technology to improve safety and security throughout their campuses," Pechacek said. "In addition, agencies are using technology to help drive operating efficiencies. E-commerce platforms, such as ESM, Oracle, SciQuest, and SmartProcure, are helping agencies manage their budgets while ensuring contract compliance,” he explained.
Pechacek said he noticed a strong uptick in information technology spend as 2013 came to a close. For 2014, he sees greater levels of government acquisitions of tablet computers, e-readers, and cloud-based computing hardware and software.“I do see government agencies continuing their move to cloud-based technologies in 2014, in order to improve IT flexibility, minimize costs, and improve workforce efficiencies,” said Nina Seth, senior product marketing manager at Palo Alto, Calif.-based Accellion. The company provides mobile solutions, as well as private cloud solutions for secure file sharing, to enable higher organizational productivity while ensuring security and compliance.
“Government agencies are definitely taking advantage of the U.S. Cloud First Policy,” Seth said. "With tight budgets, agencies across all levels of government need to ensure that they are getting the most effort out of technology and employees alike. The flexibility that cloud technologies afford any employer, along with the security that private clouds ensure, makes this type of technology a perfect fit for local agencies across the nation.”
Seth notes that with a private cloud, employees can work from any location and at any time, which improves productivity, and it does not introduce additional data security risks into the network.
Governments will be investing in web-based security, predicts Doña Storey, American Express OPEN advisor on procurement, and a frequent contributor to ThomasNet News. “The one area where big R&D will be spent and new technologies will be actively pursued is the realm of cyber technology: cyber security, cyber warfare, and cyber operations,” Storey said.
Storey believes that in 2014, the federal government will try to standardize the purchase of new technologies across various agencies. “That is, does every agency have to ‘invent’ and buy its own technology solution if a single hardware or software product can meet the needs of numerous agencies, and thereby spread the buy across the government as a whole?" she said. "Companies that work in the IT integration arena will probably see great opportunities.”
State and city leaders are eager to learn how technology can help improve their transportation infrastructure, said Parker Williams, senior vice president of transportation solutions at Norwalk, Conn.-based Xerox. “In 2014, the Southeastern Pennsylvania Transit Authority (SEPTA) will introduce contactless payment methods that will allow riders to simply tap their bank cards or wave their smartphones to board any of the buses, subways, trolleys, and regional rail trains on the SEPTA system,” he said.
Transportation administrators, Williams said, “are beginning to see how advances in technology and predictive analytics can improve commutes, clear congestion, and save money for constituents. As demand for these services grows, so too will the project opportunities.”
Government marketing expert Mark Amtower offers this advice to vendors and businesses looking to land more federal government business in 2014: “If you have relied on GSA Schedules, you need to be fully aware of the Federal Strategic Sourcing Initiative (FSSI), and how it is impacting GSA Schedules for commodities. If you are a manufacturer, you need to select your resellers predicated on their ability to win FSSI blanket purchase agreements, and you have to be willing to cut margins.”
Amtower advises businesses to partner with experts if they want to win federal supply contracts in 2014. “To navigate the public sector market, it is a good idea to get advice from a recognized industry professional, someone who has helped companies through this before, and who has a demonstrated track record,” he said in an interview with ThomasNet News.
Governments will be spending more of their dollars on batteries, according to a new Freedonia Group study. Demand for primary (disposable) batteries by government agencies and organizations is forecast to grow 1.3 percent annually through 2017 to $485 million, a faster rate than during the 2007-2012 period.
According to Freedonia analysts in the report, the state and local spending on primary batteries will help reverse a period of decline in nondefense spending. However, federal government spending is expected to moderate through 2017, acting as a constraint on battery demand. Competition from rechargeable batteries will also limit future primary battery market gains.”
The expanding U.S. economy will benefit state government coffers, Sujit CanagaRetna, senior fiscal analyst at the Council of State Governments’ Atlanta-based Southern Legislative Conference, believes.
“States will continue to grapple with the usual list of fiscal challenges -- pensions, healthcare, education, transportation, infrastructure, unemployment insurance -- during their 2014 legislative sessions," he said. "Importantly, states will be able to leverage the improving housing, energy, manufacturing, and export sectors in their jurisdictions to advance economic prospects for their citizens.”
Louisville mayor Fischer told ThomasNet News that cities and states have begun to address pension reform and health care costs -- two expense areas that need long-term structural solutions. Fischer serves as chairman of the U.S. Conference of Mayors' Metro Economies Committee.
All governments, not just state governments, will use the improving economy in 2014 to balance their budgets, replenish their rainy-day funds, and take other steps to improve their fiscal conditions.Top photo credit: David Castillo Dominici Michael Keating is senior editor for Government Product News and a contributing editor for American City and County, both published by Penton Media. Read his mid-year 2013 government budget and spending forecast at the Government Product News site. Go here for his report on how to land government business. Keating has written articles on the government market for more than 100 publications, including USA Today, Sanitary Maintenance, IndustryWeek, and the Costco Connection. He can be reached at firstname.lastname@example.org.