Amid the depressing situation for many businesses across a number of markets, recent research indicates big opportunities for many selling to the local government throughout the year.

In its 2008 Government Procurement Outlook, market intelligence firm Onvia provides findings of a survey of more than 1,400 local, state and education purchasing officials across the United States. The survey's responses were fielded in January 2008, when numerous negative indicators pointed to a national economic downturn.

Across the board, 43 percent of local, state and educational agencies reported they will increase spending activity in 2008, while 37 percent of buyers expected levels to remain the same as in 2007. The remaining 20 percent reported an anticipated decrease in spending activity.

As mirrored in last week's Building Up in a Down Economy, the new Onvia report has determined that infrastructure initiatives continue to move forward in 2008, with 41 percent of agencies surveyed overall saying they plan to increase spending activity on infrastructure this year and 38 percent saying they plan to maintain current spending activity levels.

Because government infrastructure and construction procurement are projected to grow, businesses in architecture and engineering, as well as companies providing building products and construction services, are expected to benefit:

• 77 percent of agencies plan to increase or maintain spending activity on architecture and engineering services;

• 78 percent of agencies plan to increase or maintain spending activity on construction services and building supplies; and

• 83 percent of agencies plan to increase or maintain spending activity on operations and maintenance.

"Government spending for infrastructure should continue to help compensate for the residential construction downturn," Michael Balsam, vice president of products and services at Onvia, said in a statement.

Meanwhile, in keeping with modernization plans and privacy initiatives, information technology (IT) procurement continues to accelerate. According to survey respondents, 82 percent of agencies will increase or maintain IT procurement activity for hardware and for telecommunications, while 83 percent said they will increase or maintain IT procurement for software and services.

Particularly positive, school districts responding to the survey are preparing for "the largest year-over-year increase" in government spending activity compared to other segments; 58 percent of educational entities reported they will increase purchasing activities this year, while only 18 percent said they plan to decrease spending activity.

However, the report has found that municipal governments facing revenue shortfalls will "feel the effects of reduced income from property taxes and spend cautiously." Only 30 percent of municipalities said they will increase buying activity, and 26 percent anticipated decreasing spending activity.

Onvia's government panel uniformly anticipates that budgets will continue to face challenges through 2010. As a result, agencies will continue to press for more efficient ways of running their business.

"With dollars and procurement resources at a premium, survey responses show a clear and growing trend toward more structured e-procurement solutions and cooperative purchasing," the report says.

Among the highlights related to expected alternative procurement methods:

• More electronic-only bidding processes (i.e., fewer hard-copy bid proposals) in the coming year;

• Agencies leveraging electronic procurement have reported savings of up to 60 percent of hard dollar costs associated with traditional advertising and bid package distribution;

• Broader adoption of online auction services for Sale of Surplus Equipment and Job Order Contracting for small to medium-sized construction projects;

• While some agencies will raise formal bidding thresholds, higher value contracts for simple bids will likely move toward electronic bidding;

• 49 percent of state and local agencies anticipate an increase in cooperative purchasing; and

• 11 percent of state and local agencies anticipate an increase in purchasing via reverse auctions.

Overall, the report concludes, "there are many opportunities for growth in 2008 as agencies continue to require goods and services across all industries, while leveraging cost-saving tools such as e-procurement and cooperative purchasing."

Related:

Does Federal Red Tape Deter Small Business?

Building Up in a Down Economy

Resources

2008 Government Procurement Outlook
Onvia, March 3, 2008

Onvia Government Spending Survey Identifies 2008 Growth Opportunities
Onvia, March 3, 2008