Unlocking a market of nearly $800 billion in annual federal spending, the government contracting landscape in FY2023 revealed powerful trends from the Department of Defense's massive budget dominance to surging investments in cybersecurity, cloud computing, and small business success.
Key Takeaways
- In fiscal year 2023, the total value of federal contract obligations reached $791.3 billion, marking a 3.2% increase from FY2022.
- Federal IT spending through contracts in FY2023 totaled $105.4 billion, representing 13.3% of overall federal contracting.
- The Department of Defense accounted for 62% of all federal contract spending in FY2023, obligating $490.5 billion.
- Lockheed Martin was the top federal contractor in FY2023, receiving $69.1 billion in awards.
- Boeing secured $33.2 billion in federal contracts in FY2023, primarily aircraft-related.
- General Dynamics received $24.8 billion in DoD contracts in FY2023 for shipbuilding.
- In FY2023, small businesses received 26.8% of prime contract dollars, totaling $212.4 billion.
- Small disadvantaged businesses (SDB) captured 10.2% of federal contract awards in FY2023, worth $80.7 billion.
- Women-owned small businesses (WOSB) achieved 5.4% of prime contracts in FY2023, amounting to $42.8 billion.
- In FY2023, 42% of federal contract actions were competed fully, up from 39% in FY2022.
- Use of commercial item acquisitions rose to 28.5% of total dollars in FY2023.
- Simplified acquisitions under SAT grew 6.2% to $145.3 billion in FY2023.
- In FY2024 projections, federal contracting market expected to grow 2.5% to $812 billion.
- DoD contracting forecasted at $510 billion in FY2024, driven by modernization.
- IT contracting projected to reach $118 billion in FY2024, up 12%.
Federal contracting grew overall in 2023, led strongly by Department of Defense spending.
Market Size and Spending
- In fiscal year 2023, the total value of federal contract obligations reached $791.3 billion, marking a 3.2% increase from FY2022.
- Federal IT spending through contracts in FY2023 totaled $105.4 billion, representing 13.3% of overall federal contracting.
- The Department of Defense accounted for 62% of all federal contract spending in FY2023, obligating $490.5 billion.
- In FY2022, civilian agency contract spending was $252.8 billion, up 5.1% from the previous year.
- Federal contracts for professional services reached $128.7 billion in FY2023, comprising 16.3% of total obligations.
- The value of federal construction contracts awarded in FY2023 was $42.1 billion, a 7.8% rise year-over-year.
- R&D contracts by the federal government totaled $68.9 billion in FY2023, primarily driven by DoD needs.
- In FY2023, indefinite-delivery contracts (IDVs) accounted for $389.2 billion in obligations, or 49.2% of total.
- Federal spending on engineering and technical services contracts hit $89.4 billion in FY2023.
- The top 100 federal contractors received 26% of total contract dollars in FY2023, amounting to $206.1 billion.
- GSA's Multiple Award Schedule (MAS) program facilitated $38.2 billion in contracts in FY2023.
- Federal healthcare-related contract spending reached $55.7 billion in FY2023.
- In FY2023, contracts under $250,000 (micro-purchases) totaled $12.4 billion across all agencies.
- DoD's Operation and Maintenance contracts obligated $210.3 billion in FY2023.
- NASA's contract spending in FY2023 was $22.6 billion, focused on space exploration programs.
- Federal contracts for cybersecurity services grew to $18.9 billion in FY2023.
- VA's contract obligations in FY2023 reached $32.1 billion, largely for medical services.
- DHS awarded $28.4 billion in contracts in FY2023, with border security as a key area.
- DOE's contract spending on energy R&D was $14.7 billion in FY2023.
- Federal logistics and supply chain contracts totaled $76.5 billion in FY2023.
- In FY2023, sole-source contracts amounted to $45.2 billion, or 5.7% of total obligations.
- Army Corps of Engineers awarded $9.8 billion in civil works contracts in FY2023.
- Federal environmental services contracts reached $11.3 billion in FY2023.
- DOJ's contract spending in FY2023 was $7.6 billion, focused on law enforcement tech.
- USDA obligated $6.2 billion in contracts for agricultural research in FY2023.
- Federal aircraft and ship maintenance contracts totaled $15.4 billion in FY2023.
- Treasury Department's contract awards in FY2023 reached $4.1 billion.
- Federal education and training contracts amounted to $3.9 billion in FY2023.
- Interior Department's contracting in FY2023 was $2.8 billion for land management.
- Federal transportation contracts (non-DoD) totaled $18.7 billion in FY2023.
Market Size and Spending Interpretation
The federal government, in a relentless and costly game of "keep the lights on and the planes in the air," spent nearly $800 billion last year, with the DoD predictably eating the lion's share of the pie, IT quietly powering the whole enterprise, and a handful of corporate giants pocketing one out of every four taxpayer dollars.
Procurement Trends
- In FY2023, 42% of federal contract actions were competed fully, up from 39% in FY2022.
- Use of commercial item acquisitions rose to 28.5% of total dollars in FY2023.
- Simplified acquisitions under SAT grew 6.2% to $145.3 billion in FY2023.
- Multiple award contracts (MACs) obligated $210.4 billion in FY2023.
- Fair opportunity task orders under IDIQs totaled $189.7 billion in FY2023.
- Sole-source awards decreased 2.1% to 4.8% of total obligations in FY2023.
- IT services contracts grew 9.4% year-over-year to $112.6 billion in FY2023.
- Cloud computing contract spending surged 22.7% to $14.3 billion in FY2023.
- Use of Other Transaction Authorities (OTAs) reached $18.2 billion in FY2023.
- Fixed-price contracts comprised 85.3% of total contract actions in FY2023.
- Cost-reimbursement contracts declined to 12.1% of dollars in FY2023.
- Average federal contract size increased 4.7% to $156,000 in FY2023.
- Number of new contracts awarded dropped 3.8% to 12.4 million in FY2023.
- Professional, administrative, and management support services were 22.4% of FY2023 spending.
- Sustainment contracts grew 5.6% to $320.1 billion in DoD FY2023 budget.
- AI and machine learning contracts reached $2.7 billion in FY2023.
- Federal procurement of electric vehicles and charging infrastructure hit $1.4 billion in FY2023.
- Use of GSA Schedules increased 7.2% to $41.6 billion in FY2023.
- Blanket Purchase Agreements (BPAs) facilitated $28.9 billion in FY2023.
- Federal acquisition of software-as-a-service (SaaS) grew 18.3% in FY2023.
- DoD's adaptive acquisition framework led to 15% faster awards in FY2023 pilots.
- Civilian IT modernization contracts totaled $22.1 billion in FY2023.
- Procurement protests filed with GAO increased 4.2% to 2,456 in FY2023.
- Sustainment-to-development spending ratio was 65:35 in DoD FY2023.
- Federal spending on agile software development rose 12.6% in FY2023.
Procurement Trends Interpretation
The federal marketplace is cautiously streamlining its baroque bureaucracy, as evidenced by a slight uptick in competition and commercial buying alongside a significant shift toward IT modernization, cloud, and agile methods, all while trying to balance the relentless need for sustainment with the pressure to innovate and the persistent hum of procurement protests.
Small Business Participation
- In FY2023, small businesses received 26.8% of prime contract dollars, totaling $212.4 billion.
- Small disadvantaged businesses (SDB) captured 10.2% of federal contract awards in FY2023, worth $80.7 billion.
- Women-owned small businesses (WOSB) achieved 5.4% of prime contracts in FY2023, amounting to $42.8 billion.
- HUBZone-certified small businesses received 3.1% of federal dollars in FY2023, or $24.5 billion.
- Service-disabled veteran-owned small businesses (SDVOSB) got 4.8% in FY2023, totaling $38 billion.
- In FY2023, DoD small business goaling was met at 23.1% of eligible contracts.
- GSA awarded 45.2% of its prime contract dollars to small businesses in FY2023.
- NASA achieved 32.7% small business participation in FY2023 contracts.
- Number of small business prime contractors grew to 112,400 in FY2023.
- Small businesses won 78.5% of contracts by number (but lower by value) in FY2023.
- 8(a) program participants received $28.6 billion in FY2023, up 4.5% from prior year.
- Mentor-Protégé program facilitated $1.2 billion in small business subcontracts in FY2023.
- Small business set-asides accounted for 67.3% of all small business awards in FY2023.
- WOSB set-asides awarded $12.4 billion in FY2023.
- HUBZone sole-source awards totaled $3.7 billion in FY2023.
- SDVOSB joint ventures received $4.1 billion in FY2023.
- Small business R&D contracts reached $15.9 billion in FY2023 via SBIR/STTR programs.
- DoD's small business subcontracting goals were exceeded by 12 firms in FY2023.
- Civilian agencies' small business goaling rate was 24.6% in FY2023.
- Number of HUBZone firms grew 8.2% to 7,200 in FY2023.
- Federal contract awards to small businesses in IT sector hit $32.1 billion in FY2023.
- Small businesses in construction received $18.4 billion in FY2023.
- 8(a) graduates continued to win $9.2 billion post-program in FY2023.
- Small business participation in GWACs reached 41% in FY2023.
- Federal awards to small businesses via IDIQs totaled $112.7 billion in FY2023.
Small Business Participation Interpretation
While the federal government has indeed become a sugar daddy for small businesses, sprinkling over $212 billion in contracts and celebrating with goal-meeting confetti, the feast is still served unequally at the table, with diverse slices like those for women-owned firms remaining frustratingly small.
Top Contractors and Awards
- Lockheed Martin was the top federal contractor in FY2023, receiving $69.1 billion in awards.
- Boeing secured $33.2 billion in federal contracts in FY2023, primarily aircraft-related.
- General Dynamics received $24.8 billion in DoD contracts in FY2023 for shipbuilding.
- Raytheon Technologies (RTX) was awarded $22.4 billion in missile defense contracts in FY2023.
- Northrop Grumman obtained $17.9 billion in federal awards in FY2023, focused on aeronautics.
- Leidos Holdings won $13.6 billion in IT and health contracts in FY2023.
- Huntington Ingalls Industries received $11.2 billion for naval ship construction in FY2023.
- Deloitte Consulting secured $9.7 billion in civilian agency contracts in FY2023.
- Booz Allen Hamilton was awarded $8.4 billion, mainly in intelligence services in FY2023.
- L3Harris Technologies received $7.9 billion in communications contracts in FY2023.
- SAIC (Science Applications International Corp) got $7.2 billion in engineering awards in FY2023.
- Fluor Corporation secured $6.8 billion in construction contracts in FY2023.
- ManTech International received $5.3 billion in cybersecurity contracts in FY2023.
- CACI International won $4.9 billion in IT support contracts in FY2023.
- Jacobs Engineering Group was awarded $4.6 billion for infrastructure in FY2023.
- Accenture Federal Services secured $4.2 billion in digital transformation contracts in FY2023.
- BAE Systems received $3.8 billion in electronics contracts in FY2023.
- KBR Inc. won $3.5 billion in logistics support awards in FY2023.
- Parsons Corporation secured $3.1 billion in engineering services in FY2023.
- Peraton Labs received $2.9 billion in mission services contracts in FY2023.
- Amentum Services won $2.7 billion in O&M contracts in FY2023.
- IBM Corporation was awarded $2.4 billion in cloud computing contracts in FY2023.
- Oracle America Inc. secured $2.1 billion in software licenses in FY2023.
- Microsoft Corporation received $1.9 billion in federal software and services in FY2023.
- General Electric received $1.7 billion in aviation contracts in FY2023.
Top Contractors and Awards Interpretation
In FY2023, the federal budget played a game of "choose your own adventure" and spent the vast majority on a familiar cast of characters, with Lockheed Martin as the undisputed king of the hill at $69.1 billion, proving that while the threats may be new, the business of national security is a well-funded and deeply entrenched tradition.
Trends and Future Outlook
- In FY2024 projections, federal contracting market expected to grow 2.5% to $812 billion.
- DoD contracting forecasted at $510 billion in FY2024, driven by modernization.
- IT contracting projected to reach $118 billion in FY2024, up 12%.
- Cybersecurity market in federal contracts expected to grow 15.3% to $22.1 billion in FY2024.
- Cloud services spending forecasted at $18.9 billion in FY2024, CAGR 21%.
- Small business participation projected to hit 28.2% in FY2024.
- AI/ML federal investments to exceed $5.2 billion by FY2025.
- Federal R&D contracting expected to rise 4.8% to $72.3 billion in FY2024.
- Infrastructure contracts from IIJA to total $550 billion over 5 years through 2026.
- Hypersonics and space domain awareness contracts to grow 25% annually to 2028.
- Federal healthcare IT spending projected at $12.4 billion in FY2024.
- OTA usage expected to double to $36 billion by FY2025.
- Digital engineering adoption to reduce acquisition timelines by 30% by FY2027.
- Federal electric vehicle procurement to reach 650,000 units by 2032.
- Software modernization initiatives to allocate $8.7 billion in FY2024.
- Quantum computing R&D contracts forecasted at $1.2 billion in FY2024.
- Supply chain resilience contracts to surge 18% to $45.6 billion in FY2024.
- Federal 5G deployments expected to cost $4.3 billion through FY2026.
- Climate resilience and sustainability contracts projected at $28 billion annually by 2025.
Trends and Future Outlook Interpretation
While the DoD's half-a-trillion-dollar iron grip on modernization is busy building tomorrow's weapons, the rest of the government is quietly spending just as much to wire it all together, shield it from hackers, shrink its carbon footprint, and teach its software to think for itself.
Sources & References
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