With federal spending on the decline for the first time in a decade, D.C. area contractors are looking for growth opportunities wherever they can find them. Right in the Beltway’s backyard is Norfolk, which has long been one of the nation’s top regions for federal spending.
Federal spending in Norfolk totaled $74 billion for the past five fiscal years, resulting in a compound annual growth rate of 5 percent, and, as of fiscal 2011, spending in Norfolk has increased 20 percent since 2007.
Most of that spending – 89 percent — is defense-related, with the Navy accounting for almost two-thirds. The Navy, Army, Air Force, Defense Department and Department of Homeland Security have all increased their Norfolk-area spending steadily since 2007.
Unlike some regions that rely on a single dominant industry, Norfolk has a nearly even split of federal spending across five top industries: architecture, engineering and construction; professional services; defense and aerospace; information technology; and ship and marine equipment.
Norfolk’s strength comes as no surprise to Falls Church-based Northrop Grumman, which has dominated the Norfolk regional market with 23 percent of the regional obligations for fiscal 2007 through 2011.
Nearly all of Northrop’s regional obligations are from the Navy and three of Northrop Grumman’s top five contracts are associated with the building of aircraft carriers. However, in mid- 2011, the company spun off its shipbuilding business unit, which is now known as Huntington Ingalls Industries.
McLean-based Science Applications International Corp. and Bethesda-based Lockheed Martin are also top contractors in the Norfolk region; SAIC totaled more than $1 billion in regional obligations during the five-year period, while Lockheed hit $816 million.
There are regional opportunities for small businesses, too. Reported federal obligations to 8(a) companies totaled $5.1B, or 7 percent of total federal regional spending, and information technology obligations made to 8(a) firms have increased steadily over the past five fiscal years.
Obligations made to service-disabled, veteran-owned small businesses reached $1.78 billion — or 2.4 percent of total reported federal spending for the region — which represents a more than 200 percent increase in fiscal 2007.
In the next two years, more than $4.9 billion in federal regional business opportunities are anticipated for release in the Norfolk area. While the majority are defense-related, more than $790 million are with civilian agencies such as NASA and DHS.
Professional services opportunities account for 53 percent of the total pipeline value.
As federal spending declines, many contractors inevitably will look to expand into new agencies. But expanding geographically could be an option as well, and with more than $4.9 billion in new spending in the next two years, the Norfolk area makes a rich target.
By Jennifer Sakole
March 18th, 2012