For the first time in years more companies are reporting lower government contract sales as well as lower profits, according to a new survey by the auditing and management consulting firm Grant Thornton LLP.
The 18th Annual Government Contractor Survey for 2012 found that of the responding companies, 38 percent reported decreases in revenue from government contracts while 36 companies reported increases versus the 2011 survey results.
“Compared with the 2011 survey, this represents a 15 percent decrease in revenue growth and 9 percent increase in revenue decline,” the survey says.
Grant Thornton surveyed more than 100 small, medium and large government contractors with respondents including CEOs, chief financial officers and other company officials.
Regarding profits from government contracts, the survey results show a drop in profit before interest and taxes, with 60 percent of respondents reporting either no profit or profits between 1 and 5 percent, compared with 37 percent of respondents in the 2011 findings.
Most participants in the survey have an adverse opinion of the Pentagon’s Defense Contract Audit Agency (DCAA), which is responsible for auditing contracts for the Defense Department. The results show that 60 percent believe the agency is “inflexible and rarely receptive to contractor rebuttals” while 53 percent “believe the DCAA’s audit conclusions are arbitrary and not appropriately referenced to procurement regulations.”
The survey also finds that 82 percent of participants believe that contract issues are resolved inefficiently by the government, with 56 percent blaming delays on the DCAA and 26 percent the contracting officer.
The report says that “The trend of confidence in the government’s ability to efficiently resolve disputes has been steadily going downward over the past four years.”
The survey says that 24 percent of participants report “excellent relationships” with the DCAA, the same percent as in 2011.
On the subject of mergers and acquisitions (M&A), the results are nearly evenly split–41 percent versus 43 percent–between participants expecting the deal environment to improve in the next year versus no change. The remaining respondents expect the M&A environment to worsen.
Participants in the survey report no change in contract win rates from a year ago, 30 percent, although the rate jumps to 50 percent for incumbents.