Onvia sourced Project Center and Agency Center to provide a brief recap of the major agency trends in annual contracting volume for state, local and education government (SLED). 2014 proved to be a year of minimal change overall in bidding opportunities for government contractors (+0.2% from 2013). However, the flat overall trend line masks significant fluctuation by agency function. This article will highlight the major shifts by agency function in 2014 procurement volumes and the areas of solid growth or noticeable declines in published bid and RFP opportunities. Trends in Volume of Opportunities This report provides trends across all levels of SLED government by agency function – in areas like education, public safety, natural resources, etc. regardless of whether it happened at the city, county, special district, educational or state level. Contracting growth rates by agency function for 2014 range all the way from +8% for parks and recreation to -14% for public safety (which combines police, fire departments and state prisons). Four areas are trending higher, four are trending lower and one area (transportation) mirrors the overall 2014 contracting trend by being essentially flat (see chart below). Growth Areas: Parks and Natural Resources Function % of Change Parks & Recreation 8% Natural Resources (water supply, soil, etc.) 7% Utilities 5% General Purpose 2% Of the agency functions with increased contracting opportunities, two saw growth above five percent: The resource-focused parks & recreation area and the primarily state-level natural resources area (including flood control, water supply, drainage, soil testing, etc.) Of the top two categories, the increased activity happened at different levels of government. The volume of parks & recreation contracting tended to be more locally based (56%) than statewide (44%). While state level opportunities have grown recently (6%), local parks opportunities have increased at a faster pace (9%). However, it depends on the type of local park. One of the solutions that helps support sustainable local parks funding is the stand-alone parks district structure with its dedicated share of local taxes in addition to user fees. In Onvia’s Project Center, 69% of the local government parks opportunities were put out by parks districts versus only 9% for cities and 12% for counties. The 2014 parks district growth in overall volume of bids was an impressive 14% while at the same time volume for cities declined by 17% and counties were down slightly by one percent. National resources contracting activity was much stronger at the state level, representing 69% of all 2014 opportunities versus only 31% for local agencies. While local natural resources projects did grow in volume, the growth rate for statewide projects was over three times higher (10% vs. 3%). In fact, 88% of the increase in opportunities in 2014 occurred at the state level; 69% is the most recent share that state agencies have of all projects. Among the levels of local government, natural resources districts were a significant sub-group of the contracting activity. But, unlike with parks, the 2014 volume of natural resources district projects was basically on par with 2013 volume. City and county projects made up the difference among local government with double digit growth rates. While somewhat less numerous than parks districts, natural resources districts still comprised 53% of all locally bid natural resources projects in 2014. On an industry basis, there was a bias in the growth for both categories toward construction and building supplies. A total of 64% of natural resources and 71% of parks and recreation growth were for construction-related bidding opportunities. Utilities, another resource-focused category that is primarily local, also showed a respectable rate of growth of 5% for the year – driven by an increase of both local power and water system projects. Declining Segments: Public Universities and Correctional Institutions The declining segment of public safety represented the largest rate of negative change among the four areas with decreases in the past year. Another key driver was the drop in education/libraries opportunities, which represents around 70% of all projects within the four declining segments. In comparison, the segment of health and social services made up only nine percent of projects. Function % of Change Public Safety -14% Health and Social Sciences -6% Education/Libraries -4% Economic Development -3% Given the recent media focus on effective police activity, the 14% reduction in total public safety contracting volume might seem counter-intuitive. Onvia’s Project Center reveals that a leading cause of the decline was an 18% reduction in bids and RFPs for correctional institutions. Several possible explanations for this trend include: 1) greater industry consolidation where vendors compete for fewer contracts each year with larger values or longer terms 2) an increase in buying from cooperative organizations where only the initial contract is competitively bid but subsequent purchases made off the same contract are published 3) government rulings and budgets moderating or reversing growth in inmate populations at over-crowded prisons impacted the number of contracting opportunities. While education/libraries opportunity volume had a relatively modest decrease of 4% in 2014, it declined by over 3,500 opportunities in total. The primary driver of the decline in number of contracts was a drop in higher education bids and RFPs. Higher education contracting volume decreased by 7% since 2013. The two types of higher education contracts that declined the most were technology (-13%) and business/consulting services (-8%), categories that university planners may have found easier to cut in a tough budgeting environment. Summary and Commentary The steady overall volume of opportunities from 2013 to 2014 does not fully describe the diversity of outcomes experienced by many government contractors. Trends by agency function reveal a year of change, with bid volumes shifting either upward or downward in 2014, depending on the segment or target market. Contractors specializing in natural resources and recreational areas enjoy continued growth in bidding opportunities, but that growth came from different types of agencies. State park contracting picked up somewhat, but there was bigger increase in volume of contracts at the local level with parks districts. Natural resources contractors, in contrast, had a stronger growth of opportunities at the state level. Two major areas showing a decline in bidding opportunities in 2014 were higher education and correctional institutions. University budgets and pressure to deliver services efficiently may contribute to the decline in the more discretionary areas of IT and business/consulting services. Contracting opportunities related to correctional facilities fell, but the cause may be due to several factors including contracting trends that tend to reduce the number of contracts competitively bid as well as a reduction in prison inmate populations in states with over-crowded facilities. For more in-depth information on government contracting trends and market updates, read Onvia’s quarterly State & Local Procurement Snapshot series. Also read Onvia’s forward looking 3 Trends Shaping State & Local Contracting Growth in 2015 that outlines the top trends and market forces for 2015 in an environment of improving revenues and higher confidence among agency decision-makers and buyers.