Federal marketplace shows significant growth in NC in 2020
As federal contracting increased over $2.4 billion in 2020 in North Carolina, businesses' flexibility to switch between the commercial and federal marketplace has become more important than ever.Posted — Updated
The COVID-19 pandemic had wide-ranging effects on nearly every industry, causing highs, lows and lasting impacts that will likely still be felt for years to come.
Despite the turbulence of the year, the federal marketplace came away with a significant spike in growth in North Carolina, signaling to local businesses small and large that flexibility between the commercial and federal spheres could bolster their own success.
"Federal contracting in North Carolina increased by $2.4 billion during 2020. In 2019, we had $7.1 billion in federal prime contracts, and in 2020 we had $9.5 billion," said Scott Dorney, executive director of the North Carolina Military Business Center. "Within federal contracts, for the Department of Defense in 2019, we had $4.6 billion and in 2020 we had $6.1 billion. Overall, we increased our contracting in the state significantly."
With an annual impact of $66 billion making it the second-largest sector of North Carolina's economy, the Department of Defense and its facilities play a key role in growing existing businesses and attracting new businesses to the state. At the NCMBC, Dorney and his team work with companies based in North Carolina to connect them with these federal contract opportunities, expanding the economy, growing jobs and improving quality of life in the process.
Dorney said there were two main drivers of that growth in 2020 — one being the Hurricane Florence Recovery Program that has been in operation since 2018. The recovery program covers almost $2 billion in replacement construction needed for Marine Corps stations on the North Carolina coast.
The other main driver of growth in 2020 was the COVID-19 pandemic.
"Medical products, surgical products, pharmaceuticals and personal protective equipment needed during COVID-19 have really driven a lot of this surge in contracting," said Dorney. "While that and hurricane relief were probably the two factors in 2020 that were biggest in growth, we had a lot of regular construction, regular services and other products that we sell that were not necessarily impacted by COVID that are going to continue to be drivers of growth."
In addition to medical manufacturing, other industries that spiked in 2020 included IT network services, cybersecurity, special forces training, construction, and manufactured products of all types.
In North Carolina, over half of the state's federal contracts normally come from the services industry, and the top five industries in 2020 were construction or facilities-related services. Out of the $9.5 billion in federal contracting done last year, $3.5 billion was in products and $2.7 billion was in construction.
While hurricane recovery and the pandemic were unexpected circumstances that led to more federal contracts, the state was already on a steady path for growth.
For Dorney, not knowing what could be around the corner is just another reason why it's important to get involved with federal contracting sooner rather than later.
"Who knew that Hurricane Florence was going to hit and cause $3 billion worth of damage? Who knew that COVID was going to hit and increase medical needs? We don't have a perfectly clear crystal ball, so we never know if something's going to come up that could end up being a big driver for federal contracts," said Dorney. "That's why it's so important that businesses are registered and certified as federal contractors and they're ready to be called on. Getting these businesses into the market and registered as contractors makes them able to respond to whatever the next big thing is."
While many people might be intimidated by jumping through the hoops needed for federal contracting, there are ample resources to help in the process. At the NCMBC, MatchForce can link businesses with contracts that fit their skills, and business development and strategic initiative professionals can offer extra guidance.
As technology continues to advance, especially in sectors like artificial intelligence, autonomous systems, aerospace, and installation and expeditionary energy, Dorney expects to see this growth trend continue in North Carolina for years to come.
"Emerging technologies will pave the way for federal contracting through 2021 and beyond. The DoD expects to spend $800 million on artificial intelligence and about $2 billion on autonomous systems in 2021," said Dorney. "The landscape is always changing. Ten years ago, no one anticipated the importance and defense applicability of artificial intelligence — and now it's going to be huge. We need businesses that have not considered government contracting in the past, because they might not have seen a military application for their technologies, to engage in the federal market. They really have opportunities and need to be involved in this market."
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