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Structure and Dynamics of the U.S. Federal Professional Services Industrial Base, 1995-2009
The U.S. government has a permanent and growing reliance on contracts with the private sector for a wide range of professional and support services. For the past five years, the CSIS Defense-Industrial Initiatives Group has tracked the trends driving the professional services industry since 1995. To account for the effects of inflation over this increasingly wide range of years, for the first time all dollar figures, with the exception of thresholds used to judge contract size, are in 2009 dollars.
This report analyzes the trends through 2009, the most recent year for which reliable data from the Federal Procurement Data System (FPDS) are available. On the basis of this analysis, we conclude that the some of the macro trends of the past decade continued in 2008 and 2009. Since 2007, professional services contracting increased by about $30 billion, or some 12.5 percent, and it now stands just shy of $280 billion. Most of that rise occurred between 2008 and 2009. In fact, 2008 was the lowest point for professional services contract spending in the 1995–2009 time frame, as spending for professional services accounted for only 47 percent of total federal contract spending. Following renewed growth in 2009, professional services again accounted for a majority of federal contracting, at 52 percent of value.
Looking further back—the past 15 years (1995–2009)—we can see that the professional services industry expanded at a compound annual growth rate (CAGR) of 5.2 percent per year, from $137 billion in 1995 to $280 billion in 2009. The past five years match this trend (5.0 percent) although they represent a slowdown from the 11.1 percent CAGR from 2001 to 2005.
On the policy level, recent years have witnessed a growing awareness on the part of policymakers of the industry’s magnitude and importance. Congress, the media, and voices inside the executive branch have raised significant policy questions about the government’s reliance on, and the roles of, private sector contractors. These policy concerns continued in 2010.
