The federal government is the world's biggest customer; currently spending nearly $ 400 billion a year.

Companies outside the market often have the misconception that the federal market exists only within the boundaries of the Capitol's Beltway. In fact, the Washington market includes the District of Columbia and the states of Maryland and Virginia. Although the actual Beltway is centered in the Washington, DC area, the federal government's buying power extends across the United States and even worldwide because of overseas military bases and federal facilities.

Table 1 shows estimated contract spending amounts (inside and outside the Beltway) for Fiscal Year 2004 (ending September 30, 2005). The spending amounts should be viewed as approximations. The numbers were culled from the Federal Procurement Data System, which is notorious for under-reporting contract spending data.

Table 1 - Contract Spending Inside and Outside the Beltway (Dollars in Billions)

The enormity of the federal spending numbers reflects the trend to outsource traditionally governmental functions to commercial companies. Over the last several decades, the federal government has outsourced almost everything, including the maintenance of military bases, space shuttle operations, the operation and management of Department of Energy (DOE) research laboratories, security guard services, and public relations services.

Most newcomers to the federal market do not realize that an average of $221 billion dollars is spent annually outside of the Beltway. This money may be spent at a military base or other government installations in your state. Most states receive the majority of their federal contracting dollars from the Department of Defense (DOD). DOE also contributes greatly to the coffers of a number of states. In fact, the states receiving the bulk of DOE dollars are those that are the home to DOE research laboratories (such as the Oak Ridge National Laboratory in Tennessee and the Los Alamos and Sandia National Laboratories in New Mexico). California has received the largest benefit from federal government spending, and has the luxury of hosting several military bases and three DOE laboratories.

This article is an excerpt form the new book "Rolling the Dice in DC". The book is written for managers and sales people and describes the day-to-day dogfight of competing and winning in the federal market. Read this book if you want to know the good, bad, and the ugly of the federal market, what it takes to enter the market, and the potential returns.