What is happening to the federal market? Our crystal ball is no better than anyone else's but here's our take.

1. The budget crunch will have a negative impact.
2. The Administration's focus on increasing the federal workforce and insourcing would usually have a negative impact. But the Administration now seems to be going in the opposite direction on both issues, possibly creating positive impacts. Isn't the world of politics a wonderful place! 
3. Agencies are now focusing on operational improvements, audits, collecting money for citizens and companies, and on matters that reduce cost or increase cash flow. This trend creates opportunities for professional service companies.
4. DoD appears to be focusing on reducing the costs associated with war and weapons systems, among others, a development which hurts the large defense contractors most.
5. Big IT projects are under scrutiny.  This has the biggest impact on the large IT players and provides new opportunities for small, more nimble IT contractors.   
6. Congress and the Administration are focusing on programs to increase small business awards; the positive impact could be several billion dollars or more for small businesses.

Put all of these factors together and the impact is unpredictable.  If pushed to make a choice, we would probably predict a downturn for 2011. But how would a downturn affect you?  We really don't know and it depends on your company's size, your current position in the market, and what you sell. The federal market remains the biggest and most stable in the world and a great place to do business. Focus on creative solutions and recurring operational contracts and you should be fine.

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