Grant Thornton LLP Survey Finds Increased Risk in Government Contracting

MCLEAN, Va. -- (BUSINESS WIRE) -- Nearly 40 percent of federal contractors achieved lower revenue during the past year, a 9 percent increase from 2011 results, according to Grant Thornton LLP’s 18th Annual Government Contractor Industry Survey.

Revenue from government contracts grew for 36 percent of survey participants, while 26 percent experienced no significant change. Profit rates reported by survey respondents also plunged compared to the profit rates reported in previous surveys. Sixty percent of respondents experienced either no profit or profit in the 1-5 percent range, compared to 37 percent last year.

“This is the first time in the history of our survey that a higher percentage of respondents experienced reductions in revenue from government contracts than those that experienced growth,” said retired Vice Adm. Lewis (Lou) W. Crenshaw Jr., Grant Thornton’s national Aerospace and Defense practice leader. “Demand for firm fixed price contracts, new regulations and increased government audits are certainly reflected in the declining revenues and we’re also starting to see defense contractors diversify their portfolios, moving toward the commercial sector.”

Other highlights from the survey include:

• Indirect cost rates increased at 42 percent of the surveyed companies and decreased at 17 percent of the companies, compared to 23 percent in last year’s survey.
• Eighty-five percent of surveyed companies reported that government officials frequently or occasionally request that they perform out-of-scope work without a contract modification, which contributes to low profit rates from government contracts.
• Only 41 percent of the surveyed companies with earned value management systems (EVMS) reporting requirements believe it is a cost-efficient management tool and only 34 percent ever receive meaningful feedback from government personnel.

To download a copy of Grant Thornton’s 18th Annual Government Contractor Industry Survey Highlights Book, go to www.GrantThornton.com/govcon.

About the survey

Grant Thornton LLP’s 18th Annual Government Contractor Industry Survey reflects findings from more than 100 companies. Survey questionnaires were distributed in mid-2012 and responses were received by August 2012. Financial and business statistics presented in the survey typically represent information related to fiscal years ending in 2011 or early 2012.

About Grant Thornton LLP

Grant Thornton LLP is the US member firm of Grant Thornton International Ltd. Grant Thornton International Ltd and its member firms are not a worldwide partnership, as each member firm is a separate and distinct legal entity. In the United States., visit Grant Thornton LLP at www.GrantThornton.com.