Understanding market opportunities in the defense sector can be difficult. The budget can provide a macro-view of intended spending, but it’s hard to extrapolate down to specifics in a way that gives meaningful insight regarding your particular offering. 

Another option to gain additional insight is an analysis of historical contracting data. By leveraging publicly available databases like the Federal Procurement Data System (FPDS) and USASpending.gov, as well as paid tools like GovTribe and GOVWIN, you can get a more specific idea on where money has gone, and leverage that to project.

The purpose of this article is to give you an overview of the data that’s available and a high level idea of how to execute past spending analysis. 

Common Data Sources: 

Regardless of what tool you’re using, they’re likely pulling from free public data sources.  The two most common (and free) websites used to do this analysis are fpds.gov and USASpending.gov.  Here’s a little bit about each of these sources.  

The Federal Procurement Data System (FPDS) collects its data from a variety of federal agencies and their respective procurement systems. FPDS serves as the central repository for government-wide procurement data, making it a critical resource for tracking federal contracting activities and ensuring transparency in government spending. The main sources of data for FPDS include:

1. Federal Agencies:
• Individual federal agencies are responsible for submitting detailed information about their procurement actions to FPDS. This includes all executive agencies, the Department of Defense (DoD), and other federal entities involved in contracting activities.
2. Contract Writing Systems (CWS):
• Each federal agency uses its own contract writing systems to manage and process contracts. These systems are integrated with FPDS to automatically transfer data related to contract awards, modifications, and terminations.
3. Integrated Award Environment (IAE):
• The IAE, managed by the General Services Administration (GSA), encompasses various systems that support the acquisition lifecycle. FPDS is a part of this environment, ensuring that data flows seamlessly from different stages of procurement.
4. Contracting Officers:
• Contracting officers within federal agencies input data into their respective contract writing systems. This data includes information about the contractor, contract value, contract type, and performance details.
5. Electronic Data Interchange (EDI):
• Agencies often use EDI standards to ensure that data is consistently formatted and transmitted to FPDS. This helps maintain data integrity and reduces errors in reporting.
6. Real-Time Reporting:
• Many federal agencies report their procurement data to FPDS in real-time or near real-time. This ensures that the database is regularly updated with the latest contract information.
7. Data Quality Checks:
• FPDS has built-in validation checks to ensure the accuracy and completeness of the data submitted by agencies. These checks help identify and correct errors before the data is published.

USASpending.gov aggregates data from multiple government sources to provide a comprehensive view of federal spending. This includes FPDS as it's primary data source. USASpending.gov provides a detailed picture of federal spending, covering a wide range of financial transactions from contracts to grants. By consolidating data from multiple systems, USASpending.gov offers a centralized platform for public access to federal expenditure information. The primary sources of data for USASpending.gov include:

1. Federal Procurement Data System (FPDS):
• FPDS is the primary source of data on federal contracts. It contains detailed information about contract actions, including the contractor, contract value, and the federal agency involved.
2. Financial Assistance Broker Submission (FABS):
• This includes data on federal financial assistance such as grants, loans, and other forms of financial aid to state and local governments, organizations, and individuals.
3. Treasury Account Symbol (TAS):
• The Department of the Treasury provides data on the allocation and spending of federal funds through TAS, which is a code that represents specific federal accounts.
4. Agency Financial Systems:
• Individual federal agencies report their spending data directly to USASpending.gov. These systems provide data on obligations and outlays, ensuring that the website reflects the most up-to-date financial transactions.
5. Federal Assistance Award Data System (FAADS):
• FAADS supplies information on federal assistance awards, including grants and loans. It captures details about the recipients and the amount of money awarded.
6. System for Award Management (SAM):
• SAM contains information about entities that are registered to do business with the federal government. This includes details about vendors and recipients of federal awards.
7. DATA Act Information Model Schema (DAIMS):
• The DATA Act requires federal agencies to standardize and report their financial data, which DAIMS facilitates by providing a framework for reporting.

In my opinion, USASpending gives more comprehensive results and is easier to use and read.  That said, the details are much more inclusive on FPDS, and the data comes down in a much better format for analysis. I always leverage both.

Caveats and Limitations

There are caveats and limitations to this data.  First is that the predictive power of this data can be limited by major shifts in geopolitics. As an example, we have recently shifted from the nuances of a war on terror to that of a great power competition. While I don’t think this washes the value of trend analysis, it is worth keeping in mind. There may be a shift in priorities and more or less opportunity given that shift. 

Overall, program spending doesn’t shift overnight. Our political and organizational structures do add some stability to program trajectories, and human nature inclines us to simply re-justify our program under the new senior level objectives. 

Beyond shifts like this, there are some specific nuances to the data. 

While FPDS and USASpending.gov are valuable resources, there are several limitations to consider:

Exemptions

• Certain contracts, especially those related to national security, may be exempt from public disclosure. 
• “Black money” or funding tied to classified programming and intelligence agencies has been exempt from reporting since 2007, resulting in positive error as high as 25%.

Human Error

• Data entry errors can occur, leading to inaccuracies in contract details.
• Inconsistent use of codes and categories across agencies.

Time Lags

• There is often a delay between contract award and data entry, which can affect the timeliness of the information.
• Updates and corrections to the data may not be immediately reflected.

Data Interpretation

• Variability in contract descriptions and classifications can complicate the analysis.
• Aggregating data across multiple sources requires careful reconciliation to avoid duplication.

Start with Clarity

To effectively analyze federal contract data for trends, it's important to follow a systematic process for organizing and preparing the data. Before you begin, it’s important to really define your objectives so that you approach the data in a useful way. 

• Clarify Goals: Determine what you want to achieve with the trend analysis, such as identifying market opportunities, understanding spending patterns, or analyzing competition.
• Specify Metrics: Decide on the key metrics you will track, such as total contract value, number of contracts, contractor performance, or spending by category. These may shift as your analysis progresses, but it’s smart to have a starting point to limit wasting time and money on analysis that doesn’t serve you.

Key Words Are Key 

The majority of tools leverage keyword lists to search. You will want to capture both technology and capability descriptions in your keyword list.  There is an art to this process and refinement takes some time! You will never have perfect results, but you want to find a sweet spot where you’re not cutting critical data out AND not flooding your data with false positives. For this stage, err on the side of false positives - we can refine further with NAICS.

NOTE: There are new tools on the market that allow you leverage AI and provide some details on what your technology does! 

Leverage NAICS codes

The North American Industry Classification System (NAICS) codes can act as filters to further refine your insights into relevant spending trends. Product Service Codes (PSC) may be used, as well. You can look up your appropriate NAICS here. This ensures you’re sticking to contract data triggered by your keywords that are relevant to your industry.

I recommend 2 searches, depending on where you stand: One leveraging R&D NAICS (5417…) and another with your industry NAICS.  This allows you to get a rough understanding of spending by appropriation, and gives you a better understanding of WHO is spending where. Often the organizations leading R&D are not the same as those managing your recurring revenue opportunities 

Data Refinement

Fine tuning your data can be an art. This starts with your keyword refinement, may include some artful use of NAICS codes, and ends with refining your actual data.  You’ll need to perform standard refinement practices to build something usable:  

• Remove Duplicates: Ensure that the dataset does not have duplicate entries
• Standardize Data: Ensure consistency in data formats, such as dates, monetary values, and text fields. This is particularly important if you’ve used multiple data sources, as they will not come in exactly the same format.
• Handle Missing Values: Identify and appropriately handle missing or incomplete data. You might need to fill in gaps, remove incomplete records, or use data imputation techniques.

Understand Data Categorization and Label Data

Before you begin to work with the data, make sure you understand what you’re looking at. That means having some handle on contracting Jargon, and knowing the difference between obligations, expenditures, funding agency vs. contracting agency, etc.  There’s a LOT to unpack here, and what is relevant to you will depend on the goals you outlined in step 1. 

A couple of high level recommendations:   

• Pick EITHER funds obligated or funds expended, but not both. I usually work off of obligations because it tells me what dollars the government committed in that particular year. 
• Focus your energy on Funding Agency over Contracting Agency. It’s more likely to be a reflection of the organizations appropriated for your offering.

Aggregate Data

Again, clarity is important before you start pulling your data together. Adequately aggregating your data is not as simple as basic table trends. If you do want to look at annual spending by service, you cannot pull the top level contract data. You actually will need to pull each individual modification and create a pivot table for an accurate depiction of trends. 

There are some additional insights you may need to calculate separately, such as average contract size and the number of contracts per year. You can also gain insight into competitors or potential partners in your industry, and get an idea of who is getting the most funding from federal spending right now, AND who is getting it consistently, which is often more important.  You may also want to know what percentage of forms winning contracts are being funded on a recurring basis. 

Data Visualization

Choose Visualization Tools: Use tools like Excel, Tableau, or Python libraries (Matplotlib, Seaborn) to visualize the data.  What you’d like this to look like is up to you! Displaying the data in charts and graphs makes it much easier to share, and these can be incredibly useful in visualizing opportunities and communicating your findings externally. 

Analysis & Interpretation

In the absence of a specific example, it’s hard to dive deep into analysis. That said, there are a number of valuable patterns you can learn from. Spending by service over time is useful. Things like increases or decreases in spending, shifts in contract types, or changes in top contractors can be incredibly useful when paired with an understanding of concurrent politics and global events. 

It’s also worth aligning your analysis with your budget review and see if there’s a logical connection or major disconnects.  It takes a bit of detective work, from there, to determine why, but such efforts can have major implications on your strategy.

Strategic Insights

This process, when combined with other activities, can serve to really focus your market strategy.

Market Opportunities: Identify areas with significant growth or emerging opportunities. Just what that looks like will change your strategy. For example, if R&D spending is high, but this has not yet flowed to program offices, a different strategy will come into play than a circumstance where there’s minimal R&D and an established incumbent. 

Stakeholder Identification: This can give you a more granular picture of who is ACTUALLY spending on technology that’s relevant to yours, and help you to understand potential stakeholders to better focus your outreach efforts.

Competitive or Partner Analysis: Assess the landscape by identifying top contractors and their market share.  These may be potential partners for you, or may represent your competition. This can help frame your outreach and engagement plan.

Additional Engagement: Some findings, such as a disconnect between what’s in the news and what leaders and congress are asking for and what’s actually being bought may highlight that the opportunity doesn’t really exist, OR help highlight a strong opportunity for congressional inserts. 

While there’s a lot of nuance to the process and interpretation, I hope I’ve convinced you that conducting a 5-year trend analysis on defense contracting data provides valuable insights into market opportunities and helps identify strategic areas for growth. By leveraging FPDS, USASpending.gov, and paid tools like GovTribe and GOVWIN, you can perform a comprehensive analysis while being mindful of the data's limitations. With careful preparation and analysis, you can uncover trends that inform your business strategy and enhance your competitive positioning in the defense market.

Much like my last article on budget analysis, I don’t find this work to be worth reviewing in isolation. It’s best to consider various options. Best of luck on your federal market journey! 

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