Federal Contract Spending Reaches Its Highest Level Ever in Fiscal 2019

Federal contract spending grew for the fourth year in a row to reach $567 billion in fiscal 2019, its highest level yet and a 6% increase over the previous year, according to newly released data.  Spending is expected to exceed $600 billion in fiscal 2020, without even including spending on economic stimulus funds in the wake of the novel coronavirus pandemic.  

The data, compiled by Bloomberg Government, encompasses prime and unclassified contract spending. Bloomberg released the findings in the ninth annual BGOV200 report, which ranks the top 200 federal contractors. The report analyzes market trends, contractors’ performance and other dynamics among 92 federal agencies in 20 purchasing categories during fiscal 2019. 

The agencies with the biggest gains in contract spending in fiscal 2019 included: the Housing and Urban Development, Commerce and Defense departments, and the General Services Administration. Some of the top markets were: facilities and construction; professional services; information technology and aircrafts, ships/submarines and land vehicles. 

The 200 companies won the same share of total contracts as in 2018 and 2017, which was 64%. The top six companies––all in the defense industry––were: Lockheed Martin Corp., Boeing Co., General Dynamics Corp., Raytheon Co., Northrop Grumman Corp. and United Technologies Corp. This was the same as last year, except McKesson Corp. was number six in 2018 and this year it ranked seventh. In 2019, 37 companies entered the top 200 for the first time. 

Trends affecting government spending during the last year included: consolidating spending to best-in-class contracts; expanding agencies’ rapid access to emerging technologies; and bolstering of cybersecurity policies.  

“By and large the majority of markets did see pretty tremendous growth,” said Daniel Snyder, director of contract analysis at Bloomberg Government. “Overall we had all but three [of the 19] categories” show growth. “We’ve had now the fourth straight year of government spending increases. We’re seeing that shine through in lock step in the majority of these different markets.”   

Bloomberg predicted that contract spending could top $600 billion in fiscal 2020 based on allocated appropriations. It forecasted the top markets for growth could be construction ($118 billion), professional services ($81 billion) and information technology ($74 billion). 

“When we refer to the overall fiscal 2020 amount exceeding $600 billion, that’s even before we take into consideration anything that was added from the stimulus funding,” Snyder told Government Executive. “The higher estimate is somewhere in the neighborhood of about $640 billion for fiscal 2020 once it’s complete.” The additional $40 billion includes the stimulus funding in addition to other spending. 

He said that some of the stimulus funds could be spent past 2020, but he believes all funds will be disbursed this fiscal year. “The exact amount the CARES Act would add for fiscal 2020 is unable to be determined with accuracy at this time but is likely to be significant,” he said.  

Snyder also noted that the Pandemic Response Accountability Committee, established by the $2.2 trillion CARES Act, is tracking how and when agencies spent their relief funds. On Tuesday, the committee launched an online tool to do so. The relief package appropriated an unprecedented amount of money, so there has been increased pressure to ensure the funds are not misspent.

Several weeks ago, Preston and Taylor Bartley were excited and filled with anticipation when they began the search to buy their first home.

They had already done most of their homework, including identifying Fort Worth neighborhoods such as Ridgmar, Arlington Heights and Ridglea Hills where they might snag a cozy little house in their price range.

So certain that this would work out, they notified their landlord that they planned to vacate their Dallas apartment when the lease ended in June. Since both now work in Fort Worth, it would be a logical move.

“We had plans to go look at houses during lunch and right after work,” said Preston Bartley, a civil engineer with Pacheco Koch Consulting Engineers.

The couple only had the chance to tour one house before the COVID-19 outbreak prompted shelter-in-place orders and turned people fearful of any type of contact that could lead t Now their hunt for their dream home has become a nightmarish experience with a looming deadline.

Despite shelter-in-place orders that have deeply restricted businesses such as restaurants, bars, hotels and airline travel, buying and selling real estate has been able to soldier on.

“We can do just about everything virtually these days,” said Moiri Brown, branch manager of Coldwell Banker Residential Brokerage in Fort Worth and immediate past president of the Greater Fort Worth Association of Realtors. “If this was 15 years ago, we would not be able to function.

“We still have people contacting us who want to see homes and are willing to go through the process virtually,” she said.

With people largely shut-in at home, shopping for real estate shopping online has become a favorite pastime, several local Realtors say.

But shopping isn’t translating into buying.

“Showings have definitely dropped off,” said Shelby Kimball, president of the Greater Fort Worth Association of Realtors and manager of his family-owned Kimball Real Estate. “We’ve been told we could see a 60 percent drop-off in showings in Texas.

“March was down, and April is basically done for as well” as far as showings are concerned, he said.

Nearly half of the nation’s Realtors reported that homebuyer interest has declined as a result of the COVID-19 outbreak, according to a mid-March survey by the National Association of Realtors. A week earlier, about 80 percent reported that there was no change in buyer interest due to the virus.

“The decline in confidence related to the direction of the economy coupled with the unprecedented measures taken to combat the spread of COVID-19 – including major social distancing efforts – are bringing an abundance of caution among buyers and sellers,” National Association of Realtors chief economic Lawrence Yun said in a statement.

“With fewer listings in what’s already a housing shortage environment, home prices are likely to hold steady,” Yun said.

The Bartleys’ Realtor, Clay Brant of the Brants Group with Briggs Freeman Sotheby’s International Realty, said most physical showings have been of vacant or new homes.

“Sellers who are living in their homes don’t want to allow people in,” Brants said.

Aside from health and safety concerns due to the virus, many people are working at home and cannot leave or tolerate the disruption for a showing, according to local Realtors.

Under normal circumstances, out-of-state buyers and those on a tight deadline have been willing to conduct the entire transaction virtually.

Even now, some buyers are willing to settle for virtual tours for affordable homes that infrequently hit the market, Brants said.

Some eager sellers have been willing to allow some physical showings but under strict rules, which usually mean no children allowed, wearing masks, gloves and shoe coverings and applying hand sanitizer before and after a walk-through.

“Nobody wants to transmit something or be responsible for someone getting sick, so in-person showings aren’t happening very often,” Kimball said. “We have to keep people safe.”

For prospective buyers like the Brantleys, not being able to walk-through a home is a big drawback, but it isn’t their only concern.

They also worry about other aspects of the transactions, including being able to close on time.

“Even if we could get a contract, would we be able to close by our deadline because so many people are sheltering-in-place and working at home?” Brantley said.

Other disruptions to the home-buying process include requirements that appraisals and inspections are conducted from the exterior only, a condition that makes some prospective buyers leery, Kimbell said.

Despite all the disruptions, Realtors and economists are optimistic that the real estate market will recover quickly once the virus threat is lifted.

“This is a health care crisis not a housing crisis,” Brants said. “This won’t be 2008 all over again. We’re in a strong market and we’ll be in a strong market again once this is over.”

Yun predicts a “a strong rebound once the economic ‘quarantine’ is lifted, and it’s critical that supply is sufficient to meet pent-up demand.”

Nevertheless, there is mounting concern that the economic impact of job losses and business failures will continue to impact the housing market once the COVID-19 restrictions are lifted.

A survey of consumers conducted between Feb. 22 and March 22 by Realtor.com found that 36 percent of believe that the U.S. is already in a recession and another 31 percent maintaining that the recession will begin within the next three months.

Given lessons learned from Asian countries, the U.S. is looking at a two- to three-month period of economic freeze, George Ratiu, senior economist for Realtor.com said in a statement. “With fewer Americans able to move freely and many concerned about their jobs, real estate markets are entering a period of constrained activity.”

As for the Brantleys, they are still hopeful they can buy and close on a home by their deadline. But they are also devising a fallback plan should it not work out.

Source: http://www.fortworthbusiness.com/news/virtual-showing-realtors-go-high-tech-to-sell-during-virus-crisis/article_a7fff774-7846-11ea-90e1-2ff8ec1c3fe5.html

Beginning Monday, Hilton and American Express will donate 1 million hotel rooms for  medical professionals working on the coronavirus pandemic response.

The rooms will be available to doctors, nurses, paramedics, emergency medical technicians and other workers through the end of May, according to Hilton.

“They truly are heroes,” Hilton President and CEO Christopher Nassetta said in a statement. “We are honored to extend our Hilton hospitality to them during this difficult time.”

The American College of Emergency Physicians is one of 10 medical groups the companies are working with to make the rooms available for those who need them.

“Knowing that there is a safe, clean and comfortable hotel room waiting for you at the end of a long shift can make all the difference in the world right now,” said William Jaquis, the group’s president.

Marriott is donating $10 million in hotel stays for doctors and nurses. The company’s efforts are focused on the areas of the country most affected by coronavirus, including New York and Newark, New Jersey; New Orleans; Detroit; Los Angeles; Las Vegas and Washington.

Marriott lets its customers donate their reward points to a variety of coronavirus relief efforts, including World Central Kitchen, Unicef, the American Red Cross and the International Federation of Red Cross and Red Crescent Societies.

About 80% of hotel rooms nationwide are empty, according to STR, a firm that analyzes hotel industry data.

Chip Rogers, president and CEO of the American Hotel and Lodging Association, told USA TODAY that the pandemic could lead half of U.S. hotels to close.

There are about 56,000 hotels across the USA, and 25,000 of those could close in the next few weeks, at least temporarily, according to Rogers.

Source: USA Today – https://www.usatoday.com/story/travel/2020/04/12/coronavirus-hilton-marriott-give-free-hotel-rooms-medical-workers/2978567001/

An agreement by oil-producing nations on Sunday to cut output by a record amount may sustain a recent bounce in stocks, although stay-at-home restrictions and closures tied to the coronavirus pandemic still weigh on the global economy.

OPEC and allies led by Russia agreed to cut oil output by a record amount – representing around 10% of global supply – to support oil prices amid the pandemic, although sources told Reuters that effective cuts could amount to as much as 20%.

S&P futures ESC1 were down on Sunday evening, while U.S. crude futures CLc1 and Brent LCOc1 opened higher before paring gains.

The deal could buoy oil prices over the longer term and boost stocks, since talks between producers had hit roadblocks late last week, some analysts said.

“The broader market will see this as another point of stabilization as the economy, primed by favorable fiscal and monetary policies, seems to be avoiding the worst-case market scenarios,” said Rick Meckler, a partner at Cherry Lane Investments in New Jersey.

Oil prices have been slammed recently by concerns about demand because of virus-related restrictions, with U.S. crude ending Friday’s trade at $22.76, down 62.7% year-to-date. The S&P 500 energy sector .SPNY has fallen about 43% this year.

Some analysts cautioned that some hopes of an accord had already been factored into stock prices. The S&P 500 rose 12% last week, notching its best weekly gain since 1974.

At the same time, many believe that the scope of any rally – whether in oil or stocks – will be limited by the coronavirus-related shutdowns that have slowed economic activity around the world.

Measures to slow the spread of the respiratory virus have destroyed demand for fuel and driven down oil prices, straining budgets of oil producers and hammering the U.S. shale industry, which is more vulnerable to low prices due to its higher costs.

If the global economy stays closed for another few months, “this 9.7 million (bpd) reduction will be meaningless because people aren’t driving,” said Peter Cardillo, chief market economist at Spartan Capital Securities. He added, however, that the prospect of deeper cuts would likely be welcomed.

Edward Moya, senior market analyst at Oanda in New York, wrote that the deal would help support oil prices.

“Despite the skepticism that this production deal will not see a high-level of compliance, it should end calls for oil prices to fall to single digits,” Moya said

Source: https://www.reuters.com/article/us-health-coronavirus-stocks/oil-agreement-could-support-stocks-providing-a-floor-idUSKCN21U0U4