Federal Contracting Trends in Missouri
This webpage currently provides the executive summary of this publication. Please download the PDF for the complete brief.
Mark C. White
Associate Extension Professor, Labor and Workforce Development
Federal contracting is an important generator of economic activity—not only in places like Washington, DC—but also throughout the country in states such as Connecticut, New Mexico and Missouri. Private firms of all sizes provide the products, equipment and services that the federal government needs to function. These federal contracts support many jobs, and create business and growth opportunities for additional firms through sub-contracting opportunities. This brief draws upon ten years of contracting data from the USAspending.gov database to describe the nature and extent of federal contracting activities performed in Missouri to answer several basic questions, including:
- How many contracting dollars does Missouri receive, relative to other states,
- What federal agencies spend the most money in Missouri,
- Which Missouri-based companies receive the most federal contracting dollars,
- In what activities are these companies involved,
- How do federal contracting patterns vary throughout the state,
- To what extent does federal contracting benefit small, veteran, minority- or women-owned businesses, and
- What level of sub-contracting activity occurs in Missouri.
In the federal Fiscal Year (FY) 2019, Missouri-based firms received $15.1 billion in prime federal contracts and another almost $3 billion in sub-contract awards. To place this contracting activity into context, these contracts represented 5.4% of Missouri’s 2019 GDP ($332 billion). Overall this placed Missouri 8th amongst states in terms of total (prime and sub-contracts) federal contracting as a share of total state GDP.
Over the past decade, the U.S. Department of Defense (DOD) has been the primary source of federal contract dollars. Department of Defense contracts were the source of 83.3% — $12.5 billion — of the prime federal contract dollars in Missouri. Other agencies granting contract significant contracts performed in Missouri include the U.S. Department of Energy, the U.S. Department of Agriculture, the U.S. Army Corps of Engineers, and the U.S. Veterans Administration. Overall, 42 federal agencies had contracts performed by Missouri-based companies in FY 2019.
While most federal contracts are awarded to small businesses, the vast majority of federal contract dollars go to a small number of very large firms that are required to utilize small businesses in the federal contract. The federal government’s contracts with the aircraft manufacturer Boeing represented more than half of all prime contracting dollars in Missouri in FY 2019. In total, Boeing’s Missouri-based operations received more than $9.25 billion in federal contracts in FY 2019 (61.7% of all prime contracts performed in Missouri). Six companies—Boeing (including McDonnell Douglas), Honeywell, Express Scripts, DRS Sustainment Systems, Alliant Techsystems Operations and World Wide Technology have consistently been the state’s largest recipients of prime federal contracts every year for the past decade. During this time, these six companies’ share of Missouri’s prime federal contract dollars ranged anywhere from 69% to 86% of the total.
Manufacturing (NAICS 31-33) represented almost two-thirds of Missouri’s FY 2019 prime contracting dollars, led largely by Boeing’s building aircraft. Beyond manufacturing, $1.5 billion (10% of the FY 2019 total) in prime federal contracts were in administrative and waste services (NAICS 56). Construction (NAICS 23) accounted for over $950 million in prime federal contracts, or 6.4% of the FY 2019 total, and over 40% of these funds are paying for the ongoing construction of the Next NGA West facility in Saint Louis.
In FY 2019, over 95% of total (prime and sub) federal contracts went to firms located in Missouri’s metropolitan areas, and particularly to firms in the Missouri counties of the St. Louis metro area (75% of the total). This disproportionate share is due in large part to the presence of Boeing, Express Scripts, DRS Sustainment Systems and World Wide Technology Solutions in St. Louis County, as well as the aforementioned Next NGA West Facility construction. Another 12% of Missouri’s federal contracts are in Jackson County where Honeywell manages the Department of Energy’s Kansas City National Security Campus and Alliant Techsystems’ facility in Independence. Outside of Missouri’s urban centers, the impact of federal contracting is more scattered, with Missouri’s military bases attract significant federal spending relative to the size of the county.
Although large firms receive the lion’s share of prime federal contract dollars, almost 3,400 Missouri-based firms performed prime federal contracts in FY 2019. Many of these firms were veteran-, service-disabled veteran-, women-, and minority-owned businesses; businesses located in historically underutilized (HUB) zones; as well as sole proprietorships and disadvantaged businesses participating in the Small Business Administration’s (SBA) certified 8(a) business development program. These contracts demonstrate that beyond procuring the goods, equipment or services it needs to operate, this spending can also create opportunities for potentially under-utilized or disadvantaged businesses.
Many firms first engage in federal contracting through sub-contracting agreements. Although the majority of federal contracts performed in Missouri are prime contracts, sub-contract awards also generate additional economic activity in the state. The scale of sub-contracting has varied from year-to-year over the past decade. In FY 2019, $2.95 billion in federal sub-contracts were performed in Missouri and these contracts represented 16.4% of the state’s total federal contracts. Of these sub-contracts, almost $1.7 billion (57.7% of all sub-contracts performed in Missouri) had out-of-state prime contractors. Most of these subcontracts supported manufacturing activities in the defense and aerospace industry.
The biggest challenge facing many firms interested in securing federal contracts is getting started and then securing that first contract. These difficulties arise because federal contracting comes with several unique challenges that sets it apart from more typical private sector business activities. The bidding processes and regulations often associated with these activities can prove frustrating for companies that are lacking the experience with securing federally-funded contracts. As a result, sub-contracting to a current prime contractor is often the best solution for building the required past performance necessary to win federal contracts. To overcome these challenges, the Missouri Procurement and Technical Assistance Center (PTAC) offers counseling and support to Missouri-based companies in order to help them identify federal contracting opportunities and then take advantage of those opportunities.
For the rest of this brief, download the PDF.