Top Products Bought by the Federal Government in FY24, How They Bought Them, and Next Steps You Can Take for Your Strategy

November 5, 2024 | Uncategorized

We’re now almost in the middle of Q1 of FY25, and if you’re considering getting into government contracting, the best time to develop your government sales strategy was yesterday. Good news, though—the second-best time is today. As government agencies ramp up their spending, it’s crucial for businesses to understand what products the government buys, how they buy them, and who typically wins the contracts. By taking action now, you can set your business on a path to tap into this substantial market. Let’s break down the top spending categories, competitive insights, contract vehicles, and set-aside statuses to help you build a targeted, effective government sales strategy.

Top Spending Categories: High-Demand Products and Key Agencies

Overall, the Federal government bought over $186B worth of products of all kinds in fiscal year 2024. The government’s largest spending category for products in FY24 was Drugs and Biologicals (6505), with a total of $20 billion invested. This high demand for pharmaceuticals and medical supplies comes primarily from agencies like the Centers for Disease Control (CDC) and the Department of Veterans Affairs (VA), reflecting their critical health missions. The VA’s Prime Vendor contract vehicle alone accounted for $7 billion in this category, demonstrating the scale of opportunities for suppliers within the healthcare space.

But smaller, high-potential opportunities exist as well. For open market purchases under $1 million, the leading category was Laboratory Equipment and Supplies (6640), with $71 million in awards. These smaller contracts are often more accessible entry points for small businesses looking to secure government contracts in product categories with significant demand without needing a specific contract vehicle.

Competition: Navigating Crowded and Niche Markets

For businesses trying to find less crowded markets, IT and Telecom – Business Applications (7A21) stands out. This category shows less competition (2 offers received or less for competitive RFQ/RFP)  for awards under $1 million, making it a promising choice for companies offering specialized IT solutions. By focusing on these niche areas, businesses may find a more accessible path to winning government contracts without facing intense competition.

Understanding where competition is higher or lower is vital when deciding where to invest your resources. For example, high-demand categories like Drugs and Biologicals often attract more prominent vendors with established relationships, while more niche categories may provide opportunities for smaller companies to build a foothold with less competition.

Contract Vehicles: Choosing the Right Pathway

Contract vehicles play a crucial role in the government procurement process, simplifying the buying process for agencies. Among all product categories, Prime Vendor remains the top contract vehicle, capturing $7 billion in awards, with the GSA Multiple Award Schedule (MAS) close behind at $6.3 billion. Each vehicle serves a unique purpose in the government contracting ecosystem.

Prime Vendor contracts, often used by agencies like the VA for essential medical supplies, offer stable, large-scale agreements. For companies seeking broader federal exposure, the GSA MAS is a versatile contract vehicle, providing access to multiple agencies and covering a wide range of products and services.

For small businesses entering government contracting, selecting the right contract vehicle is essential. The GSA MAS, for instance, is ideal for companies aiming to broaden their reach across various government buyers, offering flexibility and access to a broader range of opportunities. It’s important though to make sure the GSA MAS is right for your product by researching award history to find who buys what you sell using the MAS.

Set-Asides: An Advantage, but Not a Guarantee

Socioeconomic set-aside programs such as Small Business (SB) and Service-Disabled Veteran-Owned Small Business (SDVOSB) aim to level the playing field, but they don’t guarantee contract awards. For example, Small Business set-asides accounted for 26% of awards under $1 million, while SDVOSB accounted for 3%. Yet, in the $20 billion spent on Drugs and Biologicals, Full and Open contracts dominated, showing that many high-value contracts go beyond set-aside limitations.

For businesses with set-aside certifications, the takeaway is clear: while set-asides can be an advantage, they are not the sole factor in securing government contracts. Companies still need to demonstrate value, meet specific requirements, and build relationships with both government buyers and competent suppliers. An overreliance on set-aside status may hinder a company’s ability to stand out in competitive markets.

Actionable Steps: Using Data as a Springboard for Success

While data can provide essential insights, action is what drives success. Here’s how to use these insights to develop a more effective government contracting strategy:

1. Identify Key Contracting Offices and Officers: This data can be broken down to identify specific contracting offices and, in some cases, the contracting officers themselves. Reaching out to these individuals is a valuable step in learning about future opportunities and understanding their purchasing preferences. Building relationships with contracting officers or small business representatives in these offices can increase your visibility and position you favorably for upcoming contracts.
2. Target Key Agencies: The Department of Defense (DoD) and the Department of Veterans Affairs (VA) are the top two agencies purchasing products. This aligns with their extensive and varied operational needs. If you’re in industries like defense, healthcare, or logistics, these agencies should be high on your target list. Tailoring your outreach to align with their missions and specific product requirements can help you make a strong impression.
3. Use Data Strategically, but Don’t Get “Romanced” by It: Data is valuable for shaping strategy, but over-reliance can lead to paralysis by analysis. Spending too much time on data without taking action won’t win contracts. Instead, let data inform your actions—whether contacting contracting officers, meeting with small business representatives, or deciding which industry days/conferences to attend. Don’t let data become a distraction; it’s only effective when paired with decisive steps.

Final Thought: The Simplified Acquisition Threshold Opportunity

Many small businesses interested in government contracting may feel intimidated by the scope of large, full-and-open contracts. Focusing on awards under the Simplified Acquisition Threshold ($250,000) can be a more practical entry point, allowing companies to develop government sales experience, establish a track record, and position themselves for larger opportunities down the road.

If you’re considering expanding into government contracting, use this information as a launchpad to guide your strategy and take intentional steps forward. While there’s great opportunity, it requires a proactive, informed approach. Now’s the time to connect with prospects, perform capabilities briefs, and start building a presence in this significant market. 

If you want information and a strategy specific to the products you sell, I help my clients develop that through FastTrack 1:1 Coaching through RSM Federal. 

Feel free to schedule a meeting with me to discuss how we could work together if it makes sense.

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