Dr. Stephen Fuller's Annual Review of Federal Procurement Predicts:
-- Washington Region Will Lead Nation In Job Growth
-- Federal Procurement In Region Passed $50 Billion Mark In 2004
-- Region Expected To Realize 80,000 New Jobs In 2005
MCLEAN, Va., June 30, 2005 (PRIMEZONE) -- According to a study released today, the Washington-area economy is continuing its ranking as the strongest in the nation, due largely to the ongoing growth in work performed in this region under federal government contracts awarded to private companies. In his annual survey of federal procurement spending, Dr. Stephen Fuller, director of the Center for Regional Analysis at George Mason University, reports that federal procurements in the region surpassed $50 billion in 2004, accounting for 16.9 percent of the region's $295 billion Gross Regional Product (GRP), and was a major reason the region's economy grew by 4.4 percent from 2003 to 2004 and why the region appears likely to add another 80,000 new jobs in 2005.
The "Federal Procurement Spending in the Washington Area" annual report was funded for the second consecutive year by First Horizon Bank headquartered in McLean, Va. "We observe much more than strong customer-vendor activity, but the creation of a very close and long-lasting synergistic relationship between the federal government and the companies that help agencies achieve mission-critical goals," said Terrie G. Spiro, regional president for First Horizon. "The large mass of our region's businesses that are growing due to federal procurements are not responding to an episodic spike in the need for certain products, but they are engaged in long-term contracts to help the government leverage the benefits of rapid improvements in technology. As they are performing on these contracts, they are also developing skills that are transferable to private-sector customers, leading us to be optimistic for the prospects of a continuing strong regional economy."
Indeed, Fuller's report shows that almost 72 percent of the total federal procurements in the region are for technology-related services such as data processing and telecom, and that spending for research and development grew by approximately 15 percent to almost $5 billion. "This is not work that can be very easily performed without almost daily contact, requiring the vendor to be physically close to the customer," Fuller said. "As a result, the increased office space needed to accommodate this growth exceeded 11.5 million square feet in 2004 and will exceed an additional 28 million square feet between 2005 and 2007."
The net result, according to the Fuller report, is that the Washington region tops the nation in job growth and overall economic health, surpassing every metropolitan area including Los Angeles, New York and Chicago.
The report shows that as a result of the Washington area's rapid growth in federal procurement outlays, its share of the nationwide total has increased from 4 percent in 1983 to 15.7 percent in 2004; nearly 16 cents of every dollar of federal procurement nationwide was spent in the Washington metropolitan area.
"These are the best of times," said Fuller. "This year, our piece of the pie got bigger. Now in 2005, we have reached our economic peak for the decade, and federal contracting is and has consistently been the principal driver behind the Washington regional growth."
Key Findings of the 2004 report are:
-- In the past three years since the terrorist attacks of 9-11,
federal procurement spending has totaled $18.5 billion and
averaged 16.6 percent each year, distinguishing the Washington
metropolitan's performance from 356 metropolitan areas in the
nation.
-- The Washington region has received $462 billion since 1980,
and Northern Virginia has received half of that amount (49.2%).
Jobs
-- The $6.1 billion increase in procurement spending (2002-2003)
accounted for 42,000 new jobs, or 65 percent of the total gain
registered in 2004. With procurement spending up in 2004, the
incremental gain could generate 50,000 new jobs in 2005. In fact,
this record-breaking increase in federal procurement in 2004
helps to explain its strong job growth that has averaged 80,000
in the first four months.
-- Out of the 15 largest job markets, Washington, D.C., ranks in
eighth in population, but fourth in jobs.
-- During the last five years, the Washington metropolitan region
has generated 287,000 more jobs than any other city in the
country.
The local level:
-- Federal contracting in Fairfax County, with 32.2 percent of all
award value, dominated the region's federal procurement
activities. Federal contractors in Fairfax County, inclusive of
Falls Church and Fairfax City, received awards totaling $16.1
billion in 2004, up from $13.6 billion in 2003, for a gain of
18.1 percent.
-- Montgomery County's federal contractors received awards totaling
$6.6 billion, up $1.7 billion from 2003, for a gain of 34.4
percent.
What does the Federal Government Buy?:
-- Services continue to dominate local federal contracting,
accounting for $35.8 billion or 71.6 percent of total awards. R&D
increased 15 percent to $4.96 billion and purchases of supplies
and equipment experienced the greatest gain (45.6%) in award
value, bringing its total to $9.2 billion.
-- The largest categories of federal contract awards in 2004 were
data processing and telecom services, administration and
management services, general purpose ADP equipment and
communications and detection equipment.
Big Spenders:
-- The Department of Defense (DOD) dominated all of the other
departments and agencies with $25.5 billion in local procurement
awards, accounting for 51.0 percent of the total.
-- DOD's contract value increased by $6.997 billion (37.8%), a
gain greater than the overall gain of $4.646 billion.
-- Northern Virginia captured 71 percent of DOD procurement
awards.
-- The total award value for all non-DOD agencies in 2004 in the
Washington metropolitan area was $24.9 billion, down $768.0
million from 2003.
-- Nine federal departments and agencies made contract awards of at
least $1 billion to local contractors in 2004. Those agencies
include GSA, HHS, Homeland Security, Treasury, Interior, Justice,
State and Education.
-- The total value of the contract awards made by these nine
departments and agencies in the Washington metropolitan area was
$43.6 billion, accounting for 87 percent of the total awards in
the Washington metropolitan area made by all 52 departments and
agencies with independent contracting authority.
However, Fuller also notes that area companies need to diversify and provide non-federal work in order to continue the rapid pace of the economic growth.
"We believe that we have not yet felt the ripple effect that we expect as the companies that develop unique expertise working for the federal government transform that expertise to commercial customers," Spiro said. "There are two attributes of this type of work that generally aren't well recognized: the federal government is truly on the cutting edge of technology, well ahead of the private sector, and the quality of work demanded is at a mission-critical level. The Department of Defense, for example, was networking computers long before the private sector even heard of the concept, but when they did need that expertise it was largely supplied by companies that had done the same job for federal government customers. We are confident that technology being developed now will also find applications with commercial customers, which will translate into dramatic growth opportunities for the companies doing business here."
About First Horizon
The 13,000 employees of First Horizon National Corp. (NYSE:FHN) provide financial services to individuals and business customers through hundreds of offices located in more than 40 states. The corporation's three major brands -- FTN Financial, First Horizon and First Tennessee -- provide customers with a broad range of products and services including:
-- Capital markets, one of the nation's top underwriters of U.S.
government agency securities
-- Mortgage banking, one of the nation's top 20 mortgage originators
and top 15 servicers, which earned a top-10 ranking in customer
satisfaction from J.D. Power and Associates
-- Retail/commercial banking, with the largest market share in
Tennessee and one of the highest customer retention rates of any
bank in the country
FHN companies have been recognized as some of the nation's best employers by AARP, Working Mother and Fortune magazines. FHN also was named one of the nation's 100 best corporate citizens by Business Ethics magazine. More information can be found at www.fhnc.com.
About the Center for Regional Analysis
The Center for Regional Analysis conducts research and analytical studies on economic, fiscal, demographic, and social and policy issues related to the current and future growth of the Virginia, Maryland, and DC areas. Through its range of research and programs -- major economic impact studies, economic forecasts, fiscal analyses, conferences and seminars, publications, information services, and data products -- the Center's activities strengthen decision-making by businesses, governments, and institutions throughout the Greater Washington region.