2010
THE NEXT ECONOMY:
Government Market Outlook Report




 © 2010 Onvia, Inc. All rights reserved.
CONTENTS




    EXECUTIVE SUMMARY                               3

    INFRASTRUCTURE                                  6
...
EXECUTIVE SUMMARY


      In 2009 trillions of dollars were spent stabilizing the economy through
    the Troubled Asset R...
EXECUTIVE SUMMARY


         In this report, Onvia’s fourth annual analysis of the                                   with ...
EXECUTIVE SUMMARY


    areas of upcoming spending: Infrastructure, Energy
    and Information Technology.

      In its f...
INFRASTRUCTURE


        2010 will prove to be a strong year for government                                               ...
INFRASTRUCTURE


    to grow 8 percent in 2010 as only two states, New                                                    ...
INFRASTRUCTURE


      The Jobs for Main Street Act builds on the                                $10.7 billion in addition...
INFRASTRUCTURE


      Based on spending levels from existing stimulus and                                                ...
INFRASTRUCTURE


    portion of motor bus service operated on exclusive or
    controlled rights-of-way, and high-occupanc...
ENERGY


           According to the Department of Energy, every $1 the                                                   ...
ENERGY


    as solar, wind power and biomass.                              States are seeking innovations around renewabl...
INFORMATION TECHNOLOGY


      Advances in intelligent transportation systems,               Grants for electronic healthc...
INFORMATION TECHNOLOGY


    hospital record keeping range from paper records          agencies have until September 2010 ...
INFORMATION TECHNOLOGY


     NEW REGULATIONS AND PROGRAMS CREATED BY THE HITECH ACT

       New Regulations            De...
INFORMATION TECHNOLOGY


          infrastructure.                                       As with many of the new programs ...
STIMULUS & RECOVERY


        As we move into 2010, the federal government                                                ...
STIMULUS & RECOVERY


      Although ARRA funding is almost entirely                       to further stimulate job growth...
STIMULUS & RECOVERY


    to the use of ARRA funds are included in the Jobs for
    Main Street Act.

      The U.S. Senat...
CONCLUSION


      The 89,000 government entities across the                                            as was the case in...
AUTHORS


    About Onvia.                                                     Businesses across the United States rely on...
2010 PROJECT HIGHLIGHTS


    HIGHWAYS & PORTS

                          2010 PROJECTS                                   ...
2009 TOP CONTRACTORS


    HIGHWAYS & PORTS
                                                                 TRADING
     ...
The Next Economy Government Market Outlook 2010 Final
The Next Economy Government Market Outlook 2010 Final
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The Next Economy Government Market Outlook 2010 Final

  1. 1. 2010 THE NEXT ECONOMY: Government Market Outlook Report © 2010 Onvia, Inc. All rights reserved.
  2. 2. CONTENTS EXECUTIVE SUMMARY 3 INFRASTRUCTURE 6 Highways and Ports 6 Transportation Reauthorization Status 8 Transit 9 ENERGY 11 INFORMATION TECHNOLOGY 13 Healthcare IT 13 Broadband 14 STIMULUS AND RECOVERY 17 2010 ARRA Impact 17 Jobs for Main Street 18 CONCLUSION 20 AUTHORS 21 2010 PROJECT HIGHLIGHTS 22 2009 TOP CONTRACTORS 23 GLOSSARY 25 THE NEXT ECONOMY: 2010 Government Market Outlook 2
  3. 3. EXECUTIVE SUMMARY In 2009 trillions of dollars were spent stabilizing the economy through the Troubled Asset Relief Program (TARP), The American Recovery and Reinvestment Act (ARRA), Cash for Clunkers and other government-funded programs. This trend will continue through 2010 with initiatives Economy” companies that ignore the government like the Jobs for Main Street Act. Spending by sector will be significantly disadvantaged. Businesses federal, state and local governments now represents that are not doing business in the government almost half of total GDP in the United States and that marketplace are guaranteed to have one or more percentage is expected to increase in the coming competitors who are. years. Doing business with the government is no longer Regardless of where business owners and an arcane process reserved only for those companies managers fall on the political spectrum, a new with perseverance, tolerance for bureaucratic red tape reality has set in. A hybrid economy, one in which and a cadre of lobbyists. Barriers to entry have come government and business operate more closely, down. For companies that don’t do business directly is emerging. Forward-thinking organizations now with a government entity, subcontractor and supplier incorporate the government sector into their overall go- opportunities continue to abound from companies that to-market strategy to take advantage of this large and are doing business with government entities in the growing marketplace. That approach is independent of United States. With national unemployment above 10 rhetoric or political views about big government, small percent, more and more businesses are turning to the government and conservative or liberal views. The government sector as a primary source of revenue. government sector is a vast marketplace. In this “Next U.S. Government Spending As Percent of GDP THE FEDERAL, STATE U.S. Government spending has steadily increased to its highest sustained levels. & MUNICIPAL MARKET 60 $5.5 Trillion a year. $105 Billion per week. 50 $15 Billion a day. 40 $625 Million an hour. Percent of GDP 30 $10 Million a minute. $175,000 a second. 20 10 “The government has moved in next door and it ain’t leaving.” 0 1903 1906 1909 1912 1915 1918 1921 1924 1927 1930 1933 1936 1939 1942 1945 1948 1951 1954 1957 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2009 Year — Jeffrey Immelt, International Economic Forum of the Source: USGovernmentSpending.com Americas, June 9, 2009 THE NEXT ECONOMY: 2010 Government Market Outlook 3
  4. 4. EXECUTIVE SUMMARY In this report, Onvia’s fourth annual analysis of the with large general contractors will emerge as the large government marketplace, we surveyed thousands of players are extended across multiple infrastructure government officials across every level of government. projects. Volume of projects will increase through 2010 We partnered with REMI, the definitive leader in but it will remain a buyers’ market as more companies economic forecasting and policy analysis modeling, follow the money. The impact of recovery investments, to examine the impact of ARRA funding on regional both ARRA and Jobs for Main Street, will begin to be economies in the U.S. as a harbinger of things to felt in mid-2010 as heavy equipment manufacturers, come in the government sector. material suppliers and engineering service providers fully engage in the government purchasing process. There are several emerging, general government Look for a measurable rise in the cost of construction market trends which will influence capital allocation materials. and projects undertaken. First, transparency initiatives are here to stay. Government spending at all levels will Third, information technology will be a key continue to be scrutinized, and public officials will be component of all projects undertaken, across held to a higher level of accountability for the inefficient multiple verticals. A wave of modernization, from allocation of taxpayer capital. Access to more detailed regional health information networks and intelligent information will drive the transformation from the transportation systems to smart power grids coming retrospective “auditor” view to one better positioned online and green buildings being constructed, is to be predictive in support of strategic planning. afoot with information technology at its core. Further Governments will invest in tools to drive down cost and expansion of electronic procurement and cooperative increase productivity. purchasing practices by government agencies will continue to be implemented to improve efficacy of Second, while the government market continues spending. to grow there will be increased competition for government contracts as commercial markets recover With these components as the backdrop, our into 2011. An increase in subcontracting opportunities analysis for 2010 focuses on impacts in three major Businesses Pursuing Government Contracts 2010 SPENDING PRIORITIES Government is the last client standing for many businesses that otherwise Defined by Surveyed Officials relied on the commercial sector. This chart represents activity with state and local agencies tracked in the Onvia 200 index. Public Safety Infrastructure 40,000 12% Energy 35,000 Unemployment (%) 10% Information Technology # Unique Businesses 30,000 % Unemployed 8% Education 25,000 20,000 6% 15,000 4% “The frontier between the 10,000 state and market has shifted, 5,000 2% the realm of the state has 0 0% been enlarged.” Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 — Daniel Yergin, Wall Street Period Journal, After the Bailouts, Washington’s the Boss, Source: Onvia 2010 December 28, 2009 THE NEXT ECONOMY: 2010 Government Market Outlook 4
  5. 5. EXECUTIVE SUMMARY areas of upcoming spending: Infrastructure, Energy and Information Technology. In its first year in office, the Obama administration has taken on the mantle of change and begun executing on its reform agenda across healthcare, manufacturing and energy, as well as the financial markets and other sectors. These changes and their impacts are now spreading through the state- and municipal- level government markets, and none will take place without significant business engagement. THE NEXT ECONOMY: 2010 Government Market Outlook 5
  6. 6. INFRASTRUCTURE 2010 will prove to be a strong year for government the 2010 contribution of highway spending to regional contractors who serve the infrastructure market. economic productivity will increase over 2009 Although 2009 saw considerable activity with the spending levels. obligation of ARRA dollars, the majority of the actual Throughout 2009, Onvia analysis found that spending on those ARRA-funded projects will happen infrastructure projects came in below estimated costs in 2010. Of the more than 35,000 infrastructure driven by a combination of stiff competition and falling projects Onvia tracked throughout 2009 only 27 construction material prices. Some of these savings percent, or 9,500, had been awarded to contractors by served to expand the scope of projects funded by the end of 2009. ARRA . $90.4 billion across 25,500 fully or partially recovery- According to the American Road & Transportation funded projects are in the pipeline and expected to Builders Association (ARTBA), 38 states increased begin in 2010. This represents a meaningful leading the real value of their contract awards between indicator for the infrastructure market in the year January and October 2009 compared to the same ahead. It is important to note that recovery dollars time period in 2008. The real value of contract awards are funding projects in conjunction with traditional for highways and bridges over the same periods was matching funds programs. nearly $50 billion, an increase of $5 billion and an As these outstanding dollars reach local economies, important leading indicator for the 2010 construction expect to see resulting direct and indirect infrastructure season. Expect these trends to carry into 2010 as job creation to exceed 900,000. The Southeast is more contractors vie for government projects. expected to produce the most jobs with the Great Highways & Ports Lakes region setting the pace for average salaries. Spurred by record federal investment in surface With continued strong government investment in transportation and increased spending through the infrastructure through economic recovery initiatives, ARRA, the highway construction market is expected 2010 ARRA Infrastructure Jobs ARRA Infrastructure Spending More than 900,000 infrastructure jobs will be retained or created as a result of The majority of stimulus spending will hit 2010 ARRA spending. the economy in 2010. 300,000 $70,000 27% Number of Jobs Created Average Salary Per Job $60,000 250,000 $50,000 200,000 $40,000 150,000 Average Salary Per Job $30,000 73% 100,000 $20,000 50,000 $10,000 $0 2009 Contract Awards 0 Southeast Far Mideast Great Plains Southwest New Rocky $33,123,839,733 West Lakes England Mountain U.S. Region 2010 Project Pipeline $90,447,420,169 Source: Onvia and REMI 2010 Source: Onvia 2010 THE NEXT ECONOMY: 2010 Government Market Outlook 6
  7. 7. INFRASTRUCTURE to grow 8 percent in 2010 as only two states, New investment in smart roads, otherwise known as Hampshire and Wyoming, had obligated all of their intelligent transportation systems (ITS), will expedite transportation stimulus funds by the end of 2009. With job creation. the addition of the prospective Jobs for Main Street ITS initiatives are proven to produce significant Act passed by the U.S. House of representatives in economic and environmental advantages. State and December 2009, an increase from 8 percent to double- local agencies investing in ITS, for example, have digit growth is not out of the question. found that each dollar spent on technologies such as As of January 2010, Onvia was tracking more than E-Z Pass programs and synchronized and adaptive 12,500 funded highway projects across the US, many traffic signals returns at least $40 to the public in time of which are much needed maintenance efforts and and fuel savings while reducing emissions by as much upgrades that had previously been deferred. as 22 percent. According to the Reason Foundation, the percentage In advance of the Jobs for Main Street bill, of deficient bridges has been on the rise and the an American Association of State of Highway condition of urban interstates continues to degrade. Transportation Officials (ASHTO) survey captured In their December 2009 Report on the Performance a summary view of the 9,588 ready-to-go (formerly of State Highway Systems, a number of key metrics known as “Shovel Ready”) highway, transit, rail, port improved, such as urban interstate congestion, but and aviation projects across the U.S. awaiting funding. the findings highlight the difficulty in “making across These projects, valued at $70 billion, can be ready to the board progress in road conditions.” The thousands break ground within 120 days of enactment. of ARRA funded projects, many of which will start in Infrastructure-related businesses of all sizes should 2010, are targeted to address the substandard areas be poised to capture contracts and to serve as indirect of the nation’s transportation infrastructure. beneficiaries through subcontracting, materials supply Beyond traditional highway construction, increased and heavy equipment manufacturing. ARRA Actual Contract Values As Percent of Government Estimated Project Value 2010 ARRA Infrastructure GDP Competition for projects has increased resulting in lower contract values than by US Region expected on many projects. FAR WEST: $13 Billion 80 SOUTHEAST: $12 Billion GREAT LAKES: $6 Billion Actual Contract Values As Percent of Gov’t Estimated Project Value 72 PLAINS: $3 Billion 64 MIDEAST: $7 Billion SOUTHWEST: $5 Billion 56 ROCKY MOUNTAIN: $2 Billion 48 NEW ENGLAND: $2 Billion 40 March April May June July Aug Sept Oct Nov Dec 2009 Source: Onvia 2010 Source: Onvia and REMI 2010 Source: Onvia 2010 THE NEXT ECONOMY: 2010 Government Market Outlook 7
  8. 8. INFRASTRUCTURE The Jobs for Main Street Act builds on the $10.7 billion in additional funding, which resembles investment programs initiated by the ARRA. Of the the authorization for FY 2009. The bill also includes almost $37 billion in proposed transportation funding provisions to stabilize the Highway Trust Fund by in the Jobs for Main Street Act, $27.5 billion is directed restoring $19.5 billion in forgone interest payments to additional highway infrastructure investments. In and adds $1.7 billion based on accounting changes keeping with the 2009 stimulus package, the terms for fuel tax exemptions. In keeping with the ARRA, the and conditions for these funds focus on expediting legislation waives the requirement that states provide contracts with businesses. States will lose 50 percent matching revenue to receive these funds. of any funding that is not under contract within 90 Many states are concerned about the lack of a days of apportionment. In addition, there is a stated prospective reauthorization spending bill going into priority to focus on projects in economically distressed 2010. Although the Obama administration says states areas and those that can be completed within a 3-year shouldn't be concerned that a new law is not yet timeframe. in place, there is growing anxiety as transportation Transportation Reauthorization Status improvement plans are left in limbo. Planning for a new bridge, highway interchange or light rail line The Jobs for Main Street Act includes an extension typically takes years, and states need early insight of highway and transit program authorization through into how much the federal government will invest in Sept. 30, 2010 at current levels. It also provides transportation. additional Highway Trust Fund revenue to fund these programs. Since SAFETEA-LU expired on Sept. 30, Without a reauthorized transportation spending bill 2009, these programs have been extended on a short- in place, "Our industry surveys tell us that contractors term basis at a funding level that is significantly below won't be able to do long-term planning to purchase the FY 2009 authorized level. equipment," said Jeffrey Solsby, spokesman for the American Road & Transportation Builders Association. The pending Jobs for Main Street Act includes US Transit Buses By Alternative Fuel Type Sales opportunities for new and retrofitted energy efficient fleets continues to increase. 14,000 CNG & Blends 12,000 50% of Agencies are Number of Vehicles Electric & Hybrid 10,000 Currently Using eGovernment LNG & Blends 8,000 Tools and an Additional 20% 6,000 are Actively Considering 4,000 Implementation 2,000 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year Source: Public Transportation Fact Book 2008 THE NEXT ECONOMY: 2010 Government Market Outlook 8
  9. 9. INFRASTRUCTURE Based on spending levels from existing stimulus and in alternative fuel vehicles to increase efficiency, other recurring programs, Transportation Secretary support green transit and drive down operating Ray LaHood remains confident that the billions of costs. In addition to increased federal investment in dollars in the pipeline for road, bridge and transit mass transit initiatives beyond traditional dollars for projects will suffice until a new law is in place. highways, government fleets are also driving toward a greener economy. Transit Businesses that will see growing demand include In the face of an economic downturn with high vehicle manufacturers, fleet maintenance providers, unemployment, overall mass transit ridership is the alternative fuels supply chain as well firms down as fewer people are traveling to and from specializing in energy performance audits and work. Similar to unemployment mass transit use is management. a lagging economic indicator. As result, the majority of transit systems have seen a decrease in funding Infrastructure Jobs for Main Street from state, local and regional programs. But aided by The Jobs for Main Street Act allocates $8.4 billion for the significant transit funding through the ARRA as transit funding, the majority of which will be distributed well as the Jobs for Main Street, prospects are strong via formula grants, which are based on predetermined for new light rail systems as we continue to see the criteria, such as population. $800 million is proposed benefit of economic regeneration of transit corridors for Amtrak fleet modernization and $1.75 billion is also such as those in Washington, D.C., Denver, Colorado proposed for fixed guideway modernization, which and Portland, Oregon. Moving into 2010, less than half refers to any transit service that uses exclusive or of the approximately $7 billion in transit investment controlled rights-of-way or rails, entirely or in part. dollars made available through the ARRA are under This includes heavy rail, commuter rail, light rail, contract. monorail, trolleybus, aerial tramway, inclined plane, Transit agencies across the country are investing cable car, automated guideway transit, ferryboats, that Federal Alternative Fuel Vehicles By Fuel Type The federal government has been rapidly expanding its AFV fleet. “Efficiency and renewable incentives and financing 150,000 E-85 programs have the most Number of Vehicles 120,000 CNG small business and job 90,000 LPG creation opportunity here for Electric LNG 2010 and beyond.” 60,000 H2 30,000 M-85 — Government Official Survey 0 Participant, December 2009 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year Source: www.afdc.energy.gov/afdc/data/ 2008 Source: www.afdc.energy.gov/afdc/data/ 2008 THE NEXT ECONOMY: 2010 Government Market Outlook 9
  10. 10. INFRASTRUCTURE portion of motor bus service operated on exclusive or controlled rights-of-way, and high-occupancy-vehicle (HOV) lanes. In comparison, the ARRA provided $750 million for the Fixed Guideway Modernization formula program. Fixed guideway modernization projects typically include purchase and rehabilitation of rolling stock, track, line equipment, structures, signals and communications, power equipment and substations, passenger stations and terminals, security equipment and systems, maintenance facilities and equipment, operational support equipment including computer hardware and software, system extensions, and preventive maintenance. As with the proposed highway funding, states will lose 50 percent of any funding that is not under contract within 90 days of apportionment. In addition, there is a stated priority to focus on projects in economically distressed areas and those that can be completed within a 3-year timeframe. PRIMARY INFRASTRUCTURE PURCHASING CATEGORIES Infrastructure: Roadway, Bridge and Tunnel Contractors Heavy Equipment Signage and Supplies Environmental Consulting Engineering Services Transportation & Traffic Studies Transit: Rapid Transit Vehicles Buses Specialty and Vocational Vehicles Fleet Operations and Maintenance CCTV Security Services THE NEXT ECONOMY: 2010 Government Market Outlook 10
  11. 11. ENERGY According to the Department of Energy, every $1 the Company received a $200 million ARRA grant as government spends on state energy programs results part of the Energy Smart Florida initiative to advance in energy cost savings of $7.22. Smart Grid, including the installation of over 2.6 million smart meters, 9,000 intelligent distribution As of January 2010, Onvia was tracking 2,700 devices and advanced monitoring equipment in over energy-related initiatives funded partially or in full by 270 substations. With a total project value exceeding $13.5 billion from ARRA, which will create jobs in 2010 $575 million, the effort will be completed in 2011. and lay the foundation for energy efficiency, renewable General Electric will supply the meters, Silver Spring energy, upgrades to electricity transmission, carbon Networks will provide the wireless network and Cisco capture and storage and advanced energy research. will provide networking capabilities. The proposed The ARRA allocated $40 billion for energy initiatives, meters will be based on open network architecture, with several billion more likely through the Jobs for so companies can create consumer applications like Main Street Act. Most of this funding is required to Google PowerMeter that use smart meter information be spent within the next two years. Congress has to measure and manage energy consumption. also allocated $1.6 billion for Clean Renewable Energy Bonds (CREBs) to help finance construction In 2009 a number of states created specially of renewable energy facilities run by public utilities, focused teams and programs to maximize the impact electric cooperatives and city, state and tribal of federal energy programs across regional and local governments. economies. In 2010, pilot groups of consumers and businesses These include initiatives to support small businesses will continue to be fitted with smart meters and various and industry through energy savings. States are accessories to begin smart grid pilot programs. Other creating programs to provide technical and financial initiatives, like Energy Smart Miami, will begin to assistance to businesses who proactively address demonstrate larger scale implementations of citywide energy efficiency, including grants for commercial smart grids. In November 2009, Florida Power & Light institutions that adopt alternative energy means such 2010 ARRA Energy Jobs 2010 ARRA Energy GDP More than 100,000 energy jobs will be retained or created as a result of 2010 by US Region ARRA spending. FAR WEST: $1 Billion 70,000 $70,000 SOUTHEAST: $3 Billion Number of Jobs Created Average Salary Per Job 60,000 $60,000 50,000 GREAT LAKES: $400 Million $50,000 40,000 $40,000 PLAINS: $120 Million 30,000 $30,000 Average Salary Per Job MIDEAST: $670 Million 20,000 $20,000 10,000 $10,000 SOUTHWEST: $400 Million 0 $0 ROCKY MOUNTAIN: $160 Million Southeast Far Mideast Great Plains Southwest New Rocky West Lakes England Mountain NEW ENGLAND: $200 Million U.S. Region Source: Onvia and REMI 2010 Source: Onvia and REMI 2010 Source: Onvia and REMI 2010 THE NEXT ECONOMY: 2010 Government Market Outlook 11
  12. 12. ENERGY as solar, wind power and biomass. States are seeking innovations around renewable energy technologies and resources. Look for States are also focusing on improving government continued creation of grant programs to foster the energy efficiency. Upgrades will address maintenance development and commercialization of technology that and renovation projects at state agencies, universities supports green business. and community colleges. The targets for these efforts are initiatives that generate significant energy savings, Energy initiatives will continue to grow and garner including retro-commission HVAC controls, lighting recognition through 2010 as the flow of funds from fixture upgrades, boiler and water heater improvement ARRA and Jobs for Main Street Act reach businesses and incandescent exit light and bulb replacement. that drive the Next Economy. Other programs promote residential energy efficiency and renewable energy. Housing authorities are promoting energy efficiency in new, affordable housing including manufactured homes. In addition, many states will subsidize energy efficiency audits for those homes that implement energy recommendations. PRIMARY ENERGY PURCHASING CATEGORIES Generation: Plant Asset Management Software Load Forecasting Generation Plan and Scheduling Transmission & Grid Asset Management Software Distribution: Capacitors Outage Management GIS Energy Management Systems Distribution Management Systems Energy Balance Management Metering: Advanced Metering Infrastructure Meter Asset Management Meter Data Processing Automated Meter Management Smart Meters Pulse Meters Switches and Routers Net Metering Smart Appliances Building Automation Software That Integrates and Normalizes Data From: Systems: Building Systems, IT, Energy Supply & Energy Demand Security Identity management and access control Technology: Threat defense Data center security Utility Compliance Security monitoring and management Physical safety and security Professional services THE NEXT ECONOMY: 2010 Government Market Outlook 12
  13. 13. INFORMATION TECHNOLOGY Advances in intelligent transportation systems, Grants for electronic healthcare initiatives are energy efficiency and patient care are all dependent expected to flow in earnest during the second half of on technologies that outpace the industries they serve. 2010, setting up 2011 as a breakout year for eHealth With healthcare and energy front and center on the initiatives. In the next twelve months, there will be an domestic agenda, technology firms of all types will increased emphasis on digitizing medical records as benefit. Almost $20 billion in healthcare technology standards and strategies fall into place. There will a spending was included in the ARRA and $80 billion will considerable number of new entrants in the eHealth be spent on energy-related initiatives approved in 2009. marketplace as venture-backed startups figure out how Funds from healthcare, energy and other programs are to create businesses on top of previously unavailable now funneling down to the commercial entities that will data and platforms. be the pioneers of Next Economy technologies. Building on the $19 billion investment in the ARRA, Healthcare IT the Administration will continue efforts to further the adoption and implementation of Health IT (HIT) as “2010 will be about laying the eHealth groundwork, an essential tool to modernize the U.S. health care particularly at the local and regional levels, in order to system. $2 billion in ARRA investments will continue develop a nationwide support structure to ensure that to be implemented in 2010, while the remaining providers and hospitals are prepared for 2011 when the $17 billion will be available as temporary incentive electronic health record incentive programs launch,” payments starting in 2011 to physicians and hospitals says Brian Wagner, Senior Director of Policy and participating in Medicare for using certified Electronic Public Affairs at the eHealth Initiative in Washington, Medical Records. D.C. “Now is the time for companies that serve the eHealth market, both as a primary and secondary With no industry standard for the use or sharing of focus, to develop and burnish their reputations. There Electronic Health Records (EHRs) widely in practice, is a lot of money in the queue, but that comes with high each medical facility is an island, using whichever expectations that companies will have to meet.” method of record storage they chose. Strategies for Estimated ARRA Health IT Spending PRIMARY IT PURCHASING CATEGORIES $40 Healthcare IT: Core Routing And Switching Wireless Infrastructure $35 Network Security Storage Solutions $30 Collaboration Solutions Telemedicine Solutions $25 Communication Solutions Wireless Solutions Billions $20 Core Infrastructure $15 Interoperability Solutions $10 $5 $0 FY 2009 ‘15 ‘19 Source: Congressional Budget Office 2009 Source: Congressional Budget Office 2009 THE NEXT ECONOMY: 2010 Government Market Outlook 13
  14. 14. INFORMATION TECHNOLOGY hospital record keeping range from paper records agencies have until September 2010 to award all to highly integrated eHealth systems which cover funding. patients from admittance to billing, and everything In 2010, technology providers will be vying for in between. This lack of standardization cripples the business of doctors and hospitals, which will information sharing in an industry where time often have significant incentives to make meaningful use means the difference between life and death. of eRecords in 2012. Technology providers and In addition to a lack of standards, there is a healthcare providers need to determine the best time significant gap in digital connectivity between the to get in the game. Those that wait too long may be medical professionals and the data and images caught far behind what is a rapidly advancing curve. on which they rely to do their jobs. Without ample Broadband broadband availability across the U.S., there is no way for EHRs to be used effectively. The infrastructure The expansion of broadband access across the US necessary to achieve electronic data exchange does will be a significant contributor to economic growth not exist in most states. The ARRA-provided funding and global competitiveness. As part of the ARRA, that will directly impact the adoption of broadband several billion dollars have been allocated to create service and electronic health records. broadband-enabled jobs, close the broadband gap, stimulate investment in broadband, spread high-speed At the end of 2009, the government took several access to schools, universities, libraries, community critical steps toward a nationwide, interoperable, centers, job training centers, hospitals and public private and secure electronic health information safety personnel in addition to encouraging demand system. The U.S. Department of Health and Human for broadband. Services (DHHS) released two proposed regulations affecting HIT. The first, a notice of proposed rule- The first step in designing a national broadband making (NPRM), describes how hospitals, physicians, strategy is an inventory initiative intended to inform and other health care professionals can qualify for policymakers' efforts and provide consumers with billions of dollars of extra Medicare and Medicaid improved information on the broadband Internet payments through the meaningful use of EHRs. The services available to them. The ARRA provided up second, an interim final regulation, describes the to $350 million to develop and maintain a broadband standards and certification criteria that those EHRs inventory map. In order to build a national strategic must meet for their users to collect the payments. In plan, states have been tasked with gathering and addition, between August and December 2009, the verifying state-specific data on the availability, speed, DHHS Office of the National Coordinator for Health location and technology type of broadband services. Information Technology announced nearly $2 billion The data they collect and compile will also be used to worth of new programs to help providers become develop publicly available state-wide broadband maps meaningful users of EHRs and to lay the groundwork and to inform the comprehensive, interactive, and for an advanced electronic health information system. searchable national broadband map that the National All these actions were authorized by the Health Telecommunications and Information Administration Information Technology for Economic and Clinical (NTIA) is required by the Recovery Act to create and Health (HITECH) Act, which was part of the ARRA. make publicly available by February 17, 2011. The formalization of these regulations brings a In 2010, inventory mapping efforts will accelerate higher degree of clarity to the Health IT roadmap, with and create short-term opportunities for: investments expected to ramp up in 2011 and funding available through the middle of this decade. Federal • Early stage expansion of broadband THE NEXT ECONOMY: 2010 Government Market Outlook 14
  15. 15. INFORMATION TECHNOLOGY NEW REGULATIONS AND PROGRAMS CREATED BY THE HITECH ACT New Regulations Description Meaningful Use Criteria established for Medicare- and Medicaid-participating providers and hospitals to receive (issued) incentives for using electronic health records (EHRs) in a meaningful manner, which includes electronically capturing health information in coded format, using that information to track key clinical conditions, communicating that information in order to help coordinate care and initiating the reporting of clinical quality measures and public health measures. Certification A defined process of ensuring the functionality, security, and interoperability of EHRs that meet (forthcoming) the standards and certification criteria required to achieve meaningful use of those records. Providers must use certified EHRs to qualify as meaningful users. Interim final regulation An initial set of standards, implementation specifications and certification criteria for EHRs. for certification criteria and standards (issued) Funds New Programs Description Allocated Regional Extension Establish up to 70 RECs to support providers in adopting and becoming $643 Million Centers (RECs) meaningful users of health information technology (HIT). Health Information Support state programs to ensure the development of health information $564 Million Exchange exchange within and across their jurisdictions. Workforce Training Create several distinct programs that aim to support the education $118 Million Programs of HIT professionals, including curriculum development, competency examinations, and training. The goal is to train up to 45,000 new HIT workers to assist providers in becoming meaningful users of EHRs. Beacon Communities Provide funding to create up to 15 demonstration communities in which $235 Million clinicians, hospitals, and consumers show how the meaningful use of EHRs can achieve measurable improvement in the quality and efficiency of health services or public health outcomes in a given geographic area. Strategic Health Fund research focused on achieving breakthrough advances to address $60 Million Information well-documented problems that have impeded the adoption of HIT, Technology Advanced including: the security of HIT, patient-centered cognitive support, health Research Projects care application and network platform architectures, and secondary use (SHARP) of EHR data. Nationwide Health Create a common platform for health information exchange across Information Network diverse entities, within communities, and across the country to promote (NHIN) a more effective marketplace, greater competition, and increased choice through accessibility to accurate information on health care costs, quality and outcomes. $64.3 Million Standards and Develop interoperability specifications that identify harmonized standards Certification and provide detailed technical specifications for how those standards need to be used; work with health care organizations and standards- development organizations to ensure the standards are available for use nationally. THE NEXT ECONOMY: 2010 Government Market Outlook 15
  16. 16. INFORMATION TECHNOLOGY infrastructure. As with many of the new programs established through ARRA, timelines have progressed slower • Acquisition of equipment, instrumentation, than expected. Scheduling and staffing challenges networking capability, hardware and software, have delayed the review of broadband applications. digital network technology and infrastructure for In order to award the $4.7 billion appropriated for broadband services. Broadband Technology Opportunities Program by September 30, 2010, NTIA and Rural Utilities Service • Access to existing broadband service by (RUS) must evaluate applications and award funds in community anchor institutions. a compressed time frame. The effort is complicated by • Access to existing broadband service by low- the fact that NTIA and RUS also face an increase in income, unemployed, aged, and otherwise the number of applications that they must review and vulnerable populations in order to provide evaluate in comparison to similar programs. educational and employment opportunities to members of such populations. THE NEXT ECONOMY: 2010 Government Market Outlook 16
  17. 17. STIMULUS & RECOVERY As we move into 2010, the federal government (direct effect), while the other half consist mainly of continues to grapple with the best equation for Intermediate Demand Employment (indirect effect) and reviving the economy without completely sacrificing Local Consumption Demand Employment (induced sustainability through the national debt burden. effect). Politicians, businesses and citizens alike are divided The growth in government spending increases over the merits of big government and big spending employment and raises real disposable income, versus tax relief and economic Darwinism. which drives consumption and ultimately the output 2010 ARRA Impact for at least as long as those funds are flowing into the economy. Consider this example: a road repavement Although the ARRA passed in early 2009, the project increases the demand for construction workers majority of the impact will be felt in 2010 as the and materials. As the workers’ real disposable income dollars funnel down to local economies in the form of increases, their consumption correspondingly goes up, government contracts and resultant job creation. At whether it be lunch at a local sandwich shop or going the end of 2009, only 25 percent of the $275 billion in out to the movies with their families. The demand ARRA contracts, grants and loans had been paid out for materials (intermediate inputs) depends on the by the federal government. Onvia expects the creation requirements of industries that use inputs from other or retention of over one million direct and indirect jobs sectors. In the case of road repavement, it would from ARRA contract spending in 2010, in addition to presumably be asphalt and machinery, and those the 460,000 created or saved by ARRA in 2009. industries would continue to employ workers as long as there is a demand for their goods and services. In conjunction with REMI, the recognized authority Essentially, every dollar spent on a project generates on regional economic models, Onvia has projected more than a dollar return to the economy. This the expected employment increase by type in each spending and re-spending is the so-called “multiplier region. Across all regions, approximately half of the effect.” employment gains are directly from ARRA funding 2010 ARRA Funded Employment More than 1 million jobs stand to be retained or created from ARRA spending in 2010. (For employment category definitions, see the glossary on pg 25.) Local Government 350 State Government 80% of ARRA-funded Jobs (Thousands) 300 250 Exogenous Industry Agencies Expect the Majority of 200 Sales Employment Initiatives to Begin in 2010 Investment Activity Demand Employment 150 Government Demand 100 Employment Local Consumption 50 Demand Employment 0 Intermediate Demand New Mideast Great Plains Southeast Southwest Rocky Far Employment England Lakes Mountain West U.S. Region Source: Onvia and REMI 2010 Source: Onvia and REMI 2010 THE NEXT ECONOMY: 2010 Government Market Outlook 17
  18. 18. STIMULUS & RECOVERY Although ARRA funding is almost entirely to further stimulate job growth. The bill is designed to government spending, most of the money will not be continue the momentum created by ARRA investments spent in the public sector. The largest employment and to help mitigate the potential cliff effect as ARRA increase from 2010 spending will take place in the programs expend their allocated capital. construction sector, with close to 480,000 expected Included in the pending bill are funds redirected jobs. This corresponds with the fact that most allocated from TARP for various infrastructure investments, projects are in the infrastructure market. Coming stabilization of public service jobs including educators in second is professional and technical services, and law enforcement and continued emergency which consists of industries such as architectural funding for unemployment and healthcare benefits. and engineering services, scientific and other consulting services, and computer systems design The infrastructure funds will be distributed to states and related services. Transportation and warehousing, by the same formulas that were used to distribute manufacturing, healthcare and social assistance, and stimulus funds previously provided in the ARRA. administrative and waste services make up about States are not required to provide any matching a third of the total employment created by recovery dollars to be eligible to receive these funds, and will spending. be required to have 50 percent of the funds under contract within 90 days or lose the remaining funds As of January 1st, 2010, Onvia was tracking more (to be redistributed to states which have met this than 47,000 ARRA funded projects and purchases with requirement; the second 50 percent must be under thousands of additional projects yet to be announced. contract within one year or be lost to other successful Jobs for Main Street states). Just as spending from the ARRA began to accelerate This is a far more stringent requirement than ARRA, in late 2009, the U.S. House of Representatives which required funds to be “obligated” rather than passed H.R. 2847, “Jobs for Main Street Act of 2010,” under contract. Many of the other provisions related 2010 ARRA Employment By Industry 3% Construction “We received ARRA funds 4% Transportation and Warehousing 39% in 2009. We anticipate 6% Finance and Insurance spending ~70% of the funds Administrative and Waste Services in 2010. We are seeing 6% Healthcare and Social Assistance jobs being created and/or retained.” 7% Manufacturing 24% Professional and Technical Services 11% — Government Official Survey Other Participant, December 2009 Source: Onvia 2010 Source: Onvia 2010 THE NEXT ECONOMY: 2010 Government Market Outlook 18
  19. 19. STIMULUS & RECOVERY to the use of ARRA funds are included in the Jobs for Main Street Act. The U.S. Senate is expected to consider the Jobs for Main Street bill in January. Passage will be hotly contested as parties debate the successes of the last several stimulus bills versus more deficit friendly strategies such as tax relief. 2010 Jobs For Main Street Act (H.R. 2847) Spending Funded initiatives from the Jobs For Main Street Act are intended to move quickly $2.0 $43.7 $4.7 Education $27.1 Billion Energy and Water $4.7 Billion Education Jobs for States ($23 Billion) Innovative Technology Loan $27.1 School Renovation Grants ($4.1 Billion) Guarantee Program ($2 Billion) Clean Water State Revolving Fund ($1 Billion) Transportation $37.2 Billion Safe Drinking Water Revolving $37.2 Additional Infrastructure Fund ($1 Billion) $35.8 Investments ($27.5 Billion) Environmental Restoration and Public Transportation Flood Protection ($715 Million) Labor and Workforce $43.7 Billion Investments ($8.4 Billion) Small Business Loans ($351 Million) Amtrak ($800 Million) Housing $2.0 Billion Expanded Unemployment National Housing Trust Fund ($1 Billion) Airport Improvements ($500 Million) Benefits ($41 Billion) Public Housing Capital Fund ($1 Billion) Law Enforcement Jobs ($1.18 Billion) Job Training ($750 Million) Healthcare $35.8 Billion Summer Youth Employment Medicaid ($23.5 Billion) ($500 Million) COBRA Subsidy ($12.3 Billion) Source: Onvia 2010 THE NEXT ECONOMY: 2010 Government Market Outlook 19
  20. 20. CONCLUSION The 89,000 government entities across the as was the case in 2009, but rather to avoid being United States represent a dynamic marketplace competitively disadvantaged in their industry. While with opportunities in every industry vertical. The some will determine no fit, most will define a short- “Next Economy” in which government more actively term and long-term strategy for playing in this sector. participates in business interests through regulation, direct ownership or other means, is emerging. Government spending as a percentage of GDP is at an all-time high and that will not change in the foreseeable future. As state lawmakers head back to their capitals they face increasing pressure to raise taxes to supplement bankrupt budgets. Tax increases are inevitable, which will have the effect of even further increasing the size of the government marketplace in coming years. Reflection on the first year of the Obama administration is a portent of the Next Economy; the reform agenda in healthcare, manufacturing, financial markets, and energy are already affecting the state and local government market. For businesses, the debate isn’t about large versus small government but rather how to engage in and influence this vast and growing market. In 2010 it is incumbent on every business to evaluate its position in the government marketplace, not just for survival Which stakeholders do you expect will have the greatest effect “Stimulus programs with long on your company’s economic value in the next 3–5 years? term effects [such as] energy Business must proactively and regularly engage with government or be left efficiency, modernization of behind in the Next Economy transportation infrastructure, modernization of medical information systems are Customers promising.” Source of Influence Government Employees — Government Official Survey Participant, December 2009 Investors Suppliers Media Non-Governmental Organizations 0 10 20 30 40 50 60 70 80 Source: McKinsey Quarterly 2010 Source: McKinsey Quarterly 2010 THE NEXT ECONOMY: 2010 Government Market Outlook 20
  21. 21. AUTHORS About Onvia. Businesses across the United States rely on Onvia as a comprehensive resource for industry-specific Onvia (NASDAQ: ONVI) is the leading provider information needed to make intelligent sales decisions. of Business-to-Government solutions in the United Onvia was founded in 1996 and is headquartered in States, covering the broadest set of industries and Seattle, Washington. products at every level of the public sector - Federal, State, Local and Education. For more than twelve Recovery.org, a service of Onvia, is tracking years, Onvia has delivered unparalleled coverage American Recovery and Reinvestment Act (ARRA) of government purchasing activity and commercial/ spending by Federal, State and Local agencies and residential projects for clients in a variety of industries, provides detailed information about what is happening including: in our States and Municipalities - from the moment ARRA funds are approved, to a government agency’s • Architecture and Engineering issuance of a Bid or RFP, through contract award to a • Construction business. • IT/Telecom Onvia, Inc. • Healthcare 509 Olive Way • Operations and Maintenance Seattle, WA 98101 • Professional Services 206.282.5170 • Transportation www.Onvia.com • Water and Energy/Alternative Energy www.Recovery.org About REMI. For three decades REMI has been the leading authority on how government actions and policy changes affect the world around us. REMI was founded on a transformative idea: government decision-makers should test the economic effects of their policies before they’re implemented. Their commitment to a better understanding of the economy drives an unceasing process of innovation in economic theory and practice, software development and application, and the use of quantitative economic analysis to guide policy decisions. Through a belief that improved knowledge and information will lead Regional Economic to better decisions, REMI’s work develops and Models, Inc. supports the use of leading economic models that 433 West Street inform government and corporate decisions. REMI is Amherst, MA 01002 headquartered in Amherst, Massachusetts and has a 413.549.1169 regional office in Washington, D.C. www.REMI.com THE NEXT ECONOMY: 2010 Government Market Outlook 21
  22. 22. 2010 PROJECT HIGHLIGHTS HIGHWAYS & PORTS 2010 PROJECTS LOCATION VALUE Reconstruction of IR 090 OH $400,000,000 I-85 Yadkin River Project NC $330,000,000 Road Reconstructions CA $321,058,000 East Bridgeport Rail Yard Improvements Bridgeport, CT $90,000,000 HOV Connector between I-405 and SR-22 CA $173,253,000 Sheldon and Arleta Slab Replacement and HOV CA $160,000,000 Port Columbus Airport Security Projects Columbus, OH $35,200,000 Renovation and Improvements to the City’s Port Petersburg, AK $1,000,000 Dock Facility Wonderland Station Garage Revere, MA $22,700,000 Lone Wolf Historic Bridge/pedestrian Bridge Tom Green,TX $1,590,201 TRANSIT Heavy Duty Transit Buses ID $51,200,000 ARRA - Fta 5307 Miami Dade Transit Urban Formula FL $69,802,389 Funding Replacement of up to 132 buses CA $61,652,000 Preventive Maintenance Atlanta,GA $121,300,000 Replacement CNG and Electric Buses - 43 in FY Long Beach; $52,565,000 2009 and 40 in FY 2010. Los Angeles; Santa Ana, CA Acquisition of Vehicles Long Beach; $84,000,000 Los Angeles; Santa Ana, CA Energy Efficient Bus Components Monroe, MI $84,000 Smartbike Expansion Washington, $3,000,000 DC Transit Security Houston, TX $3,040,560 Light Rail Projects MD $4,200,000 ENERGY Five Integrated Smart Grid Techology Systems AL $330,130,432 Implementation of the Smart Grid Miami, FL $578,347,232 Deploy a Smart Meter Network and Advanced Baltimore, MD $451,814,234 Customer Control System Build a Green Smart Grid Virtual Power Plant Raleigh, NC $520,000,000 Comprehensive Grid Modernization for Duke Charlotte, NC $851,700,000 Energy’s Midwest Electric System Integrate Smart Grid Technologies Las Vegas, NV $298,000,000 Deploy a Wide-range of Grid-related Technologies New York, NY $272,341,798 Deploy a Smart Grid Network Oklahoma City, $293,201,332 OK Complete the Installation of 2.2 Million Smart Meters Houston, TX $639,187,435 Green Energy Works! Biogas Projects Dauphin, PA $500,000 THE NEXT ECONOMY: 2010 Government Market Outlook 22
  23. 23. 2009 TOP CONTRACTORS HIGHWAYS & PORTS TRADING TOP CONTRACTORS SYMBOL Granite Construction Company NYSE: GVS Watsonville, CA APAC-Atlantic NYSE: CRH Alcoa, TN Ford Construction Company Private Dyersburg, TN Rieth-Riley Construction Co. Private Goshen, IN MRM Construction Services Private Phoenix, AZ Pike Industries NYSE: CRH Belmont, NH Ajax Paving Industries Private Nokomis, FL Ballenger Construction Company Private Harlingen, TX Shelly Company NYSE: CRH Thornville, OH James Construction Group Private Baton Rouge, LA TRANSIT The Toro Company NYSE:TTC Bloomington, MN Deere & Company NYSE: DE Moline, IL Ford Motor Company NYSE:F Dearborn, MI General Motors Corporation NYSE:GRM Detroit, MI Gillig Corporation Private Hayward, CA A123 Systems, Inc NASDAQ: Watertown, MA AONE Atlantic Machinery Inc. Private Silver Spring, MD Silver Ships, Inc Private Theodore, AL Boulton Powerboats Inc. Private Central Point, OR Hertz Equipment Rental Corporation NYSE: HTZ Rohnert Park, CA ENERGY Navarro Research and Engineering Private Oak Ridge, TN Project Assistance Corporation Private Walnut Creek, CA Hydrogen Energy California LLC Private Long Beach, CA Sandia Corporation NYSE: LMT Albuquerque, NM THE NEXT ECONOMY: 2010 Government Market Outlook 23

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