Federal downsizing gives boost to Md. firms As government does less work, businesses get to do more


WASHINGTON -- Federal downsizing in Maryland means more than a decline in jobs. A new government report suggests that it also means millions of dollars for the private sector in government contracts.

As government shrinks in the era of decreasing budgets, more federal dollars are going to Maryland businesses, according to a report released yesterday by the Bureau of the Census.

The report -- the bureau's annual accounting of all federal spending, by state and county -- ranked Maryland No. 2 in federal dollars earned, at $7,361 per capita, for fiscal 1995. Virginia ranked No. 1.

But the report revealed several new trends, all of them most evident in Baltimore, Montgomery and Prince George's counties:

* The 11 percent increase in government procurement in Maryland -- to $9.1 billion in 1995 from $8.2 billion in 1994 -- soared above the national increase of 2.2 percent.

* Aside from contracts, federal spending in Maryland failed to keep pace with the national average. Overall federal spending in the state climbed by just .7 percent, to $36.8 billion; federal spending increased by 3.3 percent nationwide.

* While contracting boomed in Maryland, other types of federal spending fell. In addition to federal salaries and wages, overall funding in grants for numerous government programs also declined.

Virginia's increase was even more impressive than Maryland's. Federal contract spending there jumped nearly $5 million, or 42 percent.

The trend created by downsizing is demonstrated most vividly in the Census Bureau report by two facts: While federal contracting grew by about $880 million, or 11 percent last year, federal dollars for the salaries for federal workers fell by $222 million, or 3 percent.

Maryland officials and analysts familiar with the Maryland economy agree that government downsizing has transformed the nature of private enterprise.

"They're reducing the size of the federal payroll and letting the private sector do some of the work," said Anne Franklin, an economist with the Maryland Comptroller's Office.

Michael Conte, director of the Regional Economic Studies Institute at Towson State University, agreed. "That's the corollary of downsizing: The functions that are being downsized are largely being outsourced to private companies," he said.

Franklin and Conte said Maryland companies that specialize in computer and logistics services, and management and public relations, are benefiting from the increased market.

Franklin would not speculate on how long the trend would continue. She said Washington-area firms benefit from their proximity to the nation's capital and the federal agencies' familiarity with their services.

The continued strength of Maryland and Virginia procurement, she said, depends on the long-term role of the federal government. Local companies could suffer if the federal government, should "devolve" contracting decisions to the 50 states.

"Maryland and Virginia could be at a disadvantage if the outsourcing is not so centralized," she said.

Pub Date: 6/18/96

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