Due to unprecedented federal funding from multiple rounds of stimulus, the businesses that sell to K-12 education market have seen many opportunities to provide products and services. This market has been recovering well from the 2020 pandemic and season of remote learning - in some areas such as curriculum, textbooks and educational products, 2021 as a year already surpassed 2019 levels. However, along with the re-opening of schools, the market continues to grapple with the effects of COVID-19 on students and faculty. School districts are leveraging federal funding to address these issues.
As mentioned in Deltek’s 10 Hotspots in State & Local Government Contracting for 2022 report, procurement trends for the K-12 market include closing learning gaps, providing mental health services, and addressing needs for re-hiring and staffing. There has been greater allotment of school budgets towards professional services such as tutoring, afterschool programs, social and emotional learning programs and curriculum consulting to combat the effects of school disruptions.
Below, we will examine trends in spending and budgets from K-12 governments, as well as how they are partnering with private companies on projects in two critical areas – infrastructure and technology.
Finances, Budgets and Fiscal Trends
Data in Deltek’s GovWin IQ platform of market intelligence indicates that the FY 2022 estimate of total K-12 expenditures is approximately $821.2 billion. The K-12 sector benefits from the stability of per-pupil consistent tax funding backed up by legislative requirements to meet these needs. In hard times, K-12 will typically enjoy more protection than other functions of government and in good times, districts can afford additional “wants” alongside “needs.” In some cases, PTA associations or booster groups have independently funded some activities or travel.
Demand for infrastructure-related K-12 contracting has remained strong, driven by population growth in major metro suburbs and the remodeling and repair of older buildings. The Census of Construction Put in Place shows strong annual growth in spending within the K-12 market since 2016. Spending did peak in 2020 and decline slightly for 2021 following initial 2020 pandemic adjustments in projects and schedules that didn’t translate into spending decreases until ‘21. However, even with this recent softening, the overall market rose an average of 6.3% per year from 2016 to 2021 (from $42.3 billion to $57.4 billion).
Deltek’s Education Contracting Analysis has found that while there are far fewer high schools relative to other types of school, the high school segment was the largest in total investment for 2021, at $29.0 billion, followed by elementary ($17.1B) and then middle/junior high ($10.1B).
“EdTech” encompasses a wide range of IT/telecom purchases and solutions from supplying laptops for students to teaching aids to database solutions. Subscription-based learning platforms implemented by school districts during the height of the pandemic have proven to be sticky. The flexibility and efficiency of these online platforms have earned themselves a permanent spot in the education market for the foreseeable future. This includes the number of vendors emerging with more cost-effective approaches and subscription-based software, together with procurement activity starting to reflect a more diverse group of vendors.
Many districts have abandoned the historical model of making a few very large investments in broad tech platforms, preferring to buy smaller-scale or more tightly defined and affordable solutions (solving problems faster and with less expenditure). The K-12 market has not been immune to cyber-attacks that have swept the private and public sectors. As school districts now rely heavily on technology and cloud services for day-to-day functioning, a large gap in cybersecurity has left districts vulnerable. Help from qualified vendors will be needed to prevent data breaches, attacks and ransomware.
Paul Irby is a Principal Research Analyst for GovWin from Deltek. Follow them on Twitter and LinkedIn and stay up to date with the latest government market insights.