After making efforts to improve efficiency as they braced for sequestration, government contractors reported higher profits in 2012, according to a new industry study.

Deltek’s annual Clarity survey and industry study — set for release this week — asked senior executives from nearly 300 government contractors about their 2012 performance and their 2013 expectations. Respondents were surveyed in four categories: business development; project management; finance and operations; and compliance and risk.

Business development

Last year’s study showed that contractors planned serious changes in their business development operations to adjust to fewer contracts and lower growth rates. This year’s results suggest firms are still adjusting to the new reality, but moving in the right direction.

Contract win rates remain statistically unchanged. Small firms stood out, with more than half reporting an increased win rate and one-third saying their rate jumped more than 10 percent.

Project management

This year’s data suggests government contractors are struggling to align people, processes and tools for managing projects, with only 14 percent of surveyed firms indicating that half of their projects are on or under budget.

Firms also noted a significant drop in the maturity of their project management discipline. For example, 4 percent of companies with $100 million or more in sales reported being very immature in their project management discipline, up from none in 2011.

And as companies clamp down on spending, project management training costs appear to be a common cost-cutting casualty. Last year, 39 percent of large firms reported that more than half their project managers hold a Project Management Professional certification or a similar certification; this year, that figure dipped to 32 percent.

Finance and operations

For all of the negative news dominating headlines, this year’s financial metrics were surprisingly healthy. Profit margins are up, unallowable costs and fringe rates are down, invoice cycles have contracted. In short, almost every metric is moving in the right direction, despite obvious challenges.

Across the board, firms are reporting more profit in 2012. The number of mid-size and large companies reporting greater than 15 percent profit margins grew sharply, to 25 percent (mid-size) and 13 percent (large), up from 6 percent and 3 percent, respectively, last year.

Average monthly invoice cycles inched down to 11.7 days from 12.2 last year, while days sales outstanding bumped up to 43.7 days.

Compliance and risk

In 2012, companies reported more frequent and rigorous audits, with 76 percent of companies saying they experienced some form of audit last year.

This year’s survey results suggest companies are implementing risk, issue and opportunity management programs to assess risk proactively and pass audits more effectively.

Large companies are more actively pursuing risk mitigation as 70 percent reported they have active risk initiatives at the organization or divisional level, up from 50 percent last year.

Patrick Smith is vice president at Herndon-based Deltek, which analyzes the government contracting market and can be found at