The number of federal contractors working on unclassified prime contracts is at its lowest level in 10 years despite a steady rise in government contract spending in recent years. The fiscal 2018 vendor count now stands at 115,000, a 27% drop since fiscal 2009.

The causes of fluctuations in annual vendor counts are diverse. But the decline — accompanied by signs that competitively awarded dollars may be declining as well — raises questions about the effect of diminishing diversity in...