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Taken as a whole, the 2020 Washington TechnologyTop 100 shows a government contractor market coming off a strong year of growth and positive activity.
The first sign is that the aggregate
value of the prime contracts for theTop 100 reached $126.3 billion, compared to $115.4 billion for the 2019Top 100.That’s the fourth straight year of growth after the market hit bottom with the 2016Top 100, when the aggregate prime contracts totaled $97.2 bil- lion.That low point came after five years of successive declines.
The market still hasn’t reached the peak we saw in 2011, when theTop 100’s aggre- gate prime contracts were valued at $132 billion, but the gap is closing.
And on a historical note, for the 2001 Top 100 — 19 years ago — the aggregate prime contract number was $26.8 billion. That was before the market ramped up in the aftermath of the Sept. 11 terrorist attacks.
We analyze Federal Procurement Data System reports using over 700 product and service codes that represent IT, systems integration, telecommunications, profes- sional services, engineering services and other technology spending. It is important to note that the 2020Top 100 is based
on federal procurement data collected
for calendar year 2019, which means the rankings do not reflect the impact of the government’s response to the COVID-19 pandemic. Whether that impact is positive or negative will have to wait until next year’sTop 100.
Several long-term trends are evident, however, and will continue to drive activity in the market regardless of the pandemic. Mergers and acquisitions, divestitures, major contract awards, and more rapid adoption of business models such as cloud and managed services will continue to influence what is happening in the market.
You need look no further than Leidos, the No. 1 company on theTop 100 with $8.1 billion in prime contracts, to see those trends in action.The company pulled off two major acquisitions, paying $1.7 billion for Dynetics, a space engineering firm, and then $1 billion for the airport security tech-
nology business of L3Harris Technologies. Leidos also won major recompetes val- ued in the billions — the $4 billion contract to clean up the Hanford nuclear waste site
and a $4.6 billion Defense Information Systems Agency contract to run a global network. Still in the protest phase is the Navy’s $7.6 billion Next Generation Enter- prise Networks contract that Leidos took away from Perspecta.
And Leidos isn’t alone in big wins.
Science Applications International Corp. (No. 11 with $3.7 billion in prime contracts) acquired Unisys Federal for $1.2 billion. It also captured a five-year, $2.9 billion task order under the One Acquisition Solution for Integrated Services contract to provide software development and other services to the Army. The company also captured a $1.4 billion contract to continue supporting the Justice Department’s asset forfeiture program.
Many others are reporting sizable wins as well. For example, executives at NCI Information Systems (No. 83 with $268.3 million in prime contracts) told us that their book-to-bill ratio for 2019 was two times revenue and will be better than 1.5 times for 2020. And CACI International (No. 12 with $2.9 billion) captured a significant new contract when it won the Border Enforce- ment Applications for Government Leading Edge IT, a $1.8 billion contract to modern- ize back-office systems for Customs and Border Protection.
A common theme that runs through many of those wins is the desire by gov- ernment agencies to modernize their IT infrastructure, applications and systems. The big buzzword many are using is “digiti- zation.” This work is attractive for many companies because it tends to have higher margins and requires close working rela- tionships with customers.
For Serco Inc. (No. 34 with $869.5 mil- lion in prime contracts), getting into posi- tion to win that kind of work meant walking away from lower-margin contracts that were primarily competed on a lowest price technically acceptable basis.
“In the past, we were just saying, ‘Let’s bid lower and then we’ll win the work,’”
said David Daquino, CEO of Serco Inc., the U.S. subsidiary of the U.K.-based Serco Group PLC. Moving away from that kind of work was a challenge. “It was a significant cultural change because we were comfort- able with that, but our backyard was get- ting too small.”
The shift to higher-margin work required investing in people and making acquisi- tions like Serco’s deal to buy a portion of Alion Science and Technology, which added more Navy work.
That’s just one example of how the gov- ernment’s demands are driving companies to change.The market is definitely in an era of push and pull. Agencies are more open to commercial technologies and new ways of doing business, and companies are find- ing new ways to introduce those concepts to their customers.
During Washington Technology’s August event to discuss theTop 100, panelists from Booz Allen Hamilton (No. 8 with $5.2 billion in prime contracts) and ManTech Interna- tional (No. 28 with $1.2 billion in prime con- tracts) described how customer demand for modernization drives change.
Many contractors have created inter-
nal organizations that allow commercial technology vendors and government customers to test drive solutions and try cutting-edge technologies. The result is a proliferation of centers of excellence or innovation labs. That trend also shows up in executives’ titles. Srini Iyer is a senior vice president who leads ManTech’s Inno- vation and Capability Office, while Gary Labovich is the next-generation moderniza- tion lead at Booz Allen.
Both men described government customers as eager for innovative solu- tions and faster results.The moves by the companies on theTop 100 reflect those overarching market drivers.
Companies throughout theTop 100 talked about the need to focus their efforts. Tony Colangelo, founder and CEO of Min- burn Technology Group (No. 94 with $225.3 million in prime contracts), said the key to his company’s success was the decision “to do a few things really well instead of a lot of things not well at all.” n
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