2012 is fast approaching, and with it comes big changes in the Federal IT industry. WashingtonExec is giving local executives the opportunity to share their thoughts on where they see the government contracting industry headed. Leaders of the industry were asked a series of predictions questions focused on challenging issues such as cloud computing, healthcare IT, defense and so forth.
Today is insight comes from Mitch Rambler, President of Defense Systems and Services at DRS Technologies.
1) Government contracting – Calendar year 2012 will likely bring stiffer competition among government contractors. Traditional company lanes will become blurred as government cuts continue. Many companies will look to non-traditional areas for growth to sustain their shrinking revenue base. In addition, as the draw down in Southwest Asia continues, companies that have focused on overseas support will also begin to train their competitive eye on CONUS programs increasing competition further here in the United States.
2) M&A activity- We will likely see an increase in M&A activity as companies continue to shape their portfolio to better match government funding lines. Larger companies will continue to shed non-core businesses to protect their core business profitability and shed excess costs to be more competitive. Smaller companies may begin to consider selling or merging to gain better strategic positioning and bulk up against larger more resourced organizations.
3) Shape of collaboration – Collaboration between the government and industry must continue at an even greater level to deal with spiraling increases in health care, research and development, and bid and proposal costs. As the government continues to insist on cost reimbursable contracts greater emphasis will shift the burden of accounting detail to the contractor stressing profitability further. Traditional strategic relationships among contractors will begin to shift as company strategic thrusts change in accordance with the overall government contraction.