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.
WashingtonExec asked John Hillen, President and CEO of Sotera Defense Solutions, “What will next year hold for Government Contracting? More M&A Activity? More IT budget cuts?”
John Hillen: “More so than any year I can remember, looking into the future with some clarity seems daunting. We can all see the major trend lines that will effect government contracting: enormous budget pressures to cut government spending, a divided set of political leaders on exactly how and when to do that, a stubborn period of continued economic doldrums, a drawdown of some U.S. military efforts overseas, and a hotly contested Presidential and Congressional election year. But, how the federal government’s budgets for departments, agencies, and programs will turn out in light of all that is absolutely an exercise in speculation. I’m not sure anybody really knows.
I’m humbled by recent experience here – last year I spoke with a top leader in Congress about how the appropriations process would likely turn out and what actually happened was almost the opposite of what he thought would happen (and in fact he/she could significantly control). It’s not that nobody is in charge (although it seems to feel like that sometimes), but rather that all the political and policy balls that will give definition to the nature of the federal budget that feeds government contracting are in the air. I don’t know anybody sensible enough or confident enough to call how and where they’ll land.
I think we can count on a robust M&A market in the government contracting space, fueled by tax concerns of business owners, the perceived need of smaller firms to group together with others for survival in a tougher budget environment, and the need for large contractors whose growth has slowed or stalled to energize their offerings. But, we should expect and hope that valuations will come down given the more competitive market that is only growing in pockets, and flat-lining or shrinking overall.”
*Featured in the 12/5 edition of the Fairfax County Economic Development Authority online magazine E-Bird.