During third-quarter earnings calls, executives in the government services ecosystem addressed the common challenge of how to navigate an increasingly competitive landscape.
These calls, transcripts of which were provided by Bloomberg, addressed a wide variety of topics. However, three broad themes emerged: the importance of innovation, portfolio resilience and infrastructure investment opportunities.
Living on the cutting edge
Many of the large government services players focused on innovative cutting-edge technologies related to cybersecurity, IT modernization and artificial intelligence. Executives are constantly searching for the next advancement that will differentiate them from the competition.
Over the past several quarters, we’ve seen the large players evolve strategies to encourage and empower their workforces to uncover the next breakthrough.
Maximus Inc. has created the “Spark Tank” competition, in which teams of employees pitch innovative ideas to organizational leaders.
KBR Inc. hosted its first hackathon, where internal volunteers develop new solutions around sustainability, digitalization, artificial intelligence and branding.
For SAIC Inc., the application is broader, as new CEO Toni Townes-Whitley is working to create a culture that has a strong sense of entrepreneurial execution.
Historically, significant advancement in capabilities has come inorganically through the acquisition of intellectual property. During the recent period of increasing interest rates, companies also considered the benefits of investing organically—namely, through their workforce—to uncover new ideas and solutions.
As the development of cutting-edge technologies continues to accelerate, and the gap among top competitors narrows, a minor change in people, process or technology could provide an edge. Therefore, executives have increasingly turned to their employees, who know their businesses the best, for innovative results.
Building resilient portfolios
At the time of third-quarter earnings calls, uncertainty surrounding a possible government shutdown and the fiscal year 2024 budget remained. Executives responded to questions with confidence in their businesses’ ability to weather an unfavorable outcome. The collective optimism raised a broader question: Why weren’t executives more concerned about the federal budget outcome in the midst of uncertainty?
Executives mentioned common strategies, such as geographic diversification and building a more robust contract backlog. However, the true driver and strategic focus was resilience.
CACI International CEO John Mengucci said his company focuses its bids on long and enduring work, where customer demand is likely to remain high and is driven by the ever-present and elevated global threat environment.
Similarly, Booz Allen Hamilton CEO Horacio Rozanski said resiliency is built into the company’s business model. Rozanski said his company has invested in key growth areas and improved the timing of its decision-making processes.
Townes-Whitley summarized this concept well, stating that SAIC’s future investments will be focused on ensuring its operational portfolio is fully capable and at enterprise scale.
To learn more about working with the federal government, visit RSM’s government contracting page.
Ultimately, each of the large players has focused on constructing a portfolio that serves the government’s most critical, long-term needs. For many contractors, this means addressing opportunities and threats that aren’t going away any time soon—IT modernization, cybersecurity and secure communications—as global threats increase in scale and complexity.
In other words, if you’re waiting for annual budget results to drive your strategy, you’ve already fallen behind.
Building and protecting infrastructure
For the companies that provide products and services related to critical infrastructure, the Infrastructure Investment and Jobs Act (IIJA) continues to open doors.
ICF International CEO John Wasson noted increased demand for electrical engineering, power generation and technical advisory services. The heightened demand in these areas suggests that IIJA funding has positively affected renewable energy sources. This could be an area of significant growth by approximately 2027 when IIJA funding is expected to peak.
Parsons Corp. CEO Carey Smith noted “unprecedented” levels of infrastructure spending around the world, which she expects to continue for the foreseeable future. Thus, the IIJA has catalyzed global infrastructure investment as countries follow suit—both with regards to developing new infrastructure and protecting existing infrastructure.
The takeaway
The federal contracting ecosystem is incredibly competitive, and liquidity is the tightest it has been in recent history. Therefore, executives are focused on maximizing operational excellence and empowering teams to innovate within their spheres of influence.
Whether it’s protecting critical infrastructure, modernizing secure communications, or anything in between, government service providers must continue to innovate and differentiate to grow.
Brad Sawyer contributed to this article.
