If General Dynamics’ $9.7 billion acquisition of CSRA goes forward, the company will be the federal government’s largest technology services provider by a wide margin.
General Dynamics’ effort to purchase IT contractor CSRA for $9.7 billion garnered national attention in recent weeks because of the size of both companies, but, should the deal go forward, it’s difficult to overstate how big a deal it could be for the federal government’s IT market.
The numbers tell the story.
According to big data analytics firm Govini, the post-merger combination of General Dynamics and CSRA would supplant market leader Leidos as the government’s largest technology services provider by a wide margin.
Leidos, which became the biggest IT contractor in government two years ago by purchasing Lockheed Martin’s IT business, has $17.2 billion in technology services contract obligations from fiscal 2014 through fiscal 2017, according to an analysis of the merger by Govini. Over the same period, the combined General Dynamics/CSRA would hold $22.7 billion in technology services obligations, 32 percent more than Leidos.
Technology services contracts include IT, professional services, systems engineering and logistics.
“I perceive this as a leapfrogging, a catapult effect in the market,” said Tara Murphy Dougherty, vice president of Govini’s national security practice. “It’s not just one acquisition, it’s really about General Dynamics gaining a solid, firm control of the marketplace with respect to federal technology services.”
CSRA has a slew of valuable contracts spread across government. Recently, CSRA captured milCloud 2.0, a Defense Department cloud contract, for $500 million. It also won one of the National Security Agency’s most important IT contracts for $2.4 billion. Overall, the acquisition of CSRA grows General Dynamics’ presence in the Defense Department by 93 percent.
But CSRA also has a huge presence in the departments of Homeland Security, Health and Human Services and Veterans Affairs.
Acquiring CSRA boosts past performance for General Dynamics by 59 percent at HHS and VA, two of the largest civilian tech spenders. That could be a huge factor in winning new contracts.
The acquisition also more than triples General Dynamics’ footprint across public safety and other civilian agencies, the Govini report said.
However, the Defense Department will be reviewing the merger, according to Defense News.
Defense Department Directive 5000.62, which was amended in 2017, directs DOD to review proposed mergers and acquisitions that impact national security, global technology leadership or the health of the industrial and technological base. If Defense officials decide the merger isn’t in the nation’s national security interests, they could recommend against it, leading to a review by the Justice Department, Dougherty said.
Competing for JEDI?
The Defense Department is close to bidding out its Joint Enterprise Defense Infrastructure contract, a cloud computing contract that could be worth as much as $10 billion.
Pre-merger, General Dynamics and CSRA were among the market leaders in data center consolidation and in a “competitive position for future cloud deployments, such as JEDI,” Dougherty said. There are still questions about the contract, but a post-merger company would only improve its competitiveness in such a bid.