The world’s largest aerospace and defense contractor’s message to investors and other GovCon industry observers this week on the future of its government services business can be boiled down to this: wait ‘til next year.
Bruce Tanner, chief financial officer at Lockheed Martin, told a group of industry analysts the company has pushed the target date of a sale or spin-out of the services segments out to March 2016 from its original year-end intention in order to further examine external interest.
Tanner’s announcement to the Credit Suisse Industrials Conference in Florida fills the second of three pieces in the puzzle of how large prime contractors would contribute to the GovCon services segment’s consolidation narrative for 2015.
BAE Systems officially took its U.S. government services segment off the auction block two weeks ago and L-3 Communications is looking to make a decision on its own services business by this year’s end.
For GovCon watchers, Tanner’s comments tell the story of the GovCon services sector’s shifting landscape and why large primes like Lockheed may no longer want to stay in.
“This has become a marketplace where past performance does not have much precedence on future awards as it once did. It’s truly a cost shootout and what we saw was more entrants into this businesses as single-model businesses.”
Other industry players see an opportunity to stay in or even double down and we saw that come into play from Engility over the past two years with its purchase of Dynamics Research Corp. and the blockbuster combination with its Chantilly neighbor TASC.
Our website ExecutiveBiz recently caught up with Engility CEO Tony Smeraglinolo and COO John Hynes for insight into how industry is thinking about services sector consolidation, plus their outlook for Engility next year and beyond after the TASC deal.
Please click here to read more of our conversation with Engility’s top two executives.