Science Applications International Corp.’s (NYSE: SAIC) chief executive told investors Thursday he expects consolidation among government services contractors to continue as companies continue to pursue portfolio reshaping initiatives.
SAIC itself was a player in the GovCon services consolidation wave through the $790 million acquisition of Scitor announced in March 2015 nearly five months after Engility Corp. (NYSE: EGL) said it would combine with its Chantilly, Virginia-based neighbor TASC.
As a result, SAIC placed itself sixth in annual revenue among services contractors at the time and elevated to fifth at $4.4 billion after Leidos Holdings (NYSE: LDOS) merged into the former Lockheed Martin (NYSE: LMT) services segment Aug. 16.
“We’re comfortable with where we are among the top five against our broad set of competitors, ” Tony Moraco said in SAIC’s second quarter earnings call with analysts.
That consolidation has not affected the pricing of bids from contractors but has inevitably resulted in a reduction of competitors as companies focus on pursuits of larger awards, Moraco said.
“Perhaps eight primes bid on something three years ago and maybe that’s now five. Maybe the sheer number of large proposals from primes might change slightly, ” he said.
Moraco attributed pricing requirements in contracts to the budget environment and increased focus by agencies on timing of product or service implementations in awards.
“I think we’re now seeing time-to-market and ability to deliver capability sooner within those budget constraints as a new component and that leads to better value for the customer versus price alone, ” he said.
“It’s more pricing pressures based on budgets and trying to take away work from others in a flat environment.”