During their third quarter earnings call, executives across the government services ecosystem addressed a common challenge: how to navigate an increasingly competitive landscape.
A variety of topics were covered during these conference calls, recordings of which were provided by Bloomberg. But his three big themes emerged: the importance of innovation, portfolio resilience, and infrastructure investment opportunities.
live on the cutting edge
Many of the leading government services companies are focused on innovative, cutting-edge technologies related to cybersecurity, IT modernization, and artificial intelligence. Management teams are always looking for the next advancement to differentiate themselves from the competition.
Over the past few quarters, we've seen leading companies evolve strategies to encourage and empower their employees to discover the next breakthrough.
Maximus Inc. created the “Spark Tank” competition, where teams of employees pitch innovative ideas to organizational leaders.
KBR Inc. held its first hackathon, where internal volunteers developed new solutions in sustainability, digitization, artificial intelligence, and branding.
In the case of SAIC Inc., the scope extends even further as new CEO Toni Townes-Whitley works to create a strong entrepreneurial culture.
Historically, significant advances in capabilities have come about inorganically through the acquisition of intellectual property. During the recent period of rising interest rates, companies also considered the benefits of investing organically, through their employees, to discover new ideas and solutions.
As the development of cutting-edge technology continues to accelerate and the gap between you and your top competitors narrows, small changes in people, processes, and technology can give you an advantage. Therefore, executives increasingly rely on the employees who know their business best for innovative results.
Building a resilient portfolio
At the time of the third-quarter earnings release, the possibility of a government shutdown and uncertainty surrounding the fiscal year 2024 budget remained. Executives answered questions with confidence in their company's ability to weather an adverse outcome. The collective optimism prompted broader questions. Amidst the uncertainty, why wasn't the executive branch more concerned about the outcome of the federal budget?
Executives cited common strategies such as geographic diversification and building stronger contract balances. But the real driver and strategic focus was resilience.
John Mengucci, CEO of CACI International, said the company is bidding on long-term, permanent work where customer demand is likely to remain high and driven by an ever-present and growing global threat environment. He said he is concentrating on
Similarly, Booz Allen Hamilton CEO Horacio Rozansky said resilience is built into the company's business model. Rozansky said the company has invested in key growth areas and improved the timing of its decision-making process.
Townes-Whitley summed up this concept well, saying that SAIC's future investments will be focused on ensuring its operating portfolio is fully operational at enterprise scale.
To learn more about working with the federal government, visit RSM's Government Contracts page.
Ultimately, each major company has focused on building a portfolio that addresses the government's most important long-term needs. For many contractors, this means addressing opportunities and threats that won't go away anytime soon, including IT modernization, cybersecurity, and secure communications, as global threats grow in scale and complexity. means.
In other words, if you're waiting for annual budget results to drive your strategy, you're already behind the curve.
Build and protect your infrastructure
The Infrastructure Investment and Jobs Act (IIJA) continues to open the door for companies that provide products and services related to critical infrastructure.
John Wasson, CEO of ICF International, pointed to increased demand for electrical engineering, power generation and technical advisory services. Growing demand in these areas suggests that IIJA funding is having a positive impact on renewable energy sources. This could be an area of significant growth by around 2027, when IIJA's funding is expected to peak.
Parsons CEO Carrie Smith said there was an “unprecedented” level of infrastructure investment around the world and that she expected it to continue for some time. In this way, IIJA has facilitated global infrastructure investment as countries follow suit, both in terms of developing new infrastructure and protecting existing infrastructure.
Take out
The federal contracting ecosystem is incredibly competitive, and liquidity is at its tightest in recent history. Therefore, executives are focused on maximizing operational excellence and enabling their teams to innovate within their sphere of influence.
Whether it's protecting critical infrastructure, modernizing secure communications, or anything in between, government service providers must continue to innovate and differentiate in order to grow.
Brad Sawyer contributed to this article.
