A hiring company called Leidos received more than $ 16 billion in revenue last year, most through contracts with federal agencies such as the Department of Veterans Affairs.
So, when the Trump administration budget trimmers pointed to the VA last month, it seemed bad news not only for the employees of the department but also for reads and dozens of other companies in the private sector.
“No more payment consultants to do things how to make Power Point slides and write minutes of meetings!” The secretary of the department, Doug Collins, wrote in X. In general, the department indicated that it was canceling more than 850 contracts worth almost $ 2 billion.
But shortly after Mr. Collins’s announcement, the prospects for some of VA contractors seemed to rejoice. The department put the cancellations in pause, saying that he needed to review the contracts to avoid “eliminating any benefit or service” to veterans or beneficiaries of VA. Later he reduced the list of contracts canceled by a few hundred.
And government hiring experts said the cuts to the agency, which they announced last week, was trying to cut 80,000 of their approximately 480,000 employees, could even lead to a higher expense in federal contracts.
These experts pointed out that cutting employees without reaching a government function, such as providing medical care and benefits to veterans, working in which Leidos plays a key role, generally means that work will fall more in contractors.
“If you cut people and do not cut the mission, you must trust other sources to do the job,” said Stan Soloway, an official of the Defense Department in the Clinton Administration who has directed a commercial group that represents government contractors.
A spokesman for Leidos, Brandon Ver Velde, said in a statement: “We firmly support the objective of creating a dramatically more efficient and effective federal government that costs taxpayers less money,” and added that “offering innovations that make it is a nucleus for our mission.”
However, it shakes, the island and little understood of federal contractors in no way is immune to the uncertainty that President Trump and Elon Musk, the head of his government efficiency initiative, have brought the federal apparatus.
In the months after the presidential elections, since it was clear that Trump and Musk would control federal agencies, the prices of contractors that are quoted in the stock market as Leidos and Booz Allen Hamilton collapsed. (Prices are still increasing since the beginning of this decade).
Then, one of the senior government officials involved in the acquisition, the interim chief of the General Services Administration, sent a memorandum last month asking the heads of federal agencies to review a list of potentially non -essential contracts, those that generate only “a report, investigation, training or an artifact”, and defend any that they consider essential.
A follow -up memorandum listed the 10 best paid consulting firms throughout the government and said they were scheduled to receive more than $ 65 billion in rates from this year. “Provide a list of contracts with these companies that your agency intends to finish and those that intend to maintain,” added the Memo.
Leidos and Booz Allen were on the list. The employees of some contractors said their companies had discussed employment cuts in the midst of scrutiny.
But the Trump administration seems to have softened its position since then. After meetings with executives from large contracting companies, the Wall Street Journal reported, another GSA top official said in a statement that we “value their association” and that “we welcome you to work with us to reduce our excessive government expenditure while we continue to provide the essential services that the Government needs.”
Actions analysts that follow companies specialized in federal contracts said they were generally optimistic about the business’s prospects. “In the short term, there will probably be some interruption and uncertainty for contractors,” said Scott Mikus, director of Melius Research that follows federal contractors. “But probably long -term medium is good.”
Matthew Akers, capital analyst at Wells Fargo, said that despite all the holders that attract attention, the government had canceled few large contracts so far. “If there were a low fruit, they could have cut,” he said, “I think they would have done it.”
Leidos seems to illustrate the point. Founded by a nuclear physicist in 1969, the company was soon hired to study the effects of nuclear weapons by the federal government, which had just stopped performing atmospheric tests in favor of simulations. The company, then known as Science Applications Inc. (and later SAIC), entered the medical care business the following year, winning a federal contract to study the radiation treatment for cancer.
Like many federal contractors, SAIC benefited when the Clinton administration cut the federal workforce by hundreds of thousands and ended up increasing the dependence of the government of private companies, according to a 2011 report of the Government’s Supervision Project, a non -profit group that monitors federal hiring. The George W. Bush administration expanded more hiring.
The company was made public in 2006 and was renamed read in 2013, turning SAIC as a smaller consulting business. A series of acquisitions greatly expanded its size and scope.
Today, Leidos makes products as varied as the airport scanners and guided missiles. It develops offensive and defensive cyber abilities, performs intelligence analysis, updates computer systems in several federal agencies, perform medical exams for veterans and executes a cancer research laboratory funded by the federal government, where it uses more than 2,000 scientists, technicians and administrators.
While these are not businesses that would normally stay within a single company, government hiring creates a solid justification to combine them: all companies benefit from the intimate knowledge of the process often convoluted and that requires a lot of time to gain federal contracts.
“Understanding the acquisition process, from the award to the performance of the contract to the billing to the payment cycle, is very important,” said Robert Guerra, who spent decades in higher positions in federal hiring companies. “You need to have systems to do it.”
With the government buying more than $ 450 billion in services and more than $ 250 billion in goods each year, jumping through such hoops can be lucrative. According to a federal presentation of values, read, which employs almost 50,000 people, won more than $ 16 billion in revenue last year and around $ 1.25 billion in earnings. The company said that almost 90 percent of its income arrived directly or indirectly from federal contracts, and that contracts with the Pentagon or US intelligence agencies generated approximately half of their income.
Until now, Leidos has suffered little business loss. In a report circulated in February, Mr. Akers of Wells Fargo said that Leidos could be more exposed to cuts than other contractors because more of their businesses were on the civil side of the Government’s major book than with the Army. He pointed out that the Efficiency Department of Mr. Musk had already identified savings of more than $ 200 million from a read information technology contract with the Social Security Administration.
But the figure seemed to be a mistake, and the only savings of a read contract with the Social Security Administration seemed to be worth around $ 500,000, as Mr. Akers pointed out in a subsequent report.
In other cases, it is likely that the priorities of the Trump administration provide new opportunities for the company. Read recently won a contract with the VA to provide projections that verify the disability status of the veterans, and may be well positioned to expand their veteran medical care business in the midst of the cuts in the department.
“They do medical and disability exams,” Mikus said. “Veterans will still need attention while trying to solve the accumulation of cases.” Leidos said he did not see himself as a replacement for VA employees, but that he could help the department better serve veterans.
Peter Kasperoowicz, a VA spokesman, said by email that the agency was working to redirect billions of dollars in “non -critical efforts” to reduce tardadas and improve attention. He added: “Contracts will be canceled in some cases, and in other cases new contracts will be created to reduce duplication and take advantage of a better purchase power.”
Of course, it may be a mistake to assume that the uncertainty created by Trump and Musk will eventually pass, returning the hiring business to their pre -election state. Federal hiring has traditionally provided companies stable and predictable income but margins of profits lower than the most volatile work in the private sector. If the federal government is no longer a reliable customer, the business economy can change.
“You have what price in ‘What probability I think this will happen?'” War, the lifelong contractor, referring to the possibility that the Trump administration abruptly cancels a contract. He suggested that companies could begin to assume that a contract was worth, for example, 5 percent less than the amount established to take into account such risk.
Even so, the industry could survive worse, including the expenses of expenses of an agreement between President Barack Obama and the Republicans of Congress.
Almost at the same time, in June 2013, the media published revelations provided by Edward J. Snowden, a Booz Allen employee who leaked one of the most important dressers of documents classified in the history of the United States. The price of its employer’s shares quickly fell more than 5 percent, since investors seemed to worry that the government would reduce its use of contractors in national security sensitive works.
But within a month or two, the crisis had passed, and Booz Allen’s shares increased approximately 20 percent. As of this month, the price of their shares had been appreciated many times.
Jack Begg and Kirsten Noyes Contributed research.
