How CSRA expands General Dynamics' public safety footprint

Public safety is a fragmented and disparate market not unlike much of government IT and professional services but it could represent an additional growth runway for General Dynamics through its acquisition of CSRA.

The deal positions GD’s IT services business in an arena where its share of unclassified contracts has declined over the last four fiscal years, according to a new report from public sector big data and analytics firm Govini.

GD’s contracts with public safety agencies such as the Homeland Security and Justice departments fell 46.6 percent on a compound annual basis between fiscal years 2014 and 2017, Govini said in its report posted Monday. And public safety contracts accounted for only 3.1 percent of GD’s technology services capture over that period.

CSRA by comparison will bring almost $6 billion in past performance from public safety and several other non-health civilian agencies such as the Commerce Department, which runs the FirstNet public safety network program. General Dynamics is a subcontractor to AT&T on the potential 25-year, $100 FirstNet contract.

When GD announced the CSRA deal Feb. 12, executives at the company touted CSRA’s diverse revenue mix across the health and civilian, defense and intelligence markets as mirroring the defense contractor’s IT market strategy.

Neither of those three sectors at CSRA represents less than 30 percent of anticipated revenue this calendar year and that will hold true for CSRA is integrated into GDIT once the deal closes.

See our complete coverage of the GD-CSRA deal

In an investor presentation on the deal, General Dynamics said the combined entity would be a $9.9 billion-revenue business on a pro forma basis. Thirty-six percent of those sales would be in health and civil, 33 percent in intelligence and 31 percent in defense.

With that scale and diversity, General Dynamics can comfortably bid for any government IT job it wants to -- one of the key rationale behind Leidos’ merger with the former Lockheed Martin IS&GS business two years ago and other consolidation moves in the market.

Scale also can help services companies spread costs out across their business base to be more competitive on price, a benefit Leidos has touted from the IS&GS transaction.

Govini’s reading on what General Dynamics gains through the combination does not factor in sales contributions from its role as a subcontractor to AT&T on FirstNet.

General Dynamics CEO Phebe Novakovic told investors in April 2017 the company considers FirstNet a “potential growth market for many years to come.”

In a description of FirstNet, General Dynamics touts its experience in systems integration and program management along with cybersecurity resources and broadband engineering work.

AT&T’s other teammates for FirstNet are Motorola Solutions, Inmarsat Government and Sapient Consulting.