The Navy raised concerns about conflicts of interest because of work CSRA was doing under Seaport-e and now General Dynamics is looking for a buyer for the business.
General Dynamics and its now-acquired CSRA business will divest a systems engineering and acquisition support services business in order to mitigate any potential organizational conflicts-of-interest.
This business within CSRA’s defense group works with the Navy and performs services under the Seaport-e contracting vehicle for professional services and other smaller vehicles, the Naval Sea Systems Command said Tuesday.
The companies will seek a third party to buy the CSRA System Engineering and Acquisition Services Business Unit and its support for NAVSEA. In addition, General Dynamics will operate CSRA as a sister company to the defense contractor’s IT services unit.
When General Dynamics first announced its deal for CSRA Feb. 12, GD CEO Phebe Novakovic told investors in a conference that both companies “identified one extremely small potential” OCI they planned to “dispatch with very expeditiously.”
General Dynamics also holds a position on Seaport-e, the Navy’s largest vehicle for acquiring acquisition-related and other professional services. A company spokesperson told me: "We are currently reviewing our options at this time and have not made any final determinations."
As that sale process takes place, CSRA and General Dynamics will segregate and isolate program support work performed by the SEABU unit away from GD.
There is recent precedent for contractors to divest of small units after large acquisitions in order to mitigate conflicts of interest that arise when companies advise the government on writing contracts for future programs they could later bid on.
Upon the closure of its Aquilent purchase in 2017, Booz Allen Hamilton divested the business that held Aquilent’s Seaport-e contract to Octo Consulting. That divestiture covered staff, data code rights and associated assets.
Concerns over conflicts of interest helped shape the government services landscape as it stands today.
First awarded in 2004, Seaport-e has brought $2.5 billion in total task order dollars to CSRA since then at a burn rate of $180.8 million per year, according to Deltek data. The Navy has awarded $1.7 billion in task orders to General Dynamics since the award at a burn rate of $121.8 million per year.
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