How will the DC region and GovCon adjust to Amazon HQ2?

Leidos CFO Jim Reagan acknowledges that Amazon's so-called "HQ2" in Northern Virginia will result in some adjustments, some of which have been in the making already.

Government contractors of all shapes and sizes continually think through how they should hire and retain skilled technical talent, and especially as Amazon stands up half of its second corporate headquarters in Arlington, Virginia, over the next decade.

But as Leidos Chief Financial Officer Jim Reagan pointed out during a Thursday investor conference hosted by Credit Suisse, Amazon’s envisioned 25,000-strong workforce at the Crystal City site will not merely be technology staffers.

About half of those employees will be “back office kinds of people” in functions like accounting, finance and legal, Reagan said when asked about the possible impacts of the so-called “HQ2” on the government market.

And that was something Reagan said Leidos “didn’t realize until the announcement was made” in early November on how HQ2 would split evenly between Crystal City and a site in New York City.

As far as those back office roles are concerned, Reagan struck an unfazed tone when asked about the potential impacts of HQ2 being in the Washington, D.C. region. “We’re not going to be competing for that segment of the people that Amazon are going to be hiring,” he said.

In terms of people with technology skills however, Reagan described to attendees how Leidos is generally thinking through what having HQ2 in the Washington, D.C. region means for itself and industry at-large. And he offered up moving more work outside of the D.C. region, which Leidos is doing already, as part of the answer.

“Obviously we’re going to have to think about recruiting more from people that are in geographies to the west that aren’t going to want to make the hour and a half drive into Crystal City,” Reagan said.

“We’re going to have to offer more benefits of flexibility remote workplaces and ensure that we’re really connecting with people who want to connect with our mission of making the world healthier, safer and more efficient.”

Here is some of what Leidos is doing outside of the D.C. region. Many back-office functions are in two main hubs out of places like Oak Ridge, Tennessee; Tucson, Arizona and others.

“It makes Northern Virginia a curious place (for Amazon) to put those folks because we don’t hire those kinds of people in Northern Virginia ourselves,” Reagan said.

Leidos already has less than one-third of its total workforce outside the D.C. area to begin with, he said. Perspecta CEO Mac Curtis said in an earnings call earlier this month that his company has one-fourth of its employees in the D.C. region.

Leidos’ standing up of a service capability delivery center in Morgantown, West Virginia -- home of the University of West Virginia -- has been a success story as well, Reagan said. “We’re recruiting heavily into that place and people love living there, they love the lifestyle and we’re finding it to be a surprisingly attractive place to get great talent.”

And they are not the only ones to see onshoring across the U.S. as a solution. CGI has been a pioneer of this concept in some respects through its network of capability centers. Others who have done the same include CACI International, CSRA (now part of General Dynamics IT), DXC Technology (whose federal business now resides in Perspecta) and Science Applications International Corp.

Knowing more about exactly would be at the so-called “HQ2” was one of two welcome surprises to Leidos, Reagan told attendees.

What was the other thing that was helpful? “They decided half of HQ2 was going to be up in New York,” Reagan said.

Another 25,000 jobs will be at that site on Long Island.