Perspecta sums up Amazon HQ2 impact: 'Stress on the system'

Amazon's decision to place half of its much-touted second headquarters in the D.C. region certainly affects government contractors. And Perspecta had the "honor" of being the first to talk specifically about it with Wall Street.

The Washington, D.C., region is changed forever now that Amazon is placing one-half of its second corporate headquarters in the Crystal City precinct of Arlington, Virginia with 25,000 staffers eventually being housed there.

So it goes without saying that the ripple effects will be felt far and wide on the D.C. area’s economy, including the engine that drives much of it: government contracting and especially in the IT and professional services arena.

And during Perspecta’s fiscal second quarter earnings call Wednesday, CEO Mac Curtis had the distinction of being the first government services CEO to have to talk about it in response to a Wall Street analyst’s question.

Curtis started off by speaking to the first and obvious concern many regional residents have: the impact of even more foot and vehicle traffic in an already cramped corner. Having half of HQ2 in Crystal City and up to 25,000 more people there certainly “puts stress on the system (and) puts stress on (Interstate) 395… it puts stress everywhere,” he told analysts.

That stress on the system theme also extends to the question of recruiting and retaining staffers, which some market executives and observers believe is the biggest headwind to both GovCon and the D.C. region’s technology talent base.

Skilled technologists are highly sought-after by both public sector- and commercial-focused companies, and the competition is only getting fiercer. Add to that backdrop the backlog of those waiting for security clearances to do federal work and that wait often pushes those staffers away from the public sector.

Amazon’s big move of sorts into the D.C. region is certainly “another play in the field,” Curtis said. “So we’re looking at how you wrestle with that.”

“We have to be realistic in how we combat that,” he added.

But there are broader government market dynamics Curtis pointed out as ones to watch now that half of HQ2 is within a stone’s throw of the Pentagon and near other government agencies.

“The one thing I think is interesting is it is going to basically push together the government customer and industry, those that really understand the mission,” Curtis said. “Because it is about the right talent to be able to deliver the mission.”

Much of Perspecta’s 14,500 employees have high-level clearances given the company’s space and intelligence footprints in particular. Three-fourths of them are in fact located outside of the D.C. area with the remainder inside.

Also for its part, Curtis said Perspecta has spent its first five months since the June opening for business on creating short- and long-term incentive programs and other initiatives for employees.

“It is a competitive environment. We want to be a talent destination,” Curtis said.

That discussion was not limited to the question-and-answer portion of the call. Curtis' scripted remarks before taking questions explained those employee incentive programs. This is part of the cultural aspect of the three-way integration of DXC Technology’s former federal business with Vencore and KeyPoint Government Solutions to create Perspecta.

Joey Cresta, public sector IT analyst at Technology Business Research, said "it was telling that (Curtis) led off, really off the bat, with an unsolicited discussion" about those initiatives to incentivize and retain employees."

"This suggests that executive leadership does understand some pretty significant resource management issues that need to be addressed as part of the integration process," Cresta told me. "All of Perspecta’s peers are talking about hiring successes and/or adjustments to compensation and benefits to attract the workforce of the future. It’s a fiercely competitive environment and being the new brand going through a complex restructuring and integration is not an easy sell for Perspecta."

It is also not the first time Perspecta's employees have had to go through such a change given the company's complex history in itself. Consider some of them go back to heritage EDS, then to Hewlett-Packard, then Hewlett Packard Enterprise, then DXC Technology and now Perspecta.

The mission of being in the public sector -- classified or not -- is the card Perspecta is touting in its favor.

“We just have to stick to our knitting, we want to be a company where employees want to come and stay,” Curtis said.

Count Curtis among those thankful to be relatively further away from Crystal City, however.

“It’s probably the only time in my career I’ve said ‘I’m glad I’m 30 miles outside of Crystal City near Dulles,” he said in reference to the proximity of Perspecta’s Herndon headquarters to Dulles International Airport. “The commute does play a pretty big role in the work-life balance.”

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