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By Nick Wakeman

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Nick Wakeman

WT Insider exclusive: 2016 Top 100 sneak peek

We are deep into our work on the 2016 Top 100, and this year’s rankings are great indicator of the fundamental shifts the market is undergoing.

All of our research isn’t quite complete so this is just a sneak peek I’m sharing with WT Insiders. We’re still a month out from publishing our final report.

One of the biggest shifts in the market isn’t complete, and that’s the acquisition of Lockheed Martin’s IT business by Leidos.

For now, Lockheed Martin remains the No. 1 ranked company in the market, for the 22nd consecutive year. But next year, we’ll likely see Leidos in that top spot.

Lockheed will still be on the Top 100 and likely in the top 10 or 20. The company will still have a substantial amount of IT, systems engineering and professional services work it is keeping. I know they are hanging onto a lot of cybersecurity business, and there is ton of software development and other IT embedded in their platform work.

So, don’t expect Lockheed to disappear.

Sticking with an M&A theme, for a bit. CSRA (the combination of Computer Sciences Corp.’s public sector business and SRA International) and CACI International are both making moves up. CACI’s move is thanks to the acquisition of L-3 Communications’ national security business.

There are other dealmakers making moves up in the Top 100, including PAE, Engility, Harris, AECOM and Vencore.

The M&A drivers include companies looking to add scale, access to new customers and contract vehicles and adding new capabilities. They also want to add revenue in a market that remains flat.

It’ll be interesting to watch as these companies apply what they’ve acquired. Will the bets pay off? Time and contract awards will tell.

Looking at the market overall, many executives are looking for when growth returns. I think we are almost there, but not quite.

The total value of all prime contracts for the Top 100 looks like it will be slightly lower than last year’s $99.5 billion.

That total has fallen steadily since 2011, but the rate of decline has definitely decreased. The market isn’t contracting as much, so we are likely at the bottom or very close to it.

A big unknown is the impact from the coming election. It’s unclear to me whether we’ll see a significant slowing of spending. Counteracting any election-related slowdown is that we have more budget clarity right now than we’ve had in several years. Also, the requirements on the defense, cyber and homeland security side aren’t going away. Both sides of the aisle recognize that.

My best bet is that the 2016 and 2017 will be flat-ish, with 2018 being the earliest we’ll overall growth in the market.

More than anything, I think this year’s Top 100 shows a market that is undergoing fundamental changes.

Yes, there a lot of the usual suspects on this list. We have only nine companies making the list who weren’t on the Top 100 last year. And a few of those are returning after being out of the Top 100 for a year or two.

So, you can argue that the top of the market is stagnant, but that is only if you look at the surface. The companies on the Top 100 are nothing if not adaptable. They are survivors.

Look for more on this when the Top 100 makes its official debut in early June.

Posted by Nick Wakeman on May 05, 2016 at 9:26 AM

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