{"id":989,"date":"2025-03-14T13:38:23","date_gmt":"2025-03-14T13:38:23","guid":{"rendered":"https:\/\/www.insuracarelife.com\/blog\/trump-and-doge-create-anxiety-but-opportunity-for-federal-contractors\/"},"modified":"2025-03-14T13:38:23","modified_gmt":"2025-03-14T13:38:23","slug":"trump-and-doge-create-anxiety-but-opportunity-for-federal-contractors","status":"publish","type":"post","link":"https:\/\/www.insuracarelife.com\/blog\/trump-and-doge-create-anxiety-but-opportunity-for-federal-contractors\/","title":{"rendered":"Trump and DOGE Create Anxiety but Opportunity for Federal Contractors"},"content":{"rendered":"<div data-testid=\"companionColumn-0\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">A contracting firm called Leidos took in more than $16 billion in revenue last year, most of it through contracts with federal agencies like the Department of Veterans Affairs.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">So when the Trump administration\u2019s budget cutters took aim at the V.A. last month, it seemed like bad news not just for the department\u2019s employees but also for Leidos and dozens of other private-sector firms.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cNo more paying consultants to do things like make Power Point slides and write meeting minutes!\u201d the department\u2019s secretary, Doug Collins, <a class=\"css-yywogo\" href=\"https:\/\/x.com\/SecVetAffairs\/status\/1894426832641913204\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">wrote on X<\/a>. Overall, the department said, it was canceling more than 850 contracts worth nearly $2 billion.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But shortly after Mr. Collins\u2019s announcement, the outlook for some of the V.A.\u2019s contractors seemed to brighten. The department <a class=\"css-yywogo\" href=\"https:\/\/federalnewsnetwork.com\/veterans-affairs\/2025\/02\/va-pauses-billions-in-cuts-lauded-by-musk-as-lawmakers-and-veterans-decry-loss-of-critical-care\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">put the cancellations<\/a> on pause, saying it needed to review the contracts to avoid \u201celiminating any benefits or services\u201d to veterans or V.A. beneficiaries. It later <a class=\"css-yywogo\" href=\"https:\/\/news.va.gov\/press-room\/va-to-terminate-585-non-mission-critical-or-duplicative-contracts\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">narrowed the list<\/a> of canceled contracts by a few hundred.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-1\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">And experts on government contracting said cuts to the agency, which announced last week that it was seeking to trim 80,000 of its roughly 480,000 employees, could even lead to increased spending on federal contracts.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">These experts noted that cutting employees without reining in a government function \u2014 like providing health care and benefits to veterans, work in which Leidos plays a key role \u2014 typically means the job will fall more heavily on contractors.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cIf you cut people and you don\u2019t cut the mission, you have to rely on other sources to do the work,\u201d said Stan Soloway, a Defense Department official in the Clinton administration who has led a trade group representing government contractors.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">A Leidos spokesman, Brandon Ver Velde, said in a statement, \u201cWe strongly support the goal of creating a dramatically more efficient and effective federal government that costs taxpayers less money,\u201d adding that \u201cdelivering innovations that do that is core to our mission.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">However it shakes out, the insular and little-understood world of federal contractors is by no means immune to the uncertainty that President Trump and Elon Musk, the head of his government efficiency initiative, have brought to the federal apparatus.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-2\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">In the months after the presidential election, as it became clear that Mr. Trump and Mr. Musk would rein in federal agencies, the share prices of publicly traded contractors like Leidos and Booz Allen Hamilton plummeted. (The prices are still up from earlier this decade.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Then one of the government\u2019s top officials <a class=\"css-yywogo\" href=\"https:\/\/www.gsa.gov\/about-us\/organization\/federal-acquisition-service\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">involved in procurement<\/a>, the acting head of the General Services Administration, sent <a class=\"css-yywogo\" href=\"https:\/\/federalnewsnetwork.com\/wp-content\/uploads\/2025\/02\/GSA-Assistance-with-Terminating-Descoping-and-Justifying-Consulting-Contracts.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">a memo<\/a> last month asking the heads of federal agencies to review a list of potentially nonessential contracts \u2014 those that generate only \u201ca report, research, coaching or an artifact\u201d \u2014 and defend any they deemed essential.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">A <a class=\"css-yywogo\" href=\"https:\/\/federalnewsnetwork.com\/acquisition-policy\/2025\/02\/gsa-tells-agencies-to-target-top-10-consulting-firms-for-cuts\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">follow-up memo<\/a> listed the 10 highest-paid consulting firms across the government and said they were scheduled to receive over $65 billion in fees beginning this year. \u201cPlease provide us with a list of the contracts with these firms that your agency intends to terminate and those that it intends to maintain,\u201d the memo added.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Leidos and Booz Allen were on the list. Employees of some contractors said their firms had discussed job cuts amid the scrutiny.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But the Trump administration appears to have softened its stand since then. After meetings with executives of large contracting firms, <a class=\"css-yywogo\" href=\"https:\/\/www.wsj.com\/business\/big-consulting-bosses-meet-with-trump-officials-to-save-contracts-8b2946f8\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">The Wall Street Journal reported<\/a>, another top G.S.A. official said in a statement that \u201cwe value their partnership\u201d and that \u201cwe welcome them working with us to decrease our excessive government spending while continuing to provide the essential services the government needs.\u201d<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-3\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Stock analysts who follow companies specializing in federal contracts said they were generally bullish on the companies\u2019 prospects. \u201cShort term, there will probably be some disruption and uncertainty for the contractors,\u201d said Scott Mikus, a director at Melius Research who follows federal contractors. \u201cBut probably in the medium to long term it\u2019s a good thing.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Matthew Akers, an equity analyst at Wells Fargo, noted that for all the attention-grabbing headlines, the government had canceled few large contracts so far. \u201cIf there was low-hanging fruit they could have cut,\u201d he said, \u201cI think they would have done it.\u201d<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-4\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Leidos appears to illustrate the point. Founded by a nuclear physicist in 1969, the company <a class=\"css-yywogo\" href=\"https:\/\/www.leidos.com\/insights\/50th-anniversary-first-customer-DASA-contract\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">was soon hired<\/a> to study the effects of nuclear weapons by the federal government, which had just stopped conducting atmospheric tests in favor of simulations. The company, then known as Science Applications Inc. (and later SAIC), entered the health care business <a class=\"css-yywogo\" href=\"https:\/\/www.leidos.com\/company\/history\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">the next year<\/a>, winning a federal contract to study radiation treatment for cancer.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Like many federal contractors, SAIC benefited when the Clinton administration trimmed the federal work force by hundreds of thousands and ended up increasing the government\u2019s reliance on private firms, according to a <a class=\"css-yywogo\" href=\"https:\/\/s3.amazonaws.com\/docs.pogo.org\/report\/2011\/bad-business-report-only-2011.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">2011 report<\/a> by the Project on Government Oversight, a nonprofit group that monitors federal contracting. The George W. Bush administration expanded contracting further.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-5\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">The company went public in 2006 and renamed itself Leidos in 2013, spinning off SAIC as a smaller consulting business. A series of acquisitions vastly expanded its size and reach.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Today, Leidos makes products as varied as airport scanners and guided missiles. It develops offensive and defensive cyber capabilities, conducts intelligence analysis, upgrades computer systems at several federal agencies, performs medical exams for veterans and runs a <a class=\"css-yywogo\" href=\"https:\/\/frederick.cancer.gov\/about\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">federally funded cancer research lab<\/a>, where it employs more than 2,000 scientists, technicians and administrators. <\/p>\n<p class=\"css-at9mc1 evys1bk0\">While these are not businesses that would normally be housed inside a single company, government contracting creates a strong rationale for combining them: All the businesses benefit from Leidos\u2019s intimate knowledge of the often-convoluted and time-consuming process of winning federal contracts.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cUnderstanding the procurement process, from the award to the contract performance to invoicing to the payment cycle, is really, really important,\u201d said Robert Guerra, who spent decades in senior positions at federal contracting firms. \u201cYou need to have systems in place to do it.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">With the government <a class=\"css-yywogo\" href=\"https:\/\/files.gao.gov\/multimedia\/Federal_Government_Contracting\/index.html?_gl=1*1ag6k1b*_ga*NTYxNjgxODYxLjE3Mzk4MTk3Mjg.*_ga_V393SNS3SR*MTc0MDQzNDA5My42LjAuMTc0MDQzNDA5My4wLjAuMA..\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">buying<\/a> more than $450 billion in services and more than $250 billion in goods each year, jumping through such hoops can be lucrative. According to a federal securities filing, Leidos, which employs nearly 50,000 people, earned more than $16 billion in revenue last year and about $1.25 billion in profit. The company said that nearly 90 percent of its revenue came directly or indirectly from federal contracts, and that contracts with the Pentagon or U.S. intelligence agencies generated about half of its revenue.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-6\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">So far, Leidos has suffered little loss of business. In a report circulated in February, Mr. Akers of Wells Fargo said Leidos might be more exposed to cuts than other contractors because more of its business lay on the civil side of the government\u2019s ledger than with the military. He noted that Mr. Musk\u2019s Department of Government Efficiency had already identified savings of more than $200 million from a Leidos information technology contract with the Social Security Administration.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But the figure appeared to be an error, and the only savings from a Leidos contract with the Social Security Administration appeared to be worth about $500,000, as Mr. Akers noted in a later report.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">In other cases, Trump administration priorities are likely to bring new opportunities for the company. Leidos recently won a contract with the V.A. to provide screenings that verify veterans\u2019 disability status, and it may be well positioned to expand its veteran health care business amid the cuts at the department.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cThey do medical and disability exams,\u201d Mr. Mikus said. \u201cVeterans are still going to need care as you\u2019re trying to work down the backlog of cases.\u201d Leidos said that it did not see itself as a replacement for V.A. employees but that it could help the department serve veterans better.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Peter Kasperowicz, a V.A. spokesman, said by email that the agency was working to redirect billions of dollars in \u201cnon-mission-critical efforts\u201d to reduce backlogs and improve care. He added, \u201cContracts will be canceled in some instances, and in other instances new contracts will be created to reduce duplicity and leverage better buying power.\u201d<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-7\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Of course, it may be a mistake to assume that the uncertainty created by Mr. Trump and Mr. Musk will eventually pass, returning the contracting business to its pre-election state. Federal contracting has traditionally provided companies with stable, predictable revenue but lower profit margins than more volatile private-sector work. If the federal government is no longer a reliable customer, the economics of the business may change.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cYou\u2019ve got to price in \u2018What probability do I think this will happen?\u2019\u201d said Mr. Guerra, the longtime contractor, alluding to the possibility that the Trump administration will abruptly cancel a contract. He suggested that companies might begin to assume a contract was worth, say, 5 percent less than the stated amount to account for such risk.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Still, the industry has arguably survived worse, including spending cuts from a deal between President Barack Obama and congressional Republicans.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Around the same time, in June 2013, news outlets published revelations provided by Edward J. Snowden, a Booz Allen employee who leaked one of the most significant troves of classified documents in U.S. history. The share price of his employer quickly dropped more than 5 percent as investors appeared to worry that the government would curtail its use of contractors on sensitive national security work.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But within a month or two, the crisis had passed, and Booz Allen stock was up about 20 percent. As of this month, its share price had appreciated many times over.<\/p>\n<p class=\"css-798hid etfikam0\">Jack Begg<!-- --> and <!-- -->Kirsten Noyes<!-- --> contributed research.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n","protected":false},"excerpt":{"rendered":"<p>A contracting firm called Leidos took in more than $16 billion in revenue last year, most of it through contracts with federal agencies like the Department of Veterans Affairs. So when the Trump administration\u2019s budget cutters took aim at the V.A. last month, it seemed like bad news not just for the department\u2019s employees but [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":990,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[666,667,665,664,260,502,158],"class_list":["post-989","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-anxiety","tag-contractors","tag-create","tag-doge","tag-federal","tag-opportunity","tag-trump"],"_links":{"self":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/989","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/comments?post=989"}],"version-history":[{"count":0,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/posts\/989\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media\/990"}],"wp:attachment":[{"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/media?parent=989"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/categories?post=989"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.insuracarelife.com\/blog\/wp-json\/wp\/v2\/tags?post=989"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}