WASHINGTON ― General Dynamics’ $9.6 billion acquisition of government information technology solutions powerhouse CSRA on Monday demonstrates a trend of consolidation in the government services market.

In a conference call announcing the acquisition, General Dynamic’s Chairman and CEO Phebe Novakovic pointed to the power of sheer mass in targeting government services opportunities.

“In a consolidating market it makes an awful lot of sense to combine to better address the larger packaging opportunities from a contracting point of view,” she said. “Stasis is death.”

This focus on consolidation begs the question: How will General Dynamics’ acquisition of CSRA affect competition in the government services market?

Leidos’ merger with Lockheed Martin’s Information Systems and Global Solutions in 2016 cemented the company one of the largest firms in the IT market.

Since the merger, Leidos won a contract with the National Geospatial-Intelligence Agency worth nearly $1 billion, and has taken steps to compete for the Navy’s multibillion-dollar NGEN-R contracts (CSRA has also expressed its suitability for the NGEN-R contracts).

If the merger plays out like General Dynamics expects, the company will likely be able to compete with Leidos for the larger, more lucrative government services contracts.

Dan Johnson, General Dynamics’ executive vice president of information systems and technology, is particularly optimistic about emerging opportunities in this market space.

“We feel that with recent events such as the newly approved increasing budget, the realization that awarding to the lowest bidder has not worked and that quality matters all align at this point to make the combination of General Dynamics and CSRA a market-changing event, and we are very excited about it,” Johnson said.

Yet, the transition may not move as quickly as GDIT-CSRA hopes.

“The integration will be very complicated and will not be quick, given the massive size of both companies,” said Chris Helmrath, managing director of SC&H Capital. “But the bigger issues will be a cultural assimilation. Since GD is known in the market as more conservative while CSRA was seen as an innovator ... it will be telling which culture comes out on top as integration progresses.”

But once up and running, GDIT-CSRA could be expected to compete for federal IT service contracts. “This is a double-down play, and I think to compete effectively with Leidos, a player needs scale, which this deal definitely brings,” Helmrath added.

General Dynamics’ decision to double-down bucks the trend of other prime contractors. Aerospace and defense analyst Rob Stallard of Vertical Research Partners said in a report that “doubling down on Fed IT seems to move GD in the opposite direction of where the Prime contractor peers are heading.”

Helmrath and his firm expect further consolidation in all areas of the market, from the largest players like the DXC-Vencore-KeyPoint merger, down to emerging midtier competitors like Polaris Alpha and By Light Professional IT Services.

“We predict continued consolidation for unique capabilities, contracts and customers in government services to continue through 2018,” Helmrath said.

Daniel Cebul is an editorial fellow and general assignments writer for Defense News, C4ISRNET, Fifth Domain and Federal Times.

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