ORLANDO, Fla. – The government services industry is bloated and ripe for consolidation, warned a top industry executive Tuesday.
Anthony Smeraglinolo, president and CEO of Engility Corp., made his remarks as the industry keynote at the I/ITSEC show here.
He noted that between 2001 and 2011, the government services market doubled while the number of contractors servicing it tripled.
“It is still a great market, but there are too many of us addressing it,” he said. “When there is more capacity than demand, something needs to give, and I think we have begun to see that in terms of industry consolidation.”
The question of whether the training and simulation industry needs to consolidate is not new, but Smeraglinolo was clear that he sees no other way forward.
“I firmly believe consolidation is a fundamentally good thing for both industry and our government partners,” he said. “Mergers and acquisitions result in increased scale, which enables fixed infrastructure costs to be spread across the larger base.”
Smeraglinolo has put that into effect over the last year, acquiring two government services firms in Dynamics Research Corp. and TASC over the last 12 months.
“At the end of the day, consolidation done well should bring a greater pool of capabilities together in one place for our customer. From an industry standpoint consolidation is a way to enhance mission readiness.”
He also noted that industry is willing to work on lowering costs for programs, but emphasized the need for budget stability.
“We can live with these lower levels of funding, and we will develop cost efficient solutions accordingly,” he said. But “we cannot operate effectively when we have high degrees of budget uncertainty that have results in the federal procurement machine grinding to a halt.
“Innovation and agility requires not only a new approach to training, but a different mindset between government and its industry partners,” he added. ■
Email: amehta@defensenews.com.
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