Service Providers Dominate List of Top Federal Contractors

Top federal integrators had a good 2004 -- with Northrop Grumman raking in more than $3 billion in contract dollars. But rankings don't necessarily reflect ownership of the market, with the majority deriving their riches from single contract wins.

According to a list of the top 150 federal contractors released by Reston, Va.-based research firm Input, integrators dominated the top 10, with only Dell -- ranked No. 8 with $957 million -- receiving the majority of prime contract spending from the sale of products. Northrop Grumman, SAIC, Lockheed Martin, General Dynamics and EDS accounted for more than $12 billion of the $50 billion reported in the Federal Procurement Data System. CSC and Raytheon also brought in 10-digit earnings, with $1.8 billion and $1.3 billion, respectively, in federal IT contract dollars.

"The focus on services has generally been consistent year-over-year," particularly since most of the contracts tallied in 2004 were initially awarded three or four years ago," says Ashlea Higgs, manager of Input's vendor information products. CSC, for example, inherited a $132 million task order for the FBI's agencywide IT upgrade initiative, Trilogy, after acquiring DynCorp in December 2002. The initial three-year contract was awarded in May 2001. "New contract awards will drive future lists," since many contracts wrapped toward the end of last year.

Interesting to note is the impact of individual contracts on a company's ranking. EDS, for example, derived 83 percent of its $1.8 billion from three contracts; IBM and SAIC about half. In fact, seven of the top 10 saw more than 25 percent of their total IT dollars come from their three most lucrative contracts. That is not uncommon given the dollar amount affixed to many defense contracts. Middle-ranking companies, however, that focus on the civil market have the potential to climb, as equally lucrative contracts come with ramped-up homeland-security efforts.

"As you get to the medium and small companies, there will absolutely be year-over-year shuffling as companies experience a seasonal spike in spending, thanks to one or more contracts and to an increasing number of agency missions relating to homeland defense," Higgs says. "Of course, also important to keep in mind is that federal business is just one component of what many of these companies do. One contract won't make or break most of them."