By Suzanne Kubota
Senior Internet Editor
FederalNewsRadio.com

In looking at the future of federal contracting, some market analysts expect consolidation of smaller companies in order to compete with industry giants for an ever shrinking pool of available funds.

CGI Group of Montreal will pay $1 billion for systems integrator Stanley, doubling the size of GCI’s federal business and moving CGI into the U.S. defense market in a big way, according to Washington Technology.

This news comes on the heels of declining Recovery Act funds, a proposal to freeze discretionary spending, and a push for insourcing.

Company president, Donna Morea, told Federal News Radio’s Tom Temin CGI’s move is a good match.

You know, people talk about whether the federal market is growing or shrinking, but the truth is that federal governments will need IT and business process services as long as you and I are alive, Tom. So this is a great, great market to be in, especially as federal market needs evolve.

Morea said currently, CGI is “predominately focused on the civilian side of the federal government,” while Stanley’s contracts are with “all four services of the military and a broad range of security and intelligence organizations.” According to a CGI press release, once the merger is complete, the “client base will be a diversified and balanced blend of 55% defense and intelligence and 45% U.S. Federal civilian agencies.”

Morea sees opportunity in Secretary Gates’ announced “scrub” of the FY 2012 Pentagon budget to look for “roughly $10 billion in overhead cost savings “. She said huge savings could be realized by “leveraging IT solutions to bring more efficiency and effectiveness to government operations. So we’re very, very excited about that. We see that as a great opportunity to leverage our capabilities.”

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