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Rob Terry, senior writer with the Washington Business Journal and expert in current contracting trends, says many companies are looking to scale upward to increase profits.

“[The market is] pretty hot… lots of deals, especially in the mid-market space,” said Terry.

“Companies are anxious to add capabilities to their mix because of what the government customer is looking to buy. New things in technology, especially,” he said.

“You see that especially in this this deal by DXC Technology,” said Terry. The company plans to spit out its business in the public sector and combine it with two other contracting companies in Virginia and Colorado.

“The scale enables them to position themselves as this next-generation provider of choice for the government,” he said.

The public sector surprisingly has many similarities to the private sector. “It’s really interesting to me how I see a lot of the same things, a lot of the same talking points… they’re pulling from the same playbook in a lot of instances,” he said.

This is most apparent in D.C.’s cybersecurity and IT services areas. One example is Leidos, a government contracting IT company that recently merged with Lockheed Martin. “Now, they’re a $10-billion IT services behemoth,” said Terry.

Merger and acquisition activity in the public sector is a huge factor in wealth creation for the region, but it’s often underappreciated.

“It’s why private equity is so interested in this market… Uncle Sam is a pretty deep-pocketed customer, and he always pays his bills. So, they see a lot of opportunity,” said Terry.

However, the sector is still a little slowed from 2013’s sequestration. “Pretty sluggish, these last couple years… but at the same time, you’ve got a new administration that’s talked about increasing budgets for defense,” Terry said.

“I still sense that kind of a hangover, but at the same time, I sense optimism,” he said.

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