By Audrey B.
Outsourcing companies specifically offering services catering to governments and its units have started the year off with multiple contracts being signed. Particularly, IT and business process solutions providers, the Computer Sciences Corporation and CGI have announced numerous contract signings among government units since the first of January, and business does not seem to be waning for these companies.
The Computer Sciences Corporation (NYSE:CSC) on the 6th of January announced that is one of eight companies that were awarded the US Navy’s Field Training System Support III multiple award contract. The contract, valued at approximately $900 million for all firms, has a five year period of performance with three one year options. The company will be competing to provide operations and maintenance support, instructions, as well as trainer support services. On the 11th of January the company also announced a new agreement, this time with the US Department of Labor (NYSEARCA:DOL) for a blanket purchase agreement to support the department’s National Contact Center (NCC). This contract has a total ceiling value of $75 million and a one year base period with four one year options. With the NCC, CSC will be managing and operating the contact center which provides information services to DOL customers. Meanwhile on the 18th and 20th of January respectively, CSC won two contracts with the US Air Force, the first being a $30 million cyber security contract for the 33rd Network Warfare Squadron (NASDAQ:NWS) which has a one year base period and two option years. The second Air Force contract is a task order to provide analytical and technical support to the 24th Air Force (24th AF) Cyber Command. The task order has a one year base period and four one year options.
Aside from these contracts, CSC has also announced that alongside companies, General Dynamics (NYSE:GD), Harris Corporation (NYSE:HRS) and Cisco (NASDAQ:CSCO), they are also pursuing an anticipated five year contract to provide Information technology (NYSE:IT) enterprise services contract with the US Navy for five years.
Canada based company, CGI (NYSE:GIB), on the other hand, along with its subsidiaries, also signed a handful of outsourcing contracts. On the 10th of January, the company announced that its subsidiary, Stanley Associates, signed with the US Department of State’s Bureau of Consular Affairs a $48 million task order with a one year base period and four one year options, under the 10 year multiple award indefinite-delivery, indefinite-quantity Global Support Strategy visa services contract with the bureau. Meanwhile, CGI’s subsidiary, CGI Federal signed two contracts on the 11th and the 12th respectively. The former is the renewals of contracts with state and local housing agency partners amounting to $40.3 million. The contracts are for the support of the US Department of Housing and Urban Development’s (HUD) Performance Based Contract Administration Program. The latter contract, on the other hand is a task order with the Centers for Medicare & Medicaid Services (NYSE:CMS). The task order, valued at $55 million, is for five years, and is under the CMS’ Enterprise System Development indefinite-delivery, indefinite-quantity contract for software development and operational support services for the Provider Enrollment Chain Ownership System (PECOS) of the CMS. Lastly, CGI will also be providing a turnkey solution as well as support to the Texas Health and Human Services Commission for a Medicaid EHR Incentive Payment Program. The contract is valued at $18 million for the first two years with 3 year options.
Notably, CGI also announced on the 12th of January that during its first quarter 2011 ending December 31, 2010, the company saw a strong booking momentum in the US Public Sector with nearly $550 million worth of bookings.
The government sector, primarily in the US, now presents a big opportunity for outsourcing companies. As Michael Roach, CGI’s President and CEO commented following US President Barack Obama’s State of the Union call for more efficient government programs, “Governments everywhere have to invest more in technology.” This highlights the potential that governments such as the US represent for outsourcing efforts, wherein the services market is estimated at $100 billion.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.