General Dynamics is 'in the conversation' to find more contract savings

Many government agencies but especially the General Services Administration have been aggressively scrutinizing what the government says are the largest consulting providers.

General Dynamics is one of the 10 companies GSA identified as wanting concessions from, but the company is also touting a posture of collaboration to get to those sought after savings.

During GD’s first quarter earnings call with investors Wednesday, the leader of its technologies segment that includes the GDIT services unit said they are in “an active conversation, and actively working, with the customer to identify opportunities for savings.”

On the other hand, Executive Vice President Jason Aiken told to analysts how GDIT sees itself and that describing what the business does is part of the dialogue.

“We are not strictly in the consulting business per se. We deliver mission-driven solutions. We deliver solutions to the customers' most challenging technology issues, but the fact is we are in the conversation,” Aiken said. “As part of that conversation, we are going to partner with our customer, and we are going to find the savings that they're looking for.”

Aiken and GDIT see that as being a shorter-term conversation. He said the longer-term dialogue with GSA and others in the government customer collective will focus on how to deploy technologies and contract types that can drive the kinds of efficiencies agencies want.

Fixed-price and other outcome-based contracts could feature in that longer-term conversation. GDIT has “a good bit of that” contract mix in its portfolio and is “comfortable with that,” Aiken said.

Recall that when GDIT acquired CSRA in 2018, it also added more fixed-price contracts for large enterprise IT jobs on a managed service model.

Those contracts typically put more risk on the contractor, but the potential bottom-line reward is greater as long as the customer gets the savings it wants.

The concept of risk also applies to the ongoing layoffs and voluntary retirements happening across many agencies that are being pushed by the Department of Government Efficiency. Losses in experience and knowledge with additional strains on federal employees who remain on the job are part of that equation.

“We need to be careful from a mission perspective, that if there's dueling priorities of significantly reducing workforce within the government and at the same time, on a meaningful level, in-sourcing this type of work to the customer, that can come at great peril,” Aiken said. “We need to be mindful of that in these conversations and make sure we don't compromise any mission capability.”

When asked about DOGE-driven contract cancellations, Aiken acknowledged "we have been a part of that" as well without quantifying the financial impact to the company.

"There have been some stop-work orders, some partial stop-work orders and so on," Aiken said.

GD’s technologies segment recorded $3.4 billion in revenue during the first quarter, up 6.8% from the prior year period. Operating earnings of $328 million showed an 11.2% year-over-year increase on the bottom line.

In 2024, the technologies segment posted $13.1 billion in sales to show 1.6% growth on the top line. GD’s current 2025 outlook expects technologies revenue to be $13.5 billion on an operating margin of about 9.2%, down from the 9.6% figure for 2024.