The contracting company, called Leidos, received more than $16 billion in revenue last year. Most of them were acquired through contracts with federal agencies such as the Bureau of Veterans Affairs.
So when the Trump administration's budget cutters targeted the VA last month, it seemed like bad news not only for department employees, but for Rides and dozens of other private companies.
“We will no longer pay consultants to do things like making PowerPoint slides, writing meeting minutes, and more!” Department secretary Doug Collins wrote to X: Overall, the department has shown it has cancelled more than 850 contracts worth nearly $2 billion.
However, shortly after Collins' announcement, the outlook for some of the VA contractors seemed to be brightening. The department said it should suspend cancellations and confirm the contract to avoid “eliminating benefits or services” to veterans or VA beneficiaries. I then narrowed down a few hundred lists of cancelled contracts.
Government contract experts announced last week that the agency's cuts, which announced that 80,000 of its approximately 480,000 employees were about to trim, could even lead to increased spending on federal contracts.
These experts noted that jobs where raid play a key role without throttling government functions and cutting back employees, such as providing healthcare and benefits to veterans, usually mean that work is significantly reduced by contractors.
“If we don't cut people and cut missions, we have to rely on other sources to do our job,” said Stan Soloway, a Department of Defense official in the Clinton administration, who leads a trade group representing government contractors.
Leidos spokesman Brandon Ver Velde said in a statement: “We strongly support the goal of creating a dramatically efficient and effective federal government with less taxpayer costs,” he added, “to realize the core innovations of our mission.”
But it's shaking, a world that is barely understood on the island of federal contractors, is never immune to the uncertainty that his head of government efficiency initiatives brought to federal equipment.
Months after the presidential election, stock prices of stock trading contractors like Raidos and Buz's Allen Hamilton fell sharply, as it became clear that Trump and Musk would be curbing federal agencies. (Prices have only risen since the beginning of the decade.)
The General Services Director, one of the top government officials involved in procurement, then last month sent a memo to the head of federal agencies asking them to review a list of potentially non-critical contracts that generate only “reports, research, coaching, or artifacts,” defending what they deemed essential.
The follow-up memo lists the 10 highest-paid consulting companies across the government, saying they plan to receive fees of more than $65 billion this year. “Please provide a list of contracts with these companies that your agency is planning to close and what it intends to maintain,” the memo added.
Leidos and Booz Allen were on the list. Employees at some contractors said their companies discussed job openings during scrutiny.
However, the Trump administration appears to have eased its position ever since. The Wall Street Journal said in a statement after a meeting with executives from a large contracting company, another top GSA official said, “We value their partnership,” and “we are welcome to work with them to reduce government overexpenditure while continuing to provide the vital services the government needs.”
Equity analysts who follow companies specializing in federal contracts said they are generally bullish on the company's outlook. “In the short term, there will probably be some confusion and uncertainty for the contractor,” said Scott Mix, director of Merius research, which follows federal contractors. “But that's probably a good thing in the medium to long term.”
Wells Fargo equity analyst Matthew Akers said on all the attention-grabbing headlines the government had so far cancelled most major contracts. “If there were any fruits that were drooping, they could have cut it,” he said, “I think they'd have done it.”
The Raidos seems to show the point. Founded in 1969 by nuclear physicists, the company was quickly hired to study the federal impact of nuclear weapons. The federal government has stopped conducting air testing in favor of simulations. The company, known at the time as Science Applications Inc. (and then SAIC), entered the healthcare business the following year, and won a federal contract to study cancer radiation therapy.
Like many federal contractors, SAIC benefited when the Clinton administration cut its federal workforce to hundreds of thousands and increased government reliance on private companies. The George W. Bush administration expanded its contract even further.
The company was released in 2006 and renamed Leidos in 2013, releasing SAIC as a small consulting business. A series of acquisitions have significantly expanded its size and reach.
Today, Leidos manufactures as diverse as airport scanners and guided missiles. It develops offensive and defensive cyber capabilities, conducts intelligence analyses, upgrades computer systems at several federal agencies, performs veteran health checks, and runs a federally funded cancer research lab that employs more than 2,000 scientists, technicians and managers.
These are not usually companies housed within a single company, but government contracts create a strong basis for combining them. All businesses benefit from Leidos' intimate knowledge of the time-consuming process that often leads to federal contracts.
“It's really, really important to understand the procurement process from awards to contract performance to billing for payment cycles,” said Robert Guerra, who spent decades in senior positions at a federal contracting company. “You need a system to do that.”
It's an advantage to jump over such hoops, as the government purchases more than $450 billion in services each year and more than $250 billion in goods each year. Leidos, which employs nearly 50,000 people, earned more than $16 billion in revenue and about $1.25 billion in profits last year, according to a federal securities application. The company said nearly 90% of its revenues came directly or indirectly from federal contracts, with contracts with the Pentagon or the US intelligence agency generating about half of its revenues.
So far, Raidos has suffered little business loss. In a report distributed in February, Wells Fargo's Akers said the Raidos could be subject to cuts more than other contractors. He said Musk's government's Department of Efficiency has already identified more than $200 million in savings from the Leidos Information Technology contract with the Social Security Agency.
However, the numbers looked like an error, and as Akers noted in a later report, the only savings from a Raidos deal with the Social Security Agency appeared to be worth around $500,000.
Otherwise, the Trump administration's priorities could bring new opportunities for the company. Leidos recently won a contract with the VA to offer screenings to check the status of veteran disability, and it may well be well put into the expansion of veteran healthcare business amid the divisional cuts.
“They are doing medical and disability testing,” Mix said. “Veterans will still need care as you are trying to work on a case backlog,” Raidos said, although he doesn't consider himself an alternative to VA employees, it will help the department improve veteran services.
VA spokesman Peter Kasperowicz said in an email that the agency is working to redirect billions of dollars in “non-lost critical efforts” to reduce the backlog and improve care. He said, “In some cases, contracts are cancelled, and in other cases new contracts are created to reduce duplication and harness better purchasing power.”
Of course, it may be a mistake to assume that the uncertainty created by Trump and Musk will eventually pass and bring contract businesses back to pre-election status. Federal contracts traditionally provide businesses with stable and predictable revenue, but have lower profit margins than volatile private sector jobs. Business economics can change if the federal government is no longer a trusted customer.
“You have to decide the price by 'Do you think this will happen?',” longtime contractor Guerra hints at the possibility of the Trump administration suddenly cancelling the contract. He suggested that companies may begin to assume that contracts are worthy of 5% less than the amount stated, in order to account for such risks.
Still, the industry is undoubtedly worse, with cuts in spending from transactions between President Barack Obama and Congressional Republicans.
Around the same time, in June 2013, the news outlet issued a revelation provided by Edward J. Snowden, an employee of Booze Allen, who leaked one of the most important classification documents in US history. His employer's share price quickly fell by more than 5% as investors appear to be worried about the government reducing the use of contractors in sensitive national security activities.
However, within a month or two, the crisis had passed and Booz Allen stocks had risen by about 20%. As of this month, the stock price had been highly praised many times.
Jack Begg and Kirsten Neus contributed to the research.
