Government contractors from various sectors play a key role in providing essential services and products to the U.S. government. These companies have considerable influence and power, contributing to areas such as defense, security, technology, and infrastructure.
Although defense contractors receive a significant portion of contract awards, it is important to recognize the diverse range of industries that play a critical role in the economy and federal procurement. To shed light on these sectors, we have compiled a list of noteworthy companies operating within different industries and examined their contributions and impact within the public sector.
What Is Government Contracting?
Government contracting refers to the procurement process through which the government acquires goods from private companies, including small businesses. This process is subject to government contracting regulations and requirements that aim to ensure the government achieves the best value for money while fostering competition and fairness. The government aims to promote transparency, efficiency, and accountability in its procurement practices by adhering to these guidelines.
Why are Government Contractors Important?
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Prime and sub-government contractors are important for several reasons:
1. Provides the Government’s Needs
Federal contractors provide products and services necessary for the government to effectively serve its citizens. These contractors face the challenge of making informed business decisions by effectively managing strategic costing and pricing, all while adhering to specific timelines. Their expertise in these areas enables them to optimize resources and deliver value to the government.. Without the involvement of contractors, the government will have to develop these capabilities internally, requiring the establishment staff and facilities to meet temporary needs. This alternative approach would be both costly and time-consuming, potentially straining government resources. Therefore, relying on capable contractors allows the government to leverage specialized expertise and efficiently fulfill its requirements, ultimately benefiting both the government and the citizens it serves.
2. Promotes Competition
Government contracts are predominantly open for bidding unless they fall under sole-source contracts. This approach fosters competition, encouraging businesses to demonstrate their capabilities in terms of delivering high-quality goods and services at a competitive price. This competitive environment promotes innovation and efficiency as companies strive to outperform their rivals in securing contracts. This dynamic is particularly evident in the case of lucrative multiple-award contracts, which can be worth billions of dollars. For example, the Air Force’s IDIQ contract for the construction of military facilities attracted 35 proposals, showcasing the intense competition within the industry. Such competition drives businesses to excel and ensures that taxpayers receive the best value for their money by selecting contractors who offer the most advantageous combination of quality and price.
3. Creates Jobs
Large contracts substantially impact the job market, as they often require prime contractors to engage subcontractors, creating job opportunities for millions of workers across various industries. This ripple effect can contribute to job growth and positively influence the overall economy.
Government contracting can also help support local economies and provide opportunities for disadvantaged populations. For example, Bechtel, one of the U.S. largest prime contractors, maintains relationships with suppliers and subcontractors, with 65% of these entities being small and minority-owned businesses.
Note: The following list of government contractors is ranked in no particular order. The selection criteria are based on a variety of factors, including market capitalization, revenue, and overall industry impact. While they are highly regarded in the industry, plenty of other companies also offer exceptional products and services.
1. Aerospace and Defense
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The aerospace and defense industry encompasses various activities related to aviation and national security, including the development, production, and sale of federal services and products. It comprises many companies, including aircraft manufacturers, defense companies, and aircraft, spacecraft, ships, and weapon systems suppliers.
Currently, the U.S. Congress is in the process of crafting a spending bill for the fiscal year 2023, with a proposed budget of $1.7 trillion. This bill includes a specific provision that allocates $7 billion to the U.S. Department of Defense for the procurement of new aircraft. If approved, this funding will be available until September 2024, enabling the Department of Defense to acquire and enhance its aircraft capabilities in line with its operational requirements.
Lockheed Martin
Lockheed Martin and its subsidiary Sikorsky are set to receive significant contracts under the 2023 National Defense Authorization Act. If the bill is enacted into law, Lockheed Martin is set to receive $1.5 billion for the supply of 19 new F-35 stealth fighters and $1.67 billion for 16 new C-130J Super Hercules aircraft. Sikorsky, on the other hand, will also benefit from $570 million allocated for the acquisition of ten additional HH-60W Jolly Green II Combat Rescue Helicopters and $250 million for two more CH-53K Sea King heavy-lift rotorcraft.
Additionally, Lockheed Martin and the F-35 Joint Program Office have recently finalized a contract for producing and delivering up to 398 F-35s. The contract, worth $30 billion, includes aircraft for U.S. partners and military sales. Lot 15 will comprise 145 aircraft units, Lot 16 will involve 127 units, and the Lot 17 contract option allows for up to 126 units. These aircraft will be the first to be equipped with Technical Refresh-3, which incorporates enhancements such as a new integrated core processor, panoramic cockpit display, and enhanced memory unit, enabling the incorporation of Block 4 capabilities.
Boeing
The potential passage of the 2023 National Defense Authorization Act presents various revenue opportunities for Boeing. If approved, Boeing stands to receive additional funding, including $600 million for the continuation of production for eight F/A-18 Super Hornet. Additionally, $200 million is allocated for the advanced procurement of more CH-47F Chinook transport helicopters, while $500 million is designated for the acquisition of five additional MV-22 Osprey tilt-rotor aircraft.
Boeing will also benefit from a proposed $200 million allocation aimed at expediting the replacement of the aging E-3 Airborne Warning and Control System. The planned replacement, the 737-based E-7 Wedgetail, would be accelerated through this funding. The bill also includes $834 million to purchase four additional Gulfstream G550-based EC-37B Compass Call electronic-warfare aircraft, with L3Harris leading the project.
2. Healthcare
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In the U.S., health care spending constitutes a substantial portion of the economy, accounting for approximately 18.3% of the nation’s GDP. Within the healthcare system, government contracting plays a vital role, particularly in the involvement of the federal government, specifically the Centers for Medicare & Medicaid Services—the largest payer for healthcare services.
Centene
Centene Corporation, a prominent health insurer, has recently secured contracts to provide managed care for two Medicaid programs in Oklahoma—SoonerSelect and SoonerSelect Children’s Specialty Plan. These programs will provide comprehensive physical and behavioral health care and pharmacy benefits to more than 840,000 Medicaid recipients in Oklahoma. Centene has also won new contracts to administer Medicaid benefits in California, where it will continue to serve Medi-Cal members in 10 counties across the state, including as the primary carrier in Los Angeles County. These developments are expected to boost Centene’s financial outlook this 2023.
Humana
Humana has announced its Medicare Advantage and Medicare Prescription Drug Plan offerings for 2023. The company focuses on providing benefits and support that align with member preferences and requirements. This announcement follows Humana’s pledge to identify $1 billion in cost savings, which will be redirected toward its Medicare Advantage program and CenterWell healthcare services.
As part of its strategic shift, Humana intends to gradually withdraw from commercial plans, including fully insured, self-funded, and Federal Employee Health Benefits. As well as medical plans within the next 18 to 24 months. The company aims to prioritize government-funded programs and specialty businesses in its operations. The U.S. News & World Report named Humana the Best Insurance Company for Medicare Advantage in three categories for 2023.
3. Pharmaceutical
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The pharmaceutical industry is a vital component of the healthcare sector, encompassing the research, development, and manufacturing of drugs, vitamins, and vaccines. This industry operates under stringent government regulations, with the Food and Drug Administration assuming a significant regulatory role.
During the COVID-19 pandemic, the pharmaceutical industry witnessed a substantial increase in government contracts The surge was driven by the global urgency to secure vaccines, treatment, and medical supplies to combat the virus and mitigate its impact on public health and the economy.
Moderna
Moderna’s financial success can be largely attributed to its COVID-19 vaccine. Moderna has adapted its approach as public health emergencies at the national and global levels have eased and vaccine uptake has declined. In response to the shift towards annual COVID shots instead of frequent booster doses in the United States, Moderna has adjusted its strategy, by introducing booster shots targeting the omicron variant, pending authorization from regulatory bodies such as the Food and Drug Administration and Centers for Disease Control and Prevention. These booster shots will primarily focus on senior citizens and individuals with weakened immune systems.
GlaxoSmithKline
GlaxoSmithKline has experienced a strong start to the year, particularly in the Vaccines, Specialty, and General Medicines segments. GlaxoSmithKline focuses on upcoming launches, including the world’s first respiratory syncytial virus (RSV) vaccine for older adults, Arexvy. The vaccine promises to prevent lower respiratory tract disease in the older adult population, which got FDA-approved in May 2023.
Forty percent of GSK’s sales were primarily due to the success of generic medicines, vaccines, and specialty medicines. These include the Shingrix vaccine for shingles, meningitis vaccines, oral two-drug regimens, and long-acting HIV medicines, Benlysta in immunology, and Nucala and Trelegy in respiratory.
4. Construction
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Government contracting in the construction sector presents a substantial revenue opportunity for private construction companies, particularly those specializing in public infrastructure projects, design and build, “ground-up” construction, renovations, and minor construction.
This 2023, President Biden announced a $1.2 billion infrastructure investment plan aimed at enhancing transportation and infrastructure systems throughout the U.S. The plan encompasses investments in roads, bridges, public transportation, airports, ports, and waterways and upgrades to the nation’s power grid and broadband infrastructure. The goal is to create jobs, promote economic growth, and address climate change, which is expected to be funded by a combination of federal and private funds over three years.
Tutor Perini
Tutor Perini Corporation, a leading civil and construction company, has achieved significant success in 2023 by securing significant contracts for various projects. The New York City Department of Design and Construction has awarded Tutor Perini Corporation a substantial contract worth $2.95 billion for the Design and Build Program of the NYC Borough-Based Jails System Facility in Brooklyn.
In addition to this major contract, Tutor Perini’s subsidiaries have also secured lucrative projects, which contribute to the company’s great start in 2023:
- Fisk Electric has been awarded a $41 million Electrical Subcontract for a New Hospital Tower in South Florida;
- Black Construction has secured the $222 million Tinian International Airport Project;
- Lunda Construction’s $62 Million I-494 Bridge Repair Project
5. Information Technology and Cybersecurity
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The U.S. government is a major customer of information technology products and services. Federal agencies spend billions of dollars on IT services annually, including software development, cloud computing, data analytics, modernization, and cybersecurity. Although the U.S. government has made significant progress in utilizing information technology to provide e-government services, many tasks are still yet to be accomplished before the e-government vision can be fully achieved.
CACI
In January 2023, the National Security Agency awarded CACI International an estimated $284 million contract. The contract entails providing expertise and systems engineering support to the agency’s Cybersecurity Directorate, which addresses the increasing pace and scope of cybersecurity threats. Over the course of five years, CACI will help modernize the NSA’s systems engineering practices, leveraging its specialized expertise and knowledge in cybersecurity to engineer solutions that aid in critical national security missions.
SAIC
SAIC is committed to enhancing support for user communities as the Defense Counterintelligence and Security Agency (DCSA) undergoes a transformative process in its security operations worldwide. The Federal Systems Integration and Management (FEDSIM) Center has awarded SAIC an estimated $889 million contract to develop and implement One IT, a program aimed at modernizing DCSA’s systems through its IT advancements. As the prime contractor for One IT, SAIC will collaborate with DCSA to simplify and standardize its IT environment, including preparing for cloud integration.
Leidos
Early this year, Leidos won two IT task orders from the Social Security Administration with a combined potential value of $1.5 billion. These task orders are part of the SSA’s IT support services contract II and involve providing software systems and infrastructure support for the SSA’s deputy commissioner of systems, including web and interface design and lifecycle software improvement. Leidos will also be responsible for planning, implementing, operating and maintaining the SSA Office of Systems Operations and Hardware Engineering’s computer systems, enterprise IT infrastructure, and application services.