Government contractors prepare for a rainy day

The pressure on government contractors continues to increase, as budgets appear likely to tighten in the wake of recent congressional action to rein in the nation’s debt.

Many contactors have already begun responding by buying or selling businesses or reshaping their enterprises to focus on areas likely to grow, such as cybersecurity and cloud computing.

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Others are looking to move into commercial markets and outside the United States, which carries its own set of risks as companies venture away from familiar terrain.

“They’ll be opportunistic about it,” said George A. Price Jr., senior equity research analyst for information technology services at BB&T Capital Markets. “If you’re protecting networks and data ... whether it’s government or commercial, there’s not a big difference.”

What follows is a look at three companies that have announced changes that could help them weather reductions in government spending.

Booz Allen expands on cyber work in the Middle East

Free of a noncompete agreement that restricted McLean-based Booz Allen Hamilton from pursuing commercial business, the contractor is aggressively moving into new work, particularly in the Middle East.

Booz Allen Hamilton already has registered to conduct business in the United Arab Emirates and has leased office space in Abu Dhabi.

The company separated its government and commercial businesses in 2008, selling a majority stake in the government unit to District private equity firm Carlyle Group. The commercial business became New York-based Booz & Co., and the deal included a three-year noncompete arrangement — though it excluded cybersecurity work because only Booz Allen had that capability at the time of the split.

With the agreement’s expiration last week, Booz Allen Hamilton hopes to build on efforts to market cybersecurity services to Middle Eastern companies and governments. The company, which recently began selling shares publicly, said work for the U.S. government will continue to be its core business, even as spending inevitably slows.

Michael W. Jones, a senior vice president who leads Booz Allen’s supply chain and logistics business for defense, intelligence and civil government markets, said the company is opening its Abu Dhabi office with about 20 employees, and hopes to grow it to 50 by the end of the fiscal year. The office, in a five-building skyscraper complex known as Etihad Towers, will replace an interim office at another facility.

The company said it hopes to move into the new office within six months. The Abu Dhabi site will function as a regional office, focused on the UAE as well as Qatar, Saudi Arabia and Oman, among other countries.

“It’s clearly a diversification play,” Jones said. “There's a lot of pent-up demand for a full systems service provider like Booz Allen Hamilton.”

Booz Allen Hamilton will initially target the financial, health care and energy industries. Jones said the company expects eventually to open more regional offices, though it has not identified sites.