Cutting Costs to Maintain Profits on Government Contracts (NOC, BAH, NCI)

Investing

Published: February 6, 2012 8:54 am

Large federal contractors have been resorting to cost containment to maintain their profits as federal spending is reduced. The situation is likely to undergo more strain as planned cuts in military spending are enacted and imposed.

The Washington Post reports that “[c]ontractors have been reducing their head count, consolidating facilities and slimming their executive ranks,” and questions how long the companies can continue cutting costs to maintain profits. The report cites cuts at Northrup Grumman Corp. (NYSE: NOC), Booz Allen Hamilton Inc. (NYSE: BAH), and NCI Inc. (NYSE: NCI).

The contractors are trying to position themselves early for the impending cuts in federal spending, and have reduced their workforces by about 2% in the cases of NCI and Booz.

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