The separation of AECOM's government services business is just the latest example of services contractors reshaping to take advantage of an improving market, experts say.
The company announced last week it would separate its management services segment into a standalone services contractor. The segment has more than 25,000 employees and generated sales of $3.7 billion in fiscal year 2018.
Andrew Hunter of the Center for Strategic and International Studies told Inside Defense services work is "likely to be, long-term, a growing market."
"So it is an area where companies are positioning themselves" to capture additional growth, he added.
At the same time, other engineering firms are making acquisitions to bolster their roles in government services. Jacobs, for instance, in April announced it would acquire KeyW, while Parsons has acquired both Polaris Alpha and OGSystems.
In April, Terry Hagen, who heads the Jacobs unit that will add KeyW, said the purchase would help Jacobs move into parts of the government services sector "tied to national priorities."
Byron Callan of Capital Alpha Partners told Inside Defense the pool of sizeable services contractors is broadening.
"The market kind of viewed this sector as, oh, it was pretty much Booz Allen [Hamilton], CACI [International], Leidos and [Science Applications International Corp.], and you now have this new group of players who have scale and heft," he said. "You have to watch them because they're going to be big factors in the market."
At the same time, commercial technology companies, from Amazon Web Services to Google, are playing a larger role in the market, Hunter noted.
"All these folks are huge as government services contractors, and no one seems to have noticed," he said.
In a call announcing the AECOM split, Mike Burke, the company's chief executive, said the separated business will "also be in a position to participate in the ongoing consolidation of the government services sector."
Callan said AECOM's newly split-off company may be able to "either consolidate or be consolidated with other entities."
"What's [a government services] business going to look like in 2021 or 2022?" he said. "If you can take advantage of a pretty buoyant market right now . . . presuming this lasts into 2020, can you build a government services business going into 2022 or 2023?"