What financial pain Reston, Va.-based ICF International (NASDAQ: ICFI) has felt so far is comparatively small and may be a happy bellwether for other engineering and construction federal contractors. Its earnings call contained one of the more detailed discussions by an industry contractor of what could happen in the unexpectedly turbulent administration effort to reduce federal spending. 

Trump appointees and the Dept. of Government Efficiency are discharging tens of thousands of employees and cutting down or reframing missions in some key federal departments served by industry firms. The departments include transportation, defense, energy, environmental protection and property management services.

U.S. General Services Administration Acting Administrator Stephen Ehikian has issued a memo calling on various federal agencies to terminate contracts worth tens of billions of dollars with top consultants.

In assessing the new landscape, contracted firms are pointing to the importance of their military, space and information technology and management units, built up or acquired over recent years to expand their government services beyond concrete, steel, soil and water.

Nine companies that appear on ENR's top lists for designers, contractors and environmental services firms also are among leaders in the Top 100 companies ranked by industry publication Washington Technology. In addition to ICF, the list includes Leidos, KBR, Jacobs, Fluor, Parsons Corp., AECOM, Tetra Tech, Bechtel and Michael Baker.

International work is also mentioned as a buffer against any slippage in federal contracts. Aside from the normal limits on federal contracting, such as budget cuts and bid protests, federal work has paid off nicely for these companies.

ICF International is among the smaller of the technology leaders. It reported net income of $110 million on $2.02 billion of revenue in 2024, up from $83 million on $1.96 billion in the prior year.

The company has a plan to remain profitable at 2024 levels in case it loses as much as 10% of its hoped-for 2025 revenue. CFO Barry Broadus told investors that ICF International management has a cost containment plan and "will proactively manage our business to achieve this target."

The 10% figure assumes there will be no extensive government shutdown or prolonged period of pauses in funding modifications to existing contracts or new procurements.

One analyst, noting that the amount of "programmatic revenue" at risk "seems like a lot," asked if that much was "truly at risk at this point?"

Wasson answered by describing ICF International's response to the unfolding federal cuts. 

"We  went through project by project in a risk analysis of our federal business based on priorities of the new administration, project by project and [project] pipeline by pipeline," he said. "We looked at all the documents in the public domain, and also figured in a significant amount of input from our clients on the potential project impacts."

That led ICFInternational to believe that its IT modernization and digital transformation work "which is half our business," could see "revenue shrinkage of mid to high single digits" in 2025, said Wasson, but would recover in the medium term "given that it is aligned with the administration's goals around leveraging code and technology solutions across the entire federal government."

The Outlook at Leidos 

Other firms are also in a position to benefit in the long run from their IT expertise.

Leidos Holdings (NYSE: LDOS), Reston, Va., performs most of its work for federal agencies or federally funded programs. It produced an optimistic assessment of its 2025 prospects, with a couple of down notes. One relates to ongoing budget strife in Congress.

CEO Tom Bell reminded investors on a Feb. 10 earnings conference call that on Dec. 23, the U.S. Congress passed a continuing resolution to fund government operations until March 14.

"So anytime you have a continuing resolution situation," he said, "that suppresses the amount of orders we see coming out immediately." But he said the company is "very hopeful" that as the budget packet heads toward approval, "this year will normalize and new orders will start to come in, and we're very excited about the future."

Leidos' technology and business consulting and design services match up well with Trump administration intentions, said Bell.

Leidos was created "to leverage innovation for our customers to meet the immense and enduring national security challenges faced by America and its allies, from protecting the homeland to deterring and winning battles abroad, and driving government efficiency."

"That's exactly what our new administration is all about too," Bell said. The first weeks of the Trump administration "has given us increased confidence in our strategy."

KBR's Role in Space Flight

Houston-based KBR (NYSE: KBR) reported 30% of its earnings before interest, taxes depreciation and amortization came from the U.S. government. But it has long been a force in the energy industry.

In a Feb. 25 earnings call, CEO Stuart Bradie pointed to the company's recently awarded projects in the energy sector, including large liquefied natural gas projects. "These project wins demonstrate the momentum in the gas market and the greater need for energy security," said Bradie.

As for federal work, the Trump administration's call for advances in space systems, hypersonics, microelectronics and directed energy comports with KBR capabilities, Bradie said. A $445-million contract win in the Dept. of Defense Joint Mission Environment Test Capability program and an $88-million contract win for rapid prototyping are examples, he said. 

But that work, said Bradie, is concentrated in serving mission-critical operations and technology development roles in areas such as military space, missile defense, digital warfare "and direct support to our warfighters, all critical."

Also, most of KBR's NASA work is the "literal operations" of human and satellite space missions, including those supporting commercial missions for private companies SpaceX, Blue Origin and Acxiom.

"Notably, less than 2% of our adjusted EBITDA relates to federal civilian agencies outside of NASA," said Bradie.
"We believe our business is very well positioned with the new administration priorities."

This story was updated March 10th to remove the word design consultant from the description of ICF International. It is a consultant.