CGI joins six other companies on US$2.5-billion U.S. navy IT contract

MONTREAL – CGI Group’s U.S. subsidiary, CGI Federal, is joining six other companies selected by the U.S. navy to compete for up to US$2.5 billion worth of technology contracts over the next eight years.

The work involves the standardization and improvement of the computer systems aboard U.S. navy ships.

Several ships have been upgraded so far and the navy expects about 20 to 30 ships will be upgraded annually.

CGI (TSX:GIB.A) has been guaranteed one contract worth less than US$10 million, but must bid for additional work.

The other companies are DRS Laurel Technologies, BAE Systems Technology Solutions & Services, Inc.; General Dynamics C4 Systems; Global Technical Systems; Northrop Grumman Systems Corp. and Serco Inc.

Analyst Thanos Moschopoulos of BMO Capital Markets said CGI’s position is positive, but the revenue that will be generated for the Montreal-based IT company is unknown.

“The more government contract vehicles that CGI is qualified for, the better, as that expands the available universe of potential business that they can bid on,” he wrote in an email.

Defence and intelligence work accounts for about half of CGI Federal’s US$1.3 billion of revenues annually.