Accenture plc (ACN) recently won two three-year contracts from the U.S. Department of Navy at an aggregate value of $30.0 million. The government department has chosen Accenture Federal Services to support the Navy’s Financial Improvement Program. The company will work in sync with the Navy to assess and design standard financial business processes with all major commands. This will help the Navy’s Office of Financial Operations to plan, achieve and sustain audit readiness.
Under the first contract, Accenture would review the business processes and internal controls at Naval Air Systems Command, Naval Sea Systems Command, the Navy’s Assistant for Administration, Field Support Activity, Office of Naval Research, Naval Research Laboratory and the Marine Corps. The review will help the naval agency to accelerate audit functions, which will ultimately lead to improved operations across the department.
Per the second contract, Accenture will support the department in the smooth running of its Navy Enterprise Resource Planning (ERP) system. For this, Accenture will monitor the computer systems and automated business processes required for the ERP system to be effective.
A government contract at the beginning of 2013 is certainly a good start for Accenture. The company has won a series of government deals in the past. However, the lower margin of the government contracts is something to worry about.
The federal budget is also a cause of concern. IT research firms, Gartner Inc. (IT) and IDC anticipate government spending on IT to decline in 2013. This could reduce the amount of deals and eventually put pressure on Accenture.
However, we are positive on Accenture’s wide industry exposure as this could mitigate weakness from the fed sector.
Currently, Accenture has a Zacks Rank #3 (Hold). Its competitors Computer Sciences Corp. (CSC) has a Zacks Rank #3 (Hold) while IBM Corp. (IBM) has a Zacks Rank #4 (Sell).
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