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                    SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, DC  20549

                                 FORM 10-K
                          ______________________

             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                    THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998     COMMISSION FILE NO. 0-19394

                   GOVERNMENT TECHNOLOGY SERVICES, INC.
          (Exact name of registrant as specified in its charter)

            DELAWARE                                       54-1248422
 (State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                      Identification Number)

                         3901 STONECROFT BOULEVARD
                      CHANTILLY, VIRGINIA  20151-0808
           (Address and zip code of principal executive offices)

    REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (703) 502-2000

     SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  NONE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                      COMMON STOCK, $0.005 PAR VALUE
                             (Title of class)

     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

                            [X] Yes     [ ] No

     Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K.  [ ]

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     The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the closing price of the Common Stock on
March 1, 1999, as reported on The Nasdaq Stock Market, was $39,780,977.

     The number of shares outstanding of the registrant's Common Stock on
March 1, 1999, was 9,199,490.

                    DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive Proxy Statement to be
delivered to stockholders in connection with their Annual Meeting of
Stockholders to be held on May 18, 1999 are incorporated by reference into
Part III of this Form 10-K.

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                                  PART  I

ITEM 1.   BUSINESS.

THE COMPANY

     Government Technology Services, Inc. ("GTSI(r)" or the "Company") is a
leading dedicated reseller of microcomputer and Unix workstation hardware,
software and networking products to the Federal government market.  (Unless
the context indicates otherwise, all references herein to the capitalized
term "Government" shall refer to the U.S. Federal Government, and all
references herein to the non-capitalized term "government" shall refer
generally to any federal, state or municipal government.)  The Company was
incorporated in Nevada in 1983 and reincorporated in Delaware in 1986.  On
August 16, 1994, the Company purchased Falcon Microsystems, Inc.
("Falcon"), which was a leading reseller of Apple Computer, Inc. ("Apple")
products to the Government for the ten years prior to its acquisition.  The
acquisition was part of the Company's corporate strategy to expand and
build upon its presence in the Federal, state and local government markets. 
(Unless the context indicates otherwise, all references below to "GTSI" or
the "Company" for periods after August 16, 1994, shall refer to Government
Technology Services, Inc. and Falcon.)

     On February 12, 1998, the Company entered into and closed on an Asset
Purchase Agreement with BTG, Inc. and two of its subsidiaries
(collectively, "BTG") under which the Company acquired substantially all of
the assets of the BTG division that resells computer hardware, software and
integrated systems to the Government (the "BTG Division").  The acquired
assets consisted primarily of inventory and rights under certain contracts
and intangible personal property, along with furniture, fixtures, supplies
and equipment.  In addition, the Company assumed certain liabilities under
specified contracts of BTG as well as certain liabilities arising from the
ownership or operation of the acquired assets after the closing.  The
Company paid at closing $7,325,265 in cash (after a $174,735 adjustment for
accrued vacation liability and satisfaction of an outstanding invoice owed
by BTG) and issued 15,375 shares, having a liquidation preference of
$15,375,000, of a new series of preferred stock designated as Series C 8%
Cumulative Redeemable Preferred Stock ("Series C Preferred Stock").  The
Company paid an additional $500,000 in cash upon the release of liens on
certain items of equipment which are part of the acquired assets.  A
portion of the consideration, $800,000 in cash and 1,538 shares of Series C
Preferred Stock, was held under an escrow agreement to secure BTG's
indemnification obligations under the Asset Purchase Agreement.  Under the
Asset Purchase Agreement, BTG was obligated to repay to the Company up to
$4.5 million to the extent that there was a shortfall in the amounts that
the Company received from dispositions of certain inventory acquired.

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     Subsequent to the closing, BTG delivered to the Company certain other
inventory ("Surplus Inventory").  By letter dated May 15, 1998, the Company
and BTG agreed that BTG would invoice GTSI an aggregate of $3,912,419 for
Surplus Inventory.  In addition, BTG agreed to pay to the Company $1
million on June 30, 1998, which constituted full and complete payment for
any inventory shortfall as described in the Asset Purchase Agreement, as
well as $250,000 for costs associated with processing the Surplus
Inventory.

     Pursuant to the Asset Purchase Agreement, the Company agreed to
convene a meeting of stockholders no later than January 1, 1999 to approve
a proposal to convert the Series C Preferred Stock into 3,000,000 shares of
Common Stock (the "Conversion Proposal"), and a proposal to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 10,000,000 to 20,000,000 (the "Charter
Amendment Proposal").  At the Company's annual meeting of stockholders held
on May 12, 1998, the Company's stockholders approved the Conversion
Proposal and the Charter Amendment Proposal.  The Series C Preferred Stock
was converted automatically into 3,000,000 shares of Common Stock valued at
$5.125 per share and which, pursuant to the exemption provided under
Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"),
were not registered under the Securities Act.

     On February 10, 1999, the Company entered into subsequent agreements
with BTG.  The agreements relate to the reacquisition of stock by GTSI from
BTG, the terms of certain contracts and the relationship of the parties
going forward.  Pursuant to the agreements, GTSI reacquired 600,000 shares
of its stock from BTG.  Of the 600,000 shares, 200,000 were tendered to
GTSI at no cost and 400,000 were purchased by GTSI for $5.00 per share,
using a three-year, 8% interest bearing note from BTG with the principal
repaid in three annual installments of $500,000, $500,000 and $1,000,000,
respectively.  As part of the agreements, GTSI has an exclusive five-year
option to purchase the remaining 1.3 million shares of GTSI stock held by
BTG for $5.25 per share.  Under the February 12, 1998 Asset Purchase
Agreement, BTG is precluded from selling any of its holdings, with certain
limited exceptions, to a third party for six years without GTSI's prior
consent.  Under the February 10, 1999 agreement, GTSI must consent to a
sale by BTG of their stock to any third party.  If GTSI consents to such a
sale, BTG is obligated to pay GTSI $0.50 per share on any shares sold by
BTG.

     As a result of the agreement, BTG transferred to GTSI all of the cash
portion of the February 12, 1998 escrow, totaling $827,219, and BTG's
ownership interest in GTSI was reduced to 13.3%.  Consequently, BTG
forfeited its right to representation on the GTSI Board and Dr. Edward H.
Bersoff, Chief Executive Officer of BTG, resigned from the GTSI Board.  The
agreements also provide that BTG will novate certain contracts that GTSI 
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had been performing in the capacity of a subcontractor, and halts all
royalty payments by GTSI to BTG after December 31, 1998.  For a discussion
of major contracts acquired with the BTG Division, see "Formal Bids" on
page 10.

     GTSI offers its customers a convenient and cost-effective centralized
source for microcomputer and workstation solutions through its broad
selection of popular products and services at competitive prices.  The
Company specializes in understanding both the various information
technology needs and the procurement processes of Government customers. 
GTSI sells to most departments and agencies of the Government, state
governments and systems integrators and prime contractors selling to the
government market.  In 1998, GTSI's sales directly to Government agencies,
to prime contractors for resale to Government agencies and to state and
local government agencies accounted for 91%, 7% and 2% of sales,
respectively.

     The Company commenced operations in 1983 and initially focused on
reselling microcomputer software to Government agencies.  In 1985, the
Company expanded its product line to include peripherals and began selling
its full line of products to the state government market.  In 1986, the
Company began selling microcomputers and networking products and began
performing network integration services, including configuring, installing
and maintaining microcomputers in local area networks ("LANs").  Since
1987, GTSI has been pursuing formal Government bids in addition to General
Services Administration ("GSA") Schedule contracts.  In January 1992, GTSI
began reselling Unix workstations and related software and peripherals.

     GTSI currently offers access to approximately 150,000 information
technology products from approximately 2,100 manufacturers, including
Hewlett-Packard Company ("Hewlett-Packard"), Compaq Computer Corporation
("Compaq"), Panasonic (a division of Matsushita Electric Corporation of
America), Microsoft Corporation ("Microsoft"), CISCO Systems Incorporated
("CISCO"), Sun Microsystems, Inc. ("Sun"), Apple, Everex Systems, Inc.
("Everex") and Toshiba America Information Systems, Inc.("Toshiba").  The
Company provides its vendors with a low-cost marketing and distribution
channel to the many end users comprising the government market, while
virtually insulating these vendors from most of the complex government
procurement rules and regulations.

     GTSI fulfills customer orders from its state-of-the-art 200,000-square
foot distribution center located in Chantilly, Virginia.  In addition to
the normal distribution functions, activities at the center include
stocking of popular items for fast delivery, customizing equipment through
the integration of various hardware and software components, and
specialized services such as providing source acceptance inspections and
documentation.  The distribution center has the capability of supporting 
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approximately $1.5 billion in shipments per year.  This includes the
capacity to integrate hardware at an estimated rate of 1,600 to 1,800 units
per day including functional and diagnostic testing of all integrated
components.   In 1998, the Company's distribution and integration
operations achieved ISO 9002 certification.   The Company also subleases a
20,000 square foot distribution center in Chattanooga, Tennessee.  In
addition to being able to ship to any of the 48 contiguous states
overnight, the center's location in the Washington, D.C. metropolitan area
allows for expedited deliveries to anywhere in the world.

     "GTSI" is a registered service mark of Government Technology Services,
Inc.  All other trademarks and service marks are proprietary to their
respective owners.

BUSINESS STRATEGY

     GTSI is committed to, and focused on, the government customer.  The
Company's business strategy is to continue to broaden its product offering,
to remain a low-cost provider and to bring new technologies to government
customers by concentrating on the following elements:

     FOCUS ON THE GOVERNMENT MARKET.  Because of its historical focus on
the Government market, GTSI has developed the expertise and established the
vendor and customer relationships necessary to be a leader in this market. 
As a result, GTSI's marketing and sales force is effective at reaching and
servicing the Government market, which consists of procurement and
contracting officers, information resource managers, systems integrators,
value-added resellers ("VARs"), prime contractors and a wide array of end
users.  In addition, by focusing on the Government market, the Company has
avoided the significant costs of commercial retail outlets and the
potentially higher credit risk associated with selling solely to commercial
entities.

     PURSUE GOVERNMENT CONTRACTS.  GTSI pursues Government contracts
ranging in size from as small as a few hundred dollars to as large as
potentially hundreds of millions of dollars in sales.  The Company holds a
wide range of Government contracts, including multi-million dollar, multi-
year contracts with the Department of Defense ("DoD") and certain civilian
agencies, as well as several multiple award schedules and Blanket
Purchasing Agreements ("BPA's") with a variety of DoD and civilian agencies
(generally, "contract vehicles").  GTSI also serves as a subcontractor to
companies holding Government contracts.  The Company intends to continue to
identify and pursue those contract vehicles that best leverage GTSI's broad
product selection, distribution capabilities and vendor relationships.  At
various times GTSI has been awarded, in addition to the GSA Schedule
contracts, the U.S. Air Force Desktop IV Microsystems Contract ("Desktop IV

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Contract"), the National Aeronautics and Space Administration's ("NASA")
Scientific & Engineering Workstation Procurement ("SEWP I Contract"), the
NASA SEWP II Contract, the U.S. Army Portable-1 Contract ("Portable-1
Contract"), the U.S. Army Portable-2 Contract ("Portable-2 Contract"), the
National Institute of Health's ("NIH") Electronic Computer Store ("ECS")
Contract ("NIH Contract") and the U.S. Treasury Department Acquisition-1
Contract ("TDA-1 Contract"), and the U.S. Army Standard Management
Information Systems Contract ("STAMIS Contract"),  as well as other
Government contracts of amounts typically under $100,000.  The Company also
has been awarded subcontracts to supply products under the U.S. Air Force
Integration for Command, Control, Communications, Computers and
Intelligence Contract ("IC4I") and the U.S. Air Force Desktop V
Microsystems Contract ("Desktop V Contract").

     FOCUS ON OFFICE AUTOMATION PRODUCTS.  GTSI focused initially on the
rapidly growing market for microcomputer applications software and expanded
successively into the complementary office automation market segments of
peripherals, microcomputers and networking products, including LANs.  The
Company continued this product strategy by expanding its product line in
early 1992 to include hardware, software and services for RISC-based Unix
workstations manufactured by Sun and in 1993 to include the full line of
products manufactured by Apple.  In 1996, GTSI began focusing on internet
and intranet products and services and entered into an agreement with HP to
add their Unix-Based server products.  In 1998, GTSI began offering a full
range of seat management services to Government agencies. These services
include project management, help desk support, local area network
management support, basic hardware support, continuous training support,
asset management, information technology planning as well as technical
assessment and evaluation.  In future years, the Company intends to add
other complementary office automation products and expanded systems
integration services.

     FOCUS ON CUSTOMER SERVICE.  In the Company's process orientation and
interaction with its many customers, Company employees focus on attempting
to provide high quality customer service(s) associated with the order,
delivery, installation and repair of microcomputer and workstation
products.  By following a "one person - one transaction - one time"
approach to customer service, the Company's employees strive to ensure
customer satisfaction and thereby increase the possibilities for future
business.

     PROVIDE A CENTRALIZED SOURCE FOR PROCURING OFFICE AUTOMATION PRODUCTS
AND SERVICES.  In addition to offering a full line of microcomputer
hardware, software and peripheral products as well as the leading brand of
workstations, GTSI offers its customers pre- and post-sale technical
support and assistance in the selection, configuration, installation and 
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maintenance of the products and systems that GTSI sells.  Furthermore, by
offering a wide range of microcomputer and workstation products through a
variety of procurement mechanisms, GTSI offers its customers the
convenience, flexibility and cost savings of purchasing from a centralized
source.  GTSI believes that its convenient "one-stop shop" for
microcomputer and workstation products is an important factor in its
success in the government market.

     MAINTAIN COMPETITIVE PRICING AND IMPROVE OPERATING EFFICIENCIES.  The
government market is price-sensitive.  GTSI therefore focuses both on
offering competitive pricing to its customers and on constantly improving
operating efficiencies.

     ESTABLISH AND MAINTAIN STRONG VENDOR RELATIONSHIPS.  In order to
provide a centralized source of products for its customers, GTSI maintains
strong relationships with leading hardware and software vendors.  GTSI
offers its vendors a wide range of marketing and sales services, which
provide them with access to the millions of end users comprising the
government market.  In addition, the Company virtually insulates its
vendors from most of the procurement regulatory complexities, costs,
extensive paperwork and complicated billing requirements associated with
the government market.

THE GOVERNMENT PROCUREMENT PROCESS

     The Company's 1998 revenues were derived primarily from sales directly
to departments and agencies of the Government and to prime contractors
reselling to the Government market.  The Company's sales fall into four
categories:  GSA Schedule contracts, which include BPA's; indefinite-
delivery/indefinite-quantity ("IDIQ") contracts, which include government-
wide acquisition contracts; subcontracts; and Open Market.

     GSA SCHEDULE CONTRACTS

     In 1996, GTSI held four GSA Schedule contracts: Schedule A, Schedule
B/C, Schedule 58 Parts VI and VII, and Schedule E.  Schedule A included
general purpose commercial automatic data processing equipment and software
including workstations and connected peripherals equipment.  Schedule B/C
included general-purpose automatic data processing equipment (end-user
computers, normally microcomputers and related software) for office use
environment.  Schedule 59 Part VI and VII was for telecommunications
products, and Schedule E was for electronic commerce and services.  On
November 26, 1997 GSA combined the four schedules under the terms of the
B/C Schedule Contract and the B/C Schedule Contract became the Information
Technology ("IT") Schedule.  Products offered under the IT Schedule
Contract include workstations, desktops, laptops, notebooks, servers, laser

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printer, color printers, scanners, monitors, modems, hard drives, memory,
networking products, facsimile products, internet and intranet products,
video teleconferencing, maintenance, training and services.  GTSI's IT
schedule is set to expire on March 31, 1999; however, GSA has issued a
proposed extension and GTSI expects the contract to be extended to March
31, 2002.  In August 1998, GTSI was awarded GSA Schedule 36.  Schedule 36
is for the supply of Hewlett-Packard printer toner cartridges.  Schedule 36
is set to expire on September 30, 2003.

     The GSA, which is the central procurement agency of the Executive
Branch of the Government, negotiates schedule contracts.  Although
Government agencies are not required to purchase products under GSA
Schedule contracts, these contracts provide all Government agencies,
certain international organizations and authorized prime contractors with
an efficient and cost-effective means for buying commercial products. 
Government agencies and other authorized purchasers (collectively, "GSA
Schedule Purchasers") may purchase goods under GSA Schedule contracts at
predetermined ceiling prices, terms and conditions.  GSA Schedule
Purchasers may place unlimited orders for products under GSA Schedule
contracts.  However, agencies are instructed to seek lower prices for
orders exceeding a "maximum order" threshold.  This threshold is $25,000
per order for classroom training, $50,000 per order for shrink-wrap
software and $500,000 per order for other software and hardware.
 
     GSA Schedule contracts are awarded on the basis of a number of
factors, the most important of which are compliance with applicable
Government regulations and the prices of the products to be sold.  Any
number of competing vendors may be awarded a GSA Schedule contract for a
given product although manufacturers may enter into exclusive
relationships.  GSA Schedule contracts require that each bidder must either
be the manufacturer of the product covered by the contract or furnish
evidence of capability to provide a manufacturer's product for the period
of the GSA Schedule contract.  Products may be added to a GSA Schedule
contract during its term under certain circumstances with the consent of
both the contractor and Government.  GSA Schedule contracts include a GSA
administrative fee calculated on the product price.  This  fee is collected
by the Company and is remitted quarterly to the GSA.

     GTSI's GSA Schedule contracts require the Government to pay for
product shipped under the contracts within 30 days of acceptance by the
Government.  The GSA Schedule contracts also permit payment by Government-
issued credit cards.  When payment is made by credit card, the Company
usually receives payment in less than 30 days.  The Government may require
GTSI to accept returns only of incorrectly shipped product.  GTSI's GSA
Schedule contracts require GTSI to pass on to customers the vendor's
warranty and to provide for on-site or depot maintenance at a pre-paid flat
fee.  GTSI's GSA Schedule contracts also contain price reduction clauses 
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requiring, among other things, that GTSI pass on to Government customers
certain reduced prices GTSI may receive from its vendors during a
contract's term but prohibiting GTSI to pass on vendor price increases for
a period of one year.  To mitigate the potential adverse impact of any such
price increase, the Company requires virtually all vendors acting as
suppliers to GTSI under its GSA Schedule contracts to provide GTSI with
supply and price protection.  The Schedule includes an economic price
adjustment clause that permits the Company to adjust contract prices upward
if certain conditions have been satisfied after a period of one year.

     FORMAL BIDS

     A significant portion of Government purchases of computer products and
services are made under contracts or purchase orders awarded through formal
competitive bids and negotiated procurements.  Since 1987, in addition to
its GSA Schedule and open market business, GTSI has pursued formal
Government bids.  Since substantially all of these bids are awarded on the
basis of "best value" to the Government (which, depending on the bid, can
be a combination of price, technical expertise, past performance on other
Government contracts and other factors), GTSI has sought to use its vendor
contacts, purchasing power, distribution strength and procurement expertise
to successfully compete for the business.  These major procurements can
exceed millions of dollars in total revenues, span many years, and provide
a purchasing vehicle for many agencies.  The vast majority of the contracts
pursued by GTSI have been fixed-price (i.e., at the time of initial award,
the end-user selling prices are set for the duration of the contract at a
specified level or at specified levels varying over time) and IDIQ (i.e.,
the contract provides no pre-set delivery schedules or minimum purchase
levels).  In some cases, various agencies levy a fee on those on purchases
made by departments outside of the agency, which awarded the contract. 
These fees are collected by the Company, and as under the GSA contract,
remitted to the respective agency on a contract specified payment schedule.

     GTSI's bids group is responsible for evaluating bid opportunities,
identifying key products or services needed to respond to bids, negotiating
favorable agreements with suppliers and subcontractors, preparing written
responses to the solicitation document, meeting all mandatory technical
requirements and, in general, successfully managing the proposal effort. 
GTSI's competitors for these contracts typically include major systems
integrators, computer manufacturers and a variety of other systems
integrators, VARs and commercial resellers.
     
     NIH ECS I CONTRACT.  In September 1995, GTSI and 16 other contractors
were jointly awarded the Electronic Computer Store I ("ECS I") Contract to
provide commercial off-the-shelf personal computer equipment (including
laptops, peripherals, software and operating systems) and related warranty 
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service to the National Institutes of Health and other agencies of the U.S.
Department of Health and Human Services.  The contract is a non-mandatory,
fixed price, IDIQ contract with an original expiration date of September
30, 1996.  The Government exercised one option to extend the contract to
September 30, 1997.  The Government's maximum evaluated dollar value for
the ECS I Contract over its two-year maximum life is approximately $96.8
million.  Sales under the ECS Contract in 1998, 1997 and 1996 were
approximately $1.1 million, $52 million and $33.6 million, respectively.

     TDA-1 CONTRACT.  In March 1996, GTSI was awarded the TDA-1 Contract. 
The TDA-1 Contract is a fixed-price, IDIQ contract which calls for GTSI to
provide desktop and laptop computers, as well as software and peripherals,
to the U.S. Treasury Department.  The contract is non-mandatory with an
original expiration date of March 3, 1997, with one option to extend for a
one-year period.  The Government exercised its option to extend the
contract to September 4, 1998.   Shipments under the TDA-1 Contract began
in August 1996.  Sales under the TDA-1 Contract in 1998, 1997 and 1996 were
approximately $27.9 million, $17.6 million and $2.1 million, respectively.

     SEWP II CONTRACT.  In November 1996, the Company was awarded two SEWP
II Contracts out of 20 awarded by NASA under the SEWP program.  The
contracts were available for orders in January 1997.  Thereafter, NASA
consolidated the contracts so that there are now 16 contracts, of which
GTSI holds one.  The SEWP II Contract is a non-mandatory, fixed price, IDIQ
contract for specified Unix-based equipment, printers, application software
and related peripherals to the entire Government and all NASA prime
contractors.  Products may be added to the contract at fixed discounts from
the manufacturer's catalogue, list, GSA or other published pricing base by
mutual agreement with the Government.  Product discounts must be maintained
throughout the applicable contract period provided that the computed price
to the Government cannot exceed GSA Schedule pricing.  The original
contract expiration date was November 15, 1997.  The contract includes
three one-year extension options.  The Government exercised two one-year
options to extend the contract to  November 14, 1999.  Sales under the SEWP
II contract in 1998 and 1997 were approximately $65.0 million and $20.7
million, respectively.

     PORTABLE-2 CONTRACT.  In December 1996, GTSI was awarded the
Portable-2 Contract, a follow-on to the Portable-1 Contract.  The
Portable-2 Contract is a fixed-price, IDIQ contract which calls for GTSI to
provide world-wide sales of notebook computers, application software,
monitors, printers, notebook peripherals and maintenance to the Army, the
Defense Logistics Agency and other Government agencies, excluding the Navy
and the Air Force.  The contract is a two-year, dual award contract that is
scheduled to expire on May 2, 1999.  Two competitors protested the award of
the contract.  In April 1997,  the award to GTSI was affirmed.  In May 
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1997, GTSI began shipments under this contract.  The Government's maximum
evaluated dollar value for the contract over its two-year maximum life is
approximately $237 million.  Sales under the Portable-2 contract in 1998
and 1997 were approximately $22.8 million and $19.9 million, respectively.

     NIH ECS II CONTRACT.  In September 1997, GTSI and 45 other contractors
were jointly awarded the Electronic Computer Store II ("ECS II") contract
to provide commercial off-the-shelf personal computer equipment (including
laptops, peripherals, software and operating systems) and related warranty
service to the National Institutes of Health and other agencies of the
Government.  In 1998, GTSI began offering a broad range of seat management
services such as project management, help desk support, local area network
management support, basic hardware support, continuous training support,
asset management, information technology planning and technical assessment
and evaluation.  The vehicle is a non-mandatory, fixed price, IDIQ contract
with a 5-year term.  The Government's maximum evaluated dollar value for
the ECS II for the 5-year term of the contract is $1.8 billion.  Sales
under the ECS II contract in 1998 and 1997 were approximately $40.0 million
and $5.9 million, respectively.

     STAMIS CONTRACT.  In October 1997, GTSI was awarded the U.S. Army's
Standard Management Information System ("STAMIS") Computer Contract II. 
The IDIQ contract is a one-year contract with four one-year options to
renew for the purchase of products, and three additional one-year options
for the purchase of service.  The Government has exercised its first one-
year option to extend the contract to October 7, 1999.  The Government's
maximum evaluated dollar value for the STAMIS Contract for the entire term
of the contract is $469 million.  Sales under the STAMIS contract in 1998
and 1997 were approximately $35.6 million and $0.6 million, respectively.

     PC-3 CONTRACT.  In February 1999, GTSI and one other contractor were
awarded a contract by the Department of Defense to provide personal
computer equipment, operating systems, configuration support, warranty
support, system upgrades, training and leasing.  The Government's maximum
evaluated dollar value for the combined dual award contracts is $300
million.  The contract is a non-mandatory IDIQ contract that is open to all
Government agencies, and also includes Foreign Military Sales.  The
contract has a two-year base period and one one-year option.  By letter
dated March 13, 1999, the Government issued notice to GTSI to proceed under
the contract.

     BTG DIVISION CONTRACTS

     As a result of the acquisition of the BTG Division, GTSI performed
several additional contracts in 1998.  GTSI had the right to novate certain
BTG Division contracts, including the BTG Division GSA Schedule, the BTG 
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Division ECS-II contract and an Environmental Protection Agency local area
network contract, as well as particular BTG Division BPA's.  GTSI had the
right to perform certain other contracts as a subcontractor to BTG and to
pay BTG a royalty of 1% to 2% of sales under such contracts.  These royalty
contracts included contracts with the Department of Defense ("PC-2"),
Department of State ("DOSS-II"), Tennessee Valley Authority ("TVA PC" and
"TVA UNIX") and Department of the Treasury ("TDA-2"), which are described
below.

     DOSS-II CONTRACT.  In April 1997, the Department of State awarded a
single award contract to the BTG Division  to provide database solutions,
networking solutions and professional services.  The contract is a non-
mandatory, fixed price IDIQ contract with one base year and six option
years.   The primary customers are the Department of State, the U.S. Agency
for International Development and the U.S. Peace Corps.  The Government's
maximum evaluated dollar value for the DOSS contract over its seven-year
life is approximately $129 million.  The Government has exercised its first
option year and extended the contract to April 13, 1999.  In 1998, GTSI
assumed performance of the DOSS-II contract from the BTG Division, and paid
BTG a 1% royalty fee for products shipped.  Sales under the contract in
1998 were approximately $35.7 million.

     PC-2 CONTRACT.  In January 1997, the Department of Defense awarded a
dual award contract to the BTG Division to provide commercial off-the-shelf
personal computers, software, accessories, and related warranty service to
the Army, the Navy and the Air Force.  The contract is a non-mandatory,
fixed-price IDIQ contract with one base year and one option year.  The
Government has exercised its option to extend the contract to January 22,
1999 and also has issued an extension to the PC-2 contract extending
contract performance to May 12, 1999.   In 1998, GTSI assumed performance
of the PC-2 contract from the BTG Division and paid BTG a 1% royalty for
products shipped.  Sales under the contract in 1998 were approximately
$45.4 million.

     TVA-PC CONTRACT.  In September 1995, the Tennessee Valley Authority
awarded a multiple award contract to BTG to provide desktop products,
including desktop microprocessor hardware, related software, peripherals,
and accessories.  The TVA-PC contract is a fixed-price IDIQ contract with
one base year and four option year.  The Government has exercised its
fourth option year to extend the contract to September 30, 1999.  In 1998,
GTSI assumed performance of the TVA-PC contract from the BTG Division and
paid BTG a 1% royalty for products shipped.  Sales under the contract in
1998 were approximately $10.2 million.


<PAGE>
<PAGE>
                                                                         14
     TVA-UNIX CONTRACT.  In August 1997, the Tennessee Valley Authority
awarded a multiple award contract to BTG to provide UNIX based Sun
Microsystems' servers.  The TVA-UNIX contract is an IDIQ contract with an
indefinite term; thirty days notice is required to terminate the contract. 
In 1998, GTSI assumed performance of the TVA-UNIX contract from BTG
Division and paid BTG a 1% royalty for products shipped.  Sales under the
contract in 1998 were approximately $0.7 million.

     TDA-II CONTRACT.  In July 1995, the Department of Treasury awarded a
multiple award contract to BTG to provide microcomputers, notebook
computers, file servers, laser printers, impact printers, CD-ROMs and other
peripherals.  The contract is an IDIQ contract with one base year and one
option period.  The Government extended the contract to March 18, 1998 by
exercising the option period.  In 1998, GTSI assumed performance of the
TDA-II contract from the BTG Division and paid BTG a 2% royalty for
products shipped.  Sales under the contract in 1998 were approximately
$11.9 million.

     SUBCONTRACTS

     In 1998, the Company's business included subcontracts for product
supply to companies holding Government integrator prime contracts.

     IC4I CONTRACT.  In June 1996, the Company was awarded a subcontract by
Systems Research Applications Corporation ("SRA") to provide hardware and
software for use by the Government in connection with SRA's IC4I Contract. 
The IC4I Contract is non-mandatory, fixed-price IDIQ contract which expired
in June 1998 and includes three one-year extension options.  GTSI and SRA
are currently performing under the contract and are negotiating the terms
of the option years.  Shipments under the IC4I Contract began in October
1996.  Sales under the subcontract in 1998, 1997 and 1996 were
approximately $2.4 million, $6.2 million and $0.3 million, respectively.

     DESKTOP V CONTRACT.  In November 1996, the Company was awarded a
subcontract with Hughes Data Systems to provide monitors and notebooks for
use by the Air Force in connection with the Desktop V Contract.  The
subcontract expires in May 2002.  Shipments under the subcontract began in
July 1996, and sales under the subcontract in 1998, 1997 and 1996 were
approximately $106,000, $1.2 million and  $3.9 million, respectively.

     BLANKET PURCHASE AGREEMENTS

     Historically, the Company has held hundreds of BPA's with federal
agencies.  A BPA is a simplified but non-mandatory, fixed price, IDIQ
contract for the Government to purchase products, usually by establishing
charge accounts with qualified sources.  Agencies typically enter into 
<PAGE>
<PAGE>
                                                                         15
BPA's for similar products with several companies.  BPA's generally include
a list of products at established prices, individual purchase limits for
authorized purchasers, and other pre-negotiated terms and conditions. 
Purchases under BPA's are often paid for with a Government-issued credit
card.

     In 1996, the GSA authorized agencies to enter into BPA's with Schedule
holders.  The GSA-authorized BPA's incorporate many terms and conditions of
the GSA Schedule contracts, and incorporate many products offered on GSA
Schedule contracts, often at lower prices than available on the GSA
Schedules.  The Company normally enters into separate agreements with
vendors in order to offer reduced BPA prices to the Government.  The BPA
sales vehicle allows the Company to focus specific vendor relationships on
specific sets of customers.  In response to the GSA's authorization, the
Company has increased its emphasis on BPA's.

     The Company's major BPA's include: the Naval Information Systems
Management Center BPA for notebook computers and associated equipment, with
estimated aggregate sales among the BPA awardees of $98 million; and the
Naval Information Systems Management Center BPA for desktop and associated
equipment, with estimated sales among the BPA awardees of 7,500 computers
per year; the Air Force Standard Systems Group BPA for printers and
associated products.

     OPEN MARKET

     Many microcomputer and workstation products may also be resold by GTSI
through open market procurements.  These procurements are separate and
apart from GSA Schedules or formal competitive bids, and include simplified
acquisition procedures, requests for quotes, invitations for bids and
requests for proposals.  The Company is on most Government bid lists
relevant to its product offerings and responds with proposals to hundreds
of such bid solicitations each year.  When awarding contracts, the
Company's customers often evaluate, in addition to price, which is
typically the most important factor, a number of other factors, such as the
vendor's experience, performance record, service, support and financial
strength.  Unless purchasing electronically, Government agencies procuring
products not on a Schedule or other contract vehicle must typically
publicize their procurements with a value in excess of  $25,000 to allow
competitors to submit price quotes.  The Company also sells to Government
prime contractors, including systems integrators, typically through open
market procurements.  As a result of recent legislative changes, the
Government is encouraged to make purchases under $2,500 by credit card and
often without competition.  In 1996, GTSI initiated a catalog offering for
sales of microcomputer products.  Many of these products offered for sale
are for less than $2,500 and are available via credit card purchases.  GTSI

<PAGE>
<PAGE>
                                                                         16
discontinued its catalog at the end of 1998, and replaced it with an
expanded website.

     STATE AND LOCAL CONTRACTS

     Most purchases in the state government market are made through
individual competitive procurements, although many state governments issue
invitations for bid for statewide computer term contracts.  State and local
procurements typically require formal responses and the posting of "bid
bonds" or "performance bonds" to ensure complete and proper service by a
prospective bidder.  Each state maintains a separate code of procurement
regulations that must be understood and complied with in order to
successfully market and sell to that state.  GTSI currently maintains
several state and local microcomputer contracts, submits oral and written
bids to state and local governments each month and is on a number of state
and local government bid lists.

     GOVERNMENT MARKET CONSIDERATIONS

     A substantial portion of the Company's contracts are fixed-price and
IDIQ.  The uncertainties related to future contract performance costs,
product life cycles, quantities to be shipped and dates of delivery, among
other factors, make it difficult to predict the future sales and profits,
if any, that may result from such contracts.

     Under applicable Government regulations GTSI qualified as a "small
business" under many of the contracts it held during 1998 by virtue of it
being a non-manufacturing entity with a rolling average over the prior 12
months of 500 or fewer employees at the time of contract award.  As a small
business, GTSI enjoyed a number of significant benefits, including being
able to:  compete for designated small business set-aside contracts; bid
pursuant to preferential small purchase procedures for open market
purchases under $100,000 directed to non-manufacturer small businesses;
qualify as a small business subcontractor to prime contractors on contracts
over $500,000 in which the prime contractor must submit to the Government a
small business subcontracting plan; offer Government agencies the advantage
of having their purchases from GTSI count toward fulfilling their internal
small purchase goals; and avoid having to establish small business
subcontracting plans in order to compete for certain large Government
contracts.

     As a result of the acquisition of the BTG Division in February 1998,
GTSI no longer qualifies as a small business for future contract awards. 
Although most government contracts entered into before the BTG Division
acquisition will not be affected by this change, the Company cannot predict
the effect, if any, of this change on its operations.  GTSI has a number of
possible actions available to it to seek to mitigate an adverse impact to 
<PAGE>
<PAGE>
                                                                         17
GTSI of the future loss of its small business status, including the
following:  increasing sales through the large number of Government
contracts which are not subject to small purchase procedures; aggressively
implementing GTSI's low-cost, one-stop shop strategy to economically
encourage customers to continue to place orders with GTSI; expanding its
sales to prime contractors qualifying as small or minority-owned
businesses; and increasing its sales to state and other markets not subject
to Government small business regulations.  Currently, GTSI cannot precisely
quantify the extent of the impact, if any, on its future results from a
loss of its small business status.

     Noncompliance with Government procurement regulations or contract
provisions could result in termination of Government contracts, substantial
monetary fines or damages, suspension or debarment from doing business with
the Government and even civil or criminal liability.  During the term of
any suspension or debarment by any Government agency, the contractor could
be prohibited from competing for or being awarded any contract by any
Government agency.  In addition, virtually all of the Company's Government
contracts are terminable at any time at the convenience of the Government
or upon default.  Upon termination of a Government contract for default,
the Government may also seek to recover from the defaulting contractor the
increased costs of procuring the specified goods and services from a
different contractor.  The effect of any of these possible Government
actions or the adoption of new or modified procurement regulations or
practices could  adversely affect the Company.

     The Company has historically experienced and expects to continue to
experience significant seasonal fluctuations in its operations as a result
of Government buying and funding patterns.  Although these patterns have
historically led to sales being concentrated in the Company's third and
fourth quarters, the seasonality and the unpredictability of the factors
affecting such seasonality make GTSI's quarterly and yearly financial
results difficult to predict and subject to significant fluctuation.

     The industry in which the Company conducts its business, as well as
the geographic location of the Company's headquarters near the nation's
capitol and the concomitant density of high technology companies
headquartered nearby, results in a limited pool of qualified employees. 
Although the Company's believes that its compensation and benefits are
competitive, such competition and geography may from time to impact the
Company's ability to attract and retain a competent and productive
workforce.


<PAGE>
<PAGE>
                                                                         18
PRODUCTS

     The Company currently offers access to approximately 150,000
information technology products from approximately 2,100 hardware and
software vendors.  The Company continuously monitors sales of existing and
newly introduced products to ensure that it carries state-of-the-art
technology products.

     HARDWARE.  The Company currently resells microcomputers from major
brand name manufacturers, including Hewlett-Packard, Compaq, Panasonic,
Everex, Sun and Apple; and peripherals from major brand name manufacturers,
including Hewlett-Packard, Tektronix, Sony, Iomega, Panasonic and Kodak. 
The Company began selling RISC-based Unix workstations manufactured by Sun
in 1992.  In 1993, the Company began selling the full line of products
manufactured by Apple.  Peripherals carried by the Company include disk
drives, CD-ROM drives, printers, video display monitors, plug-in circuit
boards, modems and related products.  GTSI's LAN hardware products are
supplemented by the Company's LAN services, which include assisting
customers in selecting, configuring, installing and maintaining LANs.

     SOFTWARE.  The Company carries microcomputer software from virtually
every leading MS-DOS and Windows microcomputer software vendor, as well as
Sun workstation and Apple software from a number of leading software
publishers.  The Company sells packaged application software or licenses
therefor, including word processing, database management, spreadsheet and
graphics programs, for use on IBM, IBM-compatible microcomputers, Apple and
Apple-compatible microcomputers, and on Sun and Hewlett-Packard Unix
workstations.  The Company's microcomputer software vendors include
Microsoft, Symantec IBM/Lotus, Informix, Corel, and Visio.  GTSI also sells
networking software, including Novell products.

MARKETING AND SALES

     The Company's marketing and sales personnel design and direct the
Company's sales efforts and its market research, telemarketing and direct
mail campaigns; Company-sponsored catalogues and seminars; advertising in
specialty publications; and participation in major trade shows.  GTSI
provides training to its marketing and sales force on various government
procurement processes and technical features of the products and services
it offers.  All sales personnel have been trained on, and have online
access to, GTSI's computerized system for maintaining price, product
availability, bid, ordering and order-status information.

     From inception, GTSI recognized that the size and diversity of the
government market made it imperative to identify and understand the needs
of customers.  Through years of intensive effort, GTSI has compiled and 
<PAGE>
<PAGE>
                                                                         19
continuously updates one of the most comprehensive databases of federal,
state and local government microcomputer users and their buying patterns. 
This proprietary, on-line computerized database currently contains over
235,000 entries, including an extensive list of agency procurement and
contracting officers, information resource managers, end users, systems
integrators, VARs and prime contractors.  GTSI uses this database, among
other things, for targeting telemarketing and direct mail campaigns.  The
Company conducts direct mail campaigns consisting of brochures, fliers,
questionnaires, reply cards and other promotional items.

     In addition to being an active participant in major federal and state
government trade shows, GTSI sponsors and produces its own federal and
state government seminars and agency-specific shows.  GTSI designs these
seminars and shows to provide training and information about microcomputers
and workstations and related services that are of significant interest to
government users.  GTSI also produces its own "Expos" in which GTSI and
specific agencies work together to showcase products to key end users and
decision makers.  These seminars, shows and expositions are supplemented by
technical support hot lines, customer bulletin boards and an evaluation
library of microcomputer and workstation product profiles, technical
literature and demonstration hardware and software.  The Company also
offers simplified software upgrade policies designed specifically for the
Government.

     The Company publicly introduced its web site, GTSI Online (sm)
(http:\\www.gtsi.com), on the world wide web in early 1995.  In 1997 and
1998, the website provided access to certain product, contract and Company
information.  In the first quarter of 1999, the Company introduced its
third generation website which consists of two sections.  First, there is
the electronic shopping section of the website that includes a smart
shopping cart feature allowing the buyer to save and manage multiple
shopping carts, a smart check-out feature which stores products from
multiple contracts into a single shopping cart that are automatically split
(with appropriate surcharges) upon check-out, and a smart quote feature
which allows buyers to save, manage and e-mail multiple price quotes. 
Second, the site includes an information portal section that is designed to
meet the information needs of the Government customer.

VENDOR RELATIONSHIPS

     In order to offer its customers a centralized source for their
microcomputer and workstation needs, the Company establishes and maintains
relationships with key vendors and offers them a number of profitable
opportunities to expand their sales to the government market, including:


<PAGE>
<PAGE>
                                                                         20
       o  Access to the government market through a significant number of
          diverse contract vehicles.

       o  Substantial relief from the cost of compliance with procurement
          regulations involved in selling directly to the government
          market.

       o  Lower operating costs related to reduction or elimination of
          selling and marketing programs, and elimination of non-commercial
          billing and collection costs related to the government market.

       o  Participation in value-added services, including numerous
          government-specific marketing programs and end-user technical
          support.

     The terms of the Company's agreements with its vendors vary widely,
but typically permit the Company to purchase product for resale to at least
the government market.  Virtually none of the Company's vendor agreements
requires the Company to purchase any specified quantities of product.  The
Company typically requires vendors acting as suppliers to GTSI under its
term Government contracts to provide GTSI with supply and price protection
for the duration of such contracts.  Other than supply agreements under
term Government contracts, the Company's vendor agreements are typically
terminable by the vendor on short notice, at will or immediately upon
default by GTSI.  These vendor agreements also generally permit GTSI to
return previous product purchases at no charge within certain time limits,
for a restocking fee up to 10% and/or in exchange for other products of
such vendor.  The Company also purchases some products from independent
distributors.

     Vendors provide the Company with various forms of marketing and sales
assistance, including but not limited to sales incentives and market
development funds.  Vendors provide sell-through and other sales incentives
in connection with certain product promotions.  Additionally, key vendors
participate with the Company in cooperative advertising and sales events
and typically provide funding which offsets the costs of such efforts.  A
reduction in or discontinuance of any of these incentives or significant
delays in receiving reimbursements could materially adversely affect the
Company.  The Company must continue to obtain  products at competitive
prices from leading vendors in order to provide a centralized source of
price-competitive products for its customers and to be awarded government
contracts.  Although almost all of GTSI's vendors currently do not have all
of their own computer products on a GSA Schedule contract, one or more may
elect to apply for its own GSA Schedule contract and may do so at lower
end-user selling prices than those GTSI currently offers or could
profitably offer.  Although GTSI believes its relationships with its key
vendors to be good, a decision by one or more to sell directly to the 
<PAGE>
<PAGE>
                                                                         21
Government (especially if at significantly lower prices than GTSI), to sell
their products to GTSI's competitors on more favorable terms than to GTSI,
to allow additional resellers to represent their products on a GSA Schedule
contract, to restrict or terminate GTSI's rights to sell their products or
restrict their products from being carried on a GSA Schedule contract,
could materially adversely affect the Company.

CUSTOMERS

     The Company's customers are primarily federal, state and local
government agencies and prime contractors to the Government, including
systems integrators.  In 1998, the Company sold products or services to
thousands of different customers, including to most agencies and major
departments of the Government, to many state governments and to hundreds of
prime contractors.  Although no single customer accounted for greater than
5% of the Company's 1998 sales, aggregate 1998 sales to the Government's
Departments of the Army, Navy and Air Force were 20.4%, 14.5% and 16.7%,
respectively, of GTSI's 1998 sales.

     The Company's sales are highly dependent on the Government's demand
for microcomputer and workstation products.  Although the Company does not
believe that the loss of any single customer would have a materially
adverse effect on it, a material decline in its overall sales to the
Government as a whole or to certain key agencies thereof could have such an
effect.  Reductions in DoD or other Government outlays could occur and may
adversely affect the Company.  Furthermore, legislation is periodically
introduced in Congress that, if enacted, may change the Government's
current procurement processes.  GTSI cannot predict whether any such
legislative or regulatory proposals will be adopted or, if adopted, the
impact upon its operating results.  Changes in the structure, composition
and/or buying patterns of the Government could affect the Company's future
operating results.

BACKLOG

     At  February 28, 1999, and December 31, 1998, the Company's total
backlog of orders was approximately $53.4 million and $59.7 million,
respectively, as compared with approximately $59.9 million and $38.4
million at February 28, 1998, and December 31, 1997, respectively.  Total
backlog consists of written purchase orders received and accepted by GTSI
but not yet shipped.  Backlog fluctuates significantly from quarter to
quarter because of the seasonality of Government ordering patterns and the
periodic inventory shortages resulting from constrained products. 


<PAGE>
<PAGE>
                                                                         22
SERVICE AND WARRANTY

     GTSI provides post-sale field service for certain products that it
sells primarily through subcontractors and to a limited extent through the
Company's in-house technical staff.  The Company typically warrants
products sold to the Government and certain other customers for the same
term as the manufacturer's warranty period although many IDIQ contracts
include provisions for warranties that extend beyond those offered by the
manufacturer.  The Company also sells extended warranties on many of the
government contracts.  Product repaired while under the manufacturer's
warranty is at the manufacturer's expense; product repaired after
expiration of the manufacturer's and GTSI's warranty, if longer, is at the
customer's expense.  GTSI outsources to third parties a significant portion
of its extended warranty obligations.

COMPETITION

     The government microcomputer and workstation market is intensely
competitive and subject to rapid change.  GTSI competes with certain
leading microcomputer and/or workstation hardware manufacturers, which sell
to the government market directly and/or through representatives other than
the Company, and with a number of systems integrators, government and
commercial resellers and commercial computer retail chains, distributors
and VARs (including companies qualifying as minority-owned, disadvantaged
or small businesses under applicable Government regulations) seeking to
enter or expand their presence in the government market.  In 1998, certain
manufacturers selling directly to the Government have gained market share
in the GSA schedule market.  A number of GTSI's existing and potential
competitors have greater financial, sales, marketing and technological
resources than the Company.

     The Company believes that the principal competitive factors in the
government microcomputer market are price, expertise in the applicable
government procurement processes, breadth of product line, customer and
vendor relationships, financial strength, the technical and other skills of
marketing and sales personnel, distribution capability, available inventory
and customer service and support.  The Company believes that the principal
competitive factors in the government workstation market are essentially
the same, except that technical expertise and customer service and support
are often more important and breadth of product line and available
inventory are often less important.  The Company believes that it competes
favorably on each of these factors, although to a lesser degree with
respect to technical expertise.  GTSI also believes that it has a
competitive advantage over certain of its competitors because of its
procurement expertise and avoidance of costly overhead related to selling
into multiple market segments and maintaining numerous retail outlets.  In
addition, the Company's ability to offer a centralized source for purchases

<PAGE>
<PAGE>
                                                                         23
of a wide variety of leading computer products from numerous manufacturers
often provides a competitive advantage over manufacturers who sell only
their own line of products directly to the government.

EMPLOYEES

     At March 5, 1999, the Company had 505 employees, including 260 in
sales, marketing and contract management; 134 in operations; and 111 in
executive, finance, information technology, human resources and legal. 
None of the Company's employees is represented by a labor union, and the
Company has experienced no labor-related work stoppages.

ITEM 2.   PROPERTIES.

     The Company's executive offices are located in an approximately
100,500-square foot facility in Chantilly, Virginia under a lease expiring
in November 2009, with one five-year option.  GTSI's warehousing and
distribution operations are also located in Chantilly, Virginia in a
separate 200,000-square foot facility under a lease expiring in December
2006.  The Company also has a branch sales office occupying 139 square
meters in Mannheim, Germany.  The Company also subleases a 20,000 square
foot distribution center in Chattanooga, Tennessee under a sublease which
expires on March 31, 2001.

ITEM 3.   LEGAL PROCEEDINGS.

     The Company is occasionally a defendant in litigation incidental to
its business.  The Company believes that none of such litigation currently
pending against it, individually or in the aggregate, will have a material
adverse effect on the Company's financial condition or results of
operations.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Inapplicable.


<PAGE>
<PAGE>
                                                                         24
                                 PART  II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.

     STOCK DATA.  The Company's common stock trades on The Nasdaq Stock
Market (sm) under the symbol "GTSI."  As of December 31, 1998, there were
178 record holders of the Company's common stock.  As of March 22, 1999,
there were 179 record holders and approximately 1,500 beneficial holders of
the Company's common stock.  The following table sets forth, for the
periods indicated, the high and low closing prices for the Company's common
stock.

                           1998                  1997
                    -------------------   -------------------
          Quarter     High      Low         High      Low
          -------   --------  ---------   --------  ---------
          First     $ 5 7/8   $ 4 3/4     $ 5 7/8   $ 4 1/2
          Second    $ 5 7/16  $ 4 3/8     $ 5 7/16  $ 4 3/4
          Third     $ 5 3/16  $ 3 3/4     $ 5 7/8   $ 4 13/16
          Fourth    $ 5 1/2   $ 2 1/2     $ 5 7/8   $ 4 1/2

     The Company has never paid cash dividends.  It is the present policy
of the Company to retain earnings to finance the growth and development of
its business, and therefore the Company does not anticipate paying cash
dividends on its common stock in the foreseeable future.  Furthermore,
certain financial covenants in the Company's bank credit agreement restrict
the Company's ability to pay cash dividends.

     ADDITIONAL INVESTOR RELATIONS INFORMATION.  All of the Company's
current required filings with the Securities and Exchange Commission, as
well as press releases and other investor relations information, may be
found at http://www.gtsi.com on the internet's world wide web.  For those
without internet access, such information may be obtained without charge by
request to the Company addressed to: Investor Relations, Government
Technology Services, Inc., 3901 Stonecroft Boulevard, Chantilly, Virginia 
20151-0808.

     TRANSFER AGENT.  The Company's transfer agent is First Union National
Bank, Shareholder Services Group, 1525 West W.T. Harris Blvd., 3C3,
Charlotte, NC  28288-1153; telephone 1-800-829-8432.

     ANNUAL MEETING.  The Annual Meeting of Stockholders is scheduled to be
held at 9:00 a.m. on Tuesday, May 18, 1999, at the Company's headquarters
located at 3901 Stonecroft Boulevard in Chantilly, Virginia.

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                                                                         25
ITEM 6.   SELECTED FINANCIAL DATA.

     The selected financial data for the three years ended December 31,
1998, 1997 and 1996 are derived from, and are qualified in their entirety
by reference to, the Company's audited Financial Statements and Notes
thereto included elsewhere in this Form 10-K.  The December 31, 1998, 1997
and 1996 Financial Statements of the Company have been audited by Arthur
Andersen LLP, independent accountants, as indicated in their report, which
is also included elsewhere in this Form 10-K.  The selected financial data
for all other periods are derived from audited financial statements of the
Company which are not included in this Form 10-K.

<TABLE>
<CAPTION>
(In thousands, except per share amounts)                 TWELVE MONTHS ENDED DECEMBER 31,         
                                               ---------------------------------------------------
                                                 1998       1997      1996(1)    1995(2)   1994(3)
INCOME STATEMENT DATA:                         --------   --------   --------   --------  --------
<S>                                            <C>        <C>        <C>        <C>       <C>     

Sales . . . . . . . . . . . . . . . . . . . .  $ 605,884  $486,377   $491,642   $526,962  $617,220
Cost of sales . . . . . . . . . . . . . . . .    554,247   450,454    458,510    488,348   569,827
                                               --------   --------   --------   --------  --------
Gross margin. . . . . . . . . . . . . . . . .     51,637    35,923     33,132     38,614    47,393
                                               --------   --------   --------   --------  --------
Operating expenses:
   Selling, general and administrative. . . .     44,660    36,939     38,008     39,645    38,701
   Depreciation and amortization. . . . . . .      3,661     3,540     13,456      3,090     2,358
   Restructuring charges. . . . . . . . . . .          -         -          -      2,953         -
                                               --------   --------   --------   --------  --------
Total operating expenses. . . . . . . . . . .     48,321    40,479     51,464     45,688    41,059
                                               --------   --------   --------   --------  --------
Income (loss) from operations . . . . . . . .      3,316    (4,556)   (18,332)    (7,074)    6,334
Interest expense, net . . . . . . . . . . . .        977       548      1,537      4,538     2,172
                                               --------   --------   --------   --------  --------
Income (loss) before taxes. . . . . . . . . .      2,339    (5,104)   (19,869)   (11,612)    4,162
                                               --------   --------   --------   --------  --------
Income tax (benefit) provision. . . . . . . .          -         -     (2,031)    (4,435)    1,576
Net income (loss) . . . . . . . . . . . . . .  $   2,339  $ (5,104)  $(17,838)  $ (7,177) $  2,586
                                               ========   ========   ========   ========  ========
Earnings (loss) per share (basic) . . . . . .  $    0.27  $  (0.76)  $  (2.67)  $  (1.09) $   0.37
                                               ========   ========   ========   ========  ========
Earnings (loss) per share (diluted) . . . . .  $    0.26  $  (0.76)  $  (2.67)  $  (1.09) $   0.37
                                               ========   ========   ========   ========  ========
Weighted average number of common and
   common equivalent shares outstanding
   (basic). . . . . . . . . . . . . . . . . .      8,700     6,733      6,690      6,604     6,898
                                               ========   ========   ========   ========  ========
Weighted average number of common and
   common equivalent shares outstanding
   (diluted). . . . . . . . . . . . . . . . .      8,909     6,733      6,690      6,604     6,898
                                               ========   ========   ========   ========  ========

(1)  The year ended December 31, 1996 includes a pretax charge of $9.1 million ($8.2 million after tax, or $1.22 per share)
     related to the impairment of intangible assets acquired as part of the acquisition of Falcon in 1994.
(2)  The year ended December 31, 1995 includes a pretax charge of $7.9 million ($4.9 million after tax, or $0.74 per share)
     associated with the valuation of inventory and receivables, software licenses, headcount reductions and the consolidation of
     certain office and warehouse facilities.
(3)  The year ended December 31, 1994 includes a pretax charge of $9.9 million ($6.1 million after tax, or $0.89 per share)
     related to certain contracts and general merchandise inventories.

<CAPTION>
(In thousands)                                                     DECEMBER 31,
                                                 1998       1997       1996       1995      1994
BALANCE SHEET DATA:                            --------   --------   --------   --------  --------
<S>                                            <C>        <C>        <C>        <C>       <C>
Working capital . . . . . . . . . . . . . . .  $  42,206  $ 30,860   $ 34,599   $ 45,597  $ 49,355
Total assets. . . . . . . . . . . . . . . . .    161,090   137,464    141,001    197,318   209,573
Notes payable to banks. . . . . . . . . . . .     14,889    21,569     15,828     56,496    70,120
Total liabilities . . . . . . . . . . . . . .    105,766    97,590     96,153    134,841   140,413
Stockholders' equity. . . . . . . . . . . . .     55,324    39,874     44,848     62,477    69,160

</TABLE>
<PAGE>
<PAGE>
                                                                         26
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

     The following discussion and analysis is provided to increase the
understanding of, and should be read in conjunction with, the Financial
Statements and Notes.  Historical results and percentage relationships
among any amounts in the Financial Statements are not necessarily
indicative of trends in operating results for any future period.

Overview

     GTSI is one of the largest dedicated resellers of microcomputer and
Unix workstation hardware, software and networking products to the
Government.  The Company currently offers access to over 150,000
information technology products from more than 2,100 manufacturers.  GTSI
also performs network integration services, including configuring,
installing and maintaining microcomputers in local area networks.  The
Company sells to virtually all departments and agencies of the Government,
many state governments and several hundred systems integrators and prime
contractors that sell to the government market.  GTSI offers its customers
a convenient and cost-effective centralized source for microcomputer and
workstation products through its competitive pricing, broad product
selection and procurement expertise.  The Company provides its vendors with
a low-cost marketing and distribution channel to the millions of end users
comprising the government market, while virtually insulating these vendors
from most of the complex government procurement rules and regulations. 

     Changes in sales throughout the Company's history have been
attributable to increased or decreased unit sales, to expansion of the
Company's product offerings (e.g., peripherals, microcomputers and
networking and workstation products, from 1985 through 1992); to the
addition of new vendors (e.g., IBM, Sun, Panasonic, Apple and Nexar, from
1988 through 1996, and Cisco in 1998); and to the addition or expiration of
sales contract vehicles (e.g., the addition of the SEWP II Contract, the
NIH ECS-II Contract, the TDA-1 Contract and STAMIS Contract, and the
expiration of the Companion Contract in 1995 and Desktop IV systems
ordering in 1996).  The Company's financial results have fluctuated
seasonally, and may continue to do so in the future, because of the
Government's buying patterns which have historically favorably impacted the
last two calendar quarters and adversely affected the first two calendar
quarters.

     The Company's primary strategy is to focus on its core GSA Schedule
and IDIQ business and to compete aggressively on bids in order to win as
many contract vehicles as possible under the various purchasing programs
available to it in the government market.  With these contract vehicles in
place, it is then possible for the Company to use its significant product
base and marketing knowledge to sell products which both meet customers'
requirements and provide an attractive financial return to the Company.

<PAGE>
<PAGE>
                                                                         27
RESULTS OF OPERATIONS

     The following table sets forth, for the years indicated, the
percentages that selected items within the income statement bear to sales,
and the annual percentage changes in the dollar amounts of such items.

<TABLE>
<CAPTION>
                                                                                 Percentage Change
                                                     Percentage of Sales            Years Ended
                                               ------------------------------      December 31,
                                                  Years Ended December 31,      ------------------
                                               ------------------------------     1997      1996
                                                 1998       1997      1996(1)    to 1998   to 1997
                                               --------   --------   --------   --------  --------
<S>                                            <C>        <C>        <C>        <C>       <C>

Sales . . . . . . . . . . . . . . . . . . . .   100.0%     100.0%     100.0%      24.6%     (1.1)%
Cost of sales . . . . . . . . . . . . . . . .    91.5       92.6       93.3       23.0      (1.8)
                                               --------   --------   --------
Gross margin. . . . . . . . . . . . . . . . .     8.5        7.4        6.7       43.7       8.4
                                               --------   --------   --------
Operating expenses:
   Selling, general and administrative. . . .     7.3        7.6        7.7       20.9      (2.8)
   Depreciation and amortization. . . . . . .     0.6        0.7        2.7        3.4     (73.7)
   Restructuring charges. . . . . . . . . . .     -          -          -          -         -
                                               --------   --------   --------
Total operating expenses. . . . . . . . . . .     7.9        8.3       10.4       19.4     (21.3)
                                               --------   --------   --------
Income (loss) from operations . . . . . . . .     0.6       (0.9)      (3.7)    (172.8)    (75.1)
Interest expense, net . . . . . . . . . . . .     0.2        0.1        0.3       78.3     (64.3)
                                               --------   --------   --------
Income (loss) before taxes. . . . . . . . . .     0.4       (1.0)      (4.0)    (145.8)    (74.3)
Income tax (benefit) provision. . . . . . . .     -          -         (0.4)       -      (100.0)
                                               --------   --------   --------
Net income (loss) . . . . . . . . . . . . . .     0.4%      (1.0)%     (3.6)%   (145.8)    (71.4)
                                               ========   ========   ========

(1)  The quarter ended December 31, 1996 includes a pretax charge of $9.1 million ($8.2 million after tax, or $1.22 per share)
     related to the impairment of intangible assets acquired as part of the acquisition of Falcon in 1994.

</TABLE>
<PAGE>
     The following tables set forth, for the periods indicated, the
approximate sales by product, by contract vehicle and by vendor, along with
related percentages of total sales.

<TABLE>
<CAPTION>
PRODUCT CATEGORY
(Dollars in millions)                                             Years Ended December 31,
                                               --------------------------------------------------------------
                                                       1998                 1997                  1996
                                               -------------------   -------------------  -------------------
<S>                                            <C>        <C>        <C>        <C>       <C>        <C>
Hardware. . . . . . . . . . . . . . . . . . .  $  474.7     78.3%    $  430.1     88.5%   $  429.7     87.4%    
Software. . . . . . . . . . . . . . . . . . .      94.6     15.6         55.1     11.3        50.2     10.2  
Services. . . . . . . . . . . . . . . . . . .      36.6      6.1          1.2      0.2        11.7      2.4  
                                               --------   --------   --------   --------  --------   --------
   Total. . . . . . . . . . . . . . . . . . .  $  605.9    100.0%    $  486.4    100.0%   $  491.6    100.0%    
                                               ========   ========   ========   ========  ========   ========

<CAPTION>
CONTRACT VEHICLES
(Dollars in millions)                                             Years Ended December 31,
                                               --------------------------------------------------------------
                                                       1998                 1997                  1996
                                               -------------------   -------------------  -------------------
<S>                                            <C>        <C>        <C>        <C>       <C>        <C>
GSA Schedules . . . . . . . . . . . . . . . .  $  199.8     33.0%    $  208.8     42.9%   $  236.6     48.1%    
IDIQ Contracts. . . . . . . . . . . . . . . .     319.3     52.7        148.6     30.6       117.8     24.0  
Open Market . . . . . . . . . . . . . . . . .      68.6     11.3        107.3     22.1       120.1     24.4  
Other Contracts . . . . . . . . . . . . . . .      18.2      3.0         21.7      4.4        17.1      3.5  
                                               --------   --------   --------   --------  --------   --------
   Total. . . . . . . . . . . . . . . . . . .  $  605.9    100.0%    $  486.4    100.0%   $  491.6    100.0%    
                                               ========   ========   ========   ========  ========   ========
</TABLE>

<PAGE>
<PAGE>
                                                                         28
<TABLE>
<CAPTION>
VENDOR CATEGORY
(Dollars in millions)                                             Years Ended December 31,
                                               --------------------------------------------------------------
                                                       1998                 1997                  1996
                                               -------------------   -------------------  -------------------
<S>                                            <C>        <C>        <C>        <C>       <C>        <C>
Hewlett-Packard . . . . . . . . . . . . . . .  $  138.1     22.8%    $  105.6     21.7%   $   95.6     19.4%    
Microsoft . . . . . . . . . . . . . . . . . .      68.3     11.3         46.8      9.6        31.6      6.4  
Compaq. . . . . . . . . . . . . . . . . . . .      62.9     10.4         54.2     11.1        50.5     10.3  
Panasonic . . . . . . . . . . . . . . . . . .      53.4      8.8         53.8     11.1        31.9      6.5  
Cisco . . . . . . . . . . . . . . . . . . . .      30.0      5.0          3.9      0.8         0.3      0.1  
Everex. . . . . . . . . . . . . . . . . . . .      27.2      4.5         14.6      3.0         7.2      1.5  
SUN . . . . . . . . . . . . . . . . . . . . .      20.3      3.4         21.4      4.4        28.4      5.8  
Toshiba . . . . . . . . . . . . . . . . . . .      14.1      2.3         14.4      3.0        14.3      2.9  
Tektronix . . . . . . . . . . . . . . . . . .       7.4      1.2          8.6      1.8        11.1      2.3  
Other . . . . . . . . . . . . . . . . . . . .     184.2     30.3        163.1     33.5       220.7     44.8  
                                               --------   --------   --------   --------  --------   --------
   Total. . . . . . . . . . . . . . . . . . .  $  605.9    100.0%    $  486.4    100.0%   $  491.6    100.0%    
                                               ========   ========   ========   ========  ========   ========
</TABLE>

1998 COMPARED WITH 1997

     SALES.  Sales consist of revenues from product shipments and services
rendered net of allowances for customer returns and credits.  During 1998,
net sales increased $119.5 million, or 24.6% over 1997.  The primary reason
for the increase was higher sales under the Company's indefinite-delivery/
indefinite-quantity ("IDIQ") contracts of approximately $170.7 million, or
115%.  The increase in IDIQ contracts was partially offset by decreased GSA
schedule sales and Open Market sales of approximately $9.0 million, or 4.3%
and $38.7 million, or 36.1%, respectively.  Management believes that the
decline in Open Market sales is primarily attributable to recent changes in
the procurement regulations that allow the Government to purchase products
by other means (e.g. GSA schedule contracts, Government-wide Agency
Contract ("GWAC"), Blanket Purchase Agreements ("BPA's")) in a quicker and
easier manner than was the case before such changes.  In addition, the
decrease in sales under GSA schedule contracts can be attributed primarily
to decreased sales relating to GSA Schedule B/C contract of $33.3 million
offset by an increase in BPA sales of $28.1 million from the same period
last year.  In 1996, GSA schedule contracts expressly authorized agencies
to procure from schedule holders under BPA's which incorporate many terms
and conditions of the GSA schedule contracts.  Additionally, BPA's offer
many of the same products as GSA schedules, often at lower prices than
available on GSA schedules.  In response to GSA's authorization, the
Company has increased its emphasis on BPA's.

     Sales under IDIQ contracts increased primarily as result of increased
sales under contracts with the State Department, the Army's PC-2 and the
Tennessee Valley Authority, totaling $91.4 million.  The Company performs,
as a subcontractor, under these contracts as a result of the acquisition of
the BTG Division.  In addition, the Company's contract with the U.S. Army's
Standard Army Management Information Systems ("STAMIS") Computer Contract
II, which was awarded in November 1997, produced sales of $35.6 million
during 1998.

     Total booked backlog at December 31, 1998 was approximately $59.7
million compared to $38.4 million at December 31, 1997.  Total booked
backlog was $53.4 million at February 28, 1999, up $6.5 million or 13.9%
compared to February 28, 1998.  Booked backlog represents orders received
but product has yet to ship.
<PAGE>
<PAGE>
                                                                         29
     GROSS MARGIN.  In 1998, gross margin increased in absolute dollars
$15.7 million, or 43.7%, and increased as a percentage of sales from 7.4%
to 8.5%, when compared to 1997.  The increase in gross margin was impacted
by an inventory adjustment of approximately $2.2 million resulting from a
June 1998 physical inventory valuation.  Gross margin for 1998 was 8.2%,
including the impact of the inventory adjustment.  In addition, gross
margins were favorably impacted by change in the Company's mix of contract
vehicles.  Gross margins for 1998, were also impacted by the realization of
greater contract price protection credits offset by increased warranty
maintenance expense.  The change in gross margin percentage can be impacted
by a variety of factors and is not necessarily indicative of gross margin
percentages to be earned in the future periods.
     
     OPERATING EXPENSES.  Total operating expenses for 1998 increased $7.8
million, or 19.4% compared to 1997.  This increase was due primarily to
increased personnel cost as a result of the BTG Division acquisition, as
well as increases in the overall volume of the business.  In addition, the
Company incurred approximately $1.0 million of operating costs associated
with the acquisition of the BTG Division.  Total operating expenses, as a
percentage of total sales decreased from 8.3% to 7.9%, reflecting the
Company's growth in sales requiring less additional infrastructure expenses
as existing facilities and personnel are utilized more effectively. 

     INTEREST EXPENSE.  Net interest expense is the amount of interest
expense on borrowings offset by interest income and prompt payment
discounts.  The net interest expense increased approximately $429,000, or
78.3% for the year ended December 31, 1998 compared to the same period in 
1997.  This increase was due primarily to increased average borrowings as a
result of increased sales volumes, as well as additional borrowings
required for the BTG Division acquisition.  In addition, during 1998 the
Company utilized more prompt payment discounts as compared to the same
period in 1997. 

     INCOME TAXES.  No provision for income tax has been recognized with
respect to the Company's income from operations for 1998 due to the
reversal of the deferred tax valuation allowance that fully offset the
Company's current tax expenses for 1998.

1997 COMPARED WITH 1996

     SALES.  During 1997, net sales decreased $5.2 million or 1.1% and were
negatively impacted by $1.2 million in higher Industrial Funding Fees
associated with the GSA and NIH contracts. These fees are collected by the
Company and remitted to the respective agency on a payment schedule
determined by the respective agency.  Decreased sales under GSA Schedule
and under Open Market Contracts of $27.8 million and $12.8 million, 
<PAGE>
<PAGE>
                                                                         30
respectively, were offset by increased sales under GTSI's various IDIQ
Contracts. It is management's belief that the decline in Open Market sales
is primarily attributable to recent changes in the procurement regulations
that allow the Government to purchase products by other means (e.g., GSA
Schedule contracts) in a quicker and easier manner than was the case before
such changes. IDIQ contract sales rose during 1997 primarily as a result of
higher revenue on the Company's NIH, TDA-1 and SEWP contracts.  Revenue
from these contracts rose $19 million, $15 million and $16 million,
respectively, from 1996.  However, higher sales from the NIH, TDA-1 and
SEWP vehicles were offset by weaker sales activity on the GSA Schedule B/C
contract.

     Sales of Hewlett-Packard, Compaq, Panasonic, Microsoft and Nexar
products increased $60.0 million from the prior year and accounted for 58%
of GTSI's total sales activity by Vendor.  This increase was offset by
lower sales of IBM Label products which decreased by $34.5 million from the
prior year. 

     Total Backlog at December 31, 1997, was approximately $38.4 million,
down 20.1% from approximately $48.1 million at December 31, 1996.  Backlog
was $76.3 million at March 19, 1998 compared to $38.8 million in the prior
period. The increase is primarily related to orders that were recorded as
part of the BTG Division acquisition, which closed on February 12, 1998. 
Backlog represents orders received but for which product has yet to ship. 

     GROSS MARGIN.  Gross margin increased in 1997 by approximately $2.8
million or 8.4%, and increased as a percentage of sales from 6.7% to 7.4%. 
In the fourth quarter of 1996, the Company recorded $2.2 million in
adjustments that were deemed necessary to provide for contractual
obligations, and to reduce certain trade credits to the amounts ultimately
expected to be realized.  Other product cost factors that contributed to
the improvement in the gross margin percentage during 1997 were the
recognition of greater price protection credits.

     OPERATING EXPENSES.  Operating expenses in 1997 decreased
approximately $11.0 million, or 21.4%, and improved as a percentage of
sales from 10.4% to 8.3%.  The change is primarily attributable to a $9.1
million decrease in amortization expense associated with the accelerated
write-down of intangible assets which was recognized during the fourth
quarter of 1996.

     INTEREST EXPENSE.  Total interest charges between 1997 and 1996 were
relatively flat, although bank administrative and credit card fees were
higher in 1997 by approximately $0.4 million from the prior period.  These 
<PAGE>
<PAGE>
                                                                         31
costs were offset by lower interest expenses due to reduced bank borrowings
during certain times throughout 1997.

     INCOME TAXES.  In 1996, a tax benefit of $2.0 million was recorded as
a result of the Company's operating loss for that period, that was realized
by carrying back the loss to prior years in which the Company recognized
taxable income.

NEW ACCOUNTING PRONOUNCEMENTS

     Statement of Financial Accounting Standards ("SFAS") 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," was adopted by the Company during the first quarter of 1996. 
During the fourth quarter of 1996, the Company recorded a charge of
approximately $9.1 million related to the impairment of intangible assets
acquired as part of the acquisition of Falcon in 1994.

     SFAS 123, "Accounting for Stock-Based Compensation," was adopted by
the Company during 1996.  This statement requires disclosure of the fair
value of all stock-based compensation using one of several option-pricing
models.

     SFAS 128, "Earnings Per Share," and SFAS 129, "Disclosure of
Information about Capital Structure," were adopted by the Company in the
fourth quarter of 1997, with no material effect on the Company's
consolidated financial statement presentation.

     SFAS 130, "Reporting Comprehensive Income," was adopted by the Company
in 1998 and in accordance therewith, the Company's Comprehensive Income
equals reported Net Income (Loss).

     SFAS 131, "Disclosures about Segments of an Enterprise and Related
Information," was adopted by the Company in the fourth quarter of 1998.

EFFECT OF INFLATION

     The Company believes that inflation has not had a material effect on
its operations.  However, in the event inflation increases in the future it
could temporarily adversely affect the profitability of GTSI's sales under
its Government fixed-price contracts, which generally preclude the Company
from passing on inflation-related or other increases in product costs to
Government customers during the term of a pre-existing contract.  The
Company mitigates this risk in part by often obtaining agreements from
certain of its suppliers prohibiting them from increasing their prices to
GTSI during fixed-price, term contracts.

<PAGE>
<PAGE>
                                                                         32
SEASONAL FLUCTUATIONS AND OTHER FACTORS

     The Company has historically experienced and expects to continue to
experience significant seasonal fluctuations in its operations as a result
of Government buying and funding patterns, which also impact the buying
patterns of GTSI's prime contractor customers.  These buying and funding
patterns historically have had a significant positive effect on GTSI's
bookings in the third quarter ending September 30 each year (the
Government's fiscal year end), and consequently on sales and net income in
the third and fourth quarters of each year.  Quarterly financial results
are also affected by the timing of the award of and shipments of products
under government contracts, price competition in the microcomputer and
workstation industries, the addition of personnel or other expenses in
anticipation of sales growth, product line changes and expansions, and the
timing and costs of changes in customer and product mix.  In addition,
customer order deferrals in anticipation of new product releases by leading
microcomputer and workstation hardware and software manufacturers, delays
in vendor shipments of new or existing products, a shift in sales mix to
more complex requirements contracts with more complex service costs, and
vendor delays in the processing of incentives and credits due GTSI, have
occurred (all of which are also likely to occur in the future) and have
adversely affected the Company's operating performance in particular
periods.  The seasonality and the unpredictability of the factors affecting
such seasonality make GTSI's quarterly and yearly financial results
difficult to predict and subject to significant fluctuation.  The Company's
stock price could be adversely affected if any such financial results fail
to meet the financial community's expectations.

     Additionally, legislation is periodically introduced in Congress that
may change the Government's procurement practices.  GTSI cannot predict
whether any legislative or any regulatory proposals will be adopted or, if
adopted, the impact upon its operating results.  Changes in the structure,
composition and/or buying patterns of the Government, either alone or in
combination with competitive conditions or other factors, could adversely
affect future results.

LIQUIDITY AND CAPITAL RESOURCES

     During 1998, the Company's operating activities provided $10.5 million
of cash flow compared to the use of $3.0 million for 1997.  The increase
from year to year relates to the Company's increase in Accounts Payable. 
Accounts Payable increased as a result of increased inventory purchases as
a result of 1998 sales volume.  Investing activities used cash of
approximately $12.7 million during 1998.  The primary reason was the cash
payment in February 1998 of $7.8 million relating to the acquisition of the
BTG Division.  During 1998, the Company's financing activities provided
cash of approximately $1.3 million.  The net payments against the Company's

<PAGE>
<PAGE>
                                                                         33
bank notes included $7.8 million used to finance the cash portion of the
BTG Division acquisition.  At December 31, 1998, the Company had
approximately $24.4 million available for borrowing under its facility.

     On May 2, 1996, the Company executed a three-year credit facility with
a bank (the "Principal Lender") for $40.0 million and a one-year credit
facility with the Other Lenders for an additional $55.0 million
(collectively, the "Credit Facility").  Additionally, on June 27, 1996, the
Company executed a separate $10.0 million facility with the Principal
Lender for inventory financing of vendor products (the "Wholesale Financing
Facility").  Interest under the inventory financing facility is accrued at
a rate equal to prime plus 3.00% (11.25% at December 31, 1996).  On August
23, 1996, the Company and its banks executed Amendment No. 1 to the Credit
Facility, which modified certain quarterly financial covenants.

     On July 28, 1997, the Company and its banks executed the Second
Amended and Restated Business Credit and Security Agreement (the "Credit
Agreement").  The agreement modified some of the terms and conditions
contained in the Credit Facility and effectively eliminated the Company's
default condition with certain 1996 year-end financial covenants. The total
amount available under the Credit Facility was reduced from a total of $95
million to $60 million, with an additional $30 million reduction during the
period February 1 through July 31 of each year.  Further, the Wholesale
Financing Facility was increased from $10 million to $20 million, with a
$10 million reduction during the period March 1 through July 31 of each
year.  Other modifications included the revision of the Credit Facility's
term to one year with a one-year automatic renewal, the addition of an
unused line fee, an increase in the interest rate accrued against
outstanding borrowings, and the modification of all financial covenants.

     At December 31, 1997, the Company was not in compliance with the
annual covenant covering Net Income and the fourth quarter covenant related
to Tangible Net Worth.  On February 3, 1998, the Company obtained waivers
from the agent for all covenant violations at December 31, 1997.  Amounts
due to the lenders as of December 31, 1997 are classified as current
liabilities and the available portion of the Credit Facility at December
31, 1997 was approximately $18.7 million.

     On February 11, 1998, the Credit Agreement was revised to, among other
things, limit the total amount available under the facility to $60 million
for an additional two months.  The total available under the facility was
reduced to $30 million only during the period April 1, 1998 to July 31,
1998.  As for the Wholesale Financing Facility, the amount available under
the agreement remained at $20 million and was to be used solely for
inventory purchases.  The amount available was reduced to $10 million only 
<PAGE>
<PAGE>
                                                                         34
during the period April 1, 1998 to July 31, 1998.  All other material terms
of both facilities remained the same.

     On July 2, 1998, the Company and its banks executed separate
amendments adjusting, among other things, the seasonality of the total
amount available under the Credit Facility and the Wholesale Financing
Facility, respectively, in any calendar year.  The limit of the Credit
Facility will increase to $75 million during the period October 1 through
January 31.  During the periods February 1 through April 30 and July 1
through September 30, the total amount available under the Credit Facility
will be limited to $50 million.  During the period May 1 through June 30,
the total amount available under the Credit Facility will be limited to $30
million.  In addition, the interest rate under the Credit Facility was
amended to a rate of LIBOR plus 2.45%, payable quarterly; reducing to LIBOR
plus 2.25% if, commencing with the fiscal quarter ending September 30,
1998, the Company achieves certain quarterly financial covenants.  At
September 30, 1998, the Company was in compliance with all quarterly
financial covenants set forth in the Credit Agreement.  As a result, on
October 28, 1998, when the Company delivered its certified financial
statements to the Principal Lender, the interest rate was reduced to LIBOR
plus 2.25%.  Prior to this event, the interest rate under the Credit
Agreement was LIBOR plus 2.45%.  The Company's interest rate at December
31, 1998 was 7.83%.  On August 14, 1998, the limit of the Wholesale
Financing Facility was increased via temporary overline limit of up to
$10,000,000 through January 31, 1999.  The limit of the Wholesale Financing
Facility will remain at $20 million during the period June 1 through
January 31, and decrease to $10 million during the period February 1
through May 31, of any calendar year.  All other material terms of both
facilities remained the same.  At December 31, 1998, the Company was in
compliance with all financial covenants set forth in the credit facility.

     Amounts due to the Lenders as of December 31, 1998 are classified as
current liabilities and the available portion of the Credit Facility at
December 31, 1998 was approximately $24.4 million.

     Borrowing is limited to 80% of eligible accounts receivable.  The
Credit Facility is secured by substantially all of the operating assets of
the Company.  Current obligations are first funded and then all cash
receipts are automatically applied to reduce outstanding borrowings.  The
Credit Facility also contains certain covenants that include restrictions
on the payment of dividends and the repurchase of the Company's Common
Stock, as well as provisions specifying compliance with certain quarterly
and annual financial statistical ratios.


<PAGE>
<PAGE>
                                                                         35
YEAR 2000

     IMPACT OF YEAR 2000.  The Company is aware of the issues associated
with the programming code in existing computer systems as the millennium
("Year 2000") approaches.  The Year 2000 problem is complex as certain
computer operations will be affected in some way by the rollover of the
two-digit year value to 00.  The issue is whether computers systems will
properly recognize date-sensitive information when the year changes to
2000.  Systems that do not properly recognize such information could
generate erroneous data or cause a system to fail.  Assessments of the
potential effects of the Year 2000 issue vary markedly among different
companies, governments, consultants and economists, and it is not possible
to predict what the actual impact may be.  Given this uncertainty, the
Company recognizes the need to remain vigilant and is continuing its
analysis, assessment and planning for the various Year 2000 issues, across
the entire business.

     STATE OF READINESS.  The Company's primary focus has been on its own
internal information technology systems, including all types of systems in
use by the Company in its operations, marketing, finance and human
resources departments, and to deal with the most critical systems first. 
The Company has formed an Action Team representing every functional area of
the Company, with the Chairman and CEO as the Executive Sponsor, and the
senior executive management staff as the Steering Committee, of the Team. 
The Year 2000 Plan is comprehensive and auditable, and involves generally
the following phases:  inventory, risk classification, assessment,
remediation, and testing.  The scope of the plan is broad and addresses
critical suppliers, internal systems and processes, and customers.

     With respect to its internal information technology systems, the
Company has conducted an inventory of a substantial majority of its central
systems for Year 2000 compliance.  The most significant risk faced by the
Company is the Just-In-Time ("JIT") application, the Company's key
enterprise operations system.  The Company completed JIT Year 2000
conversion and testing in early 1999.  The Company has begun implementing
remediation plans for other material information technology systems.  In
addition, the Company currently is reviewing its other non-critical
internal information technology systems.  With respect to the Company's
non-information technology systems, the Company moved its headquarters to a
new location during the end of 1998.  All systems in the new facility are
Year 2000 compliant.

     The Company has begun to assess the potential for Year 2000 problems
with the information systems of its customers and vendors.  The Company has
sent questionnaires to the primary product vendors with which the Company
has a material relationship.  The Company is in the process of assessing 
<PAGE>
<PAGE>
                                                                         36
the responses received to date from the vendors and plans to follow-up with
vendors that have not responded.  The Company does not have sufficient
information to provide an estimated timetable for completion of renovation
and testing that such parties with which the Company has a material
relationship may undertake.  The Company is unable to estimate the costs
that it may incur to remedy the Year 2000 issues relating to such parties. 
The Company's primary customer is the Federal Government.  Various
departments in the Federal Government have achieved different degrees of
readiness regarding Year 2000 compliance.

     COSTS TO ADDRESS YEAR 2000 ISSUES.  The Company presently estimates
that the cost associated with becoming Year 2000 compliant is approximately
$2 million, approximately $50,000 of that  has been incurred since December
31, 1998.  Any external and internal costs specifically associated with
modifying internal-use software for the Year 2000 will be charged to
expense as incurred in accordance with the Emerging Issues Task Force
("EITF") of the Financial Accounting Standards Board Issue No. 96-14,
"Accounting for the Costs Associated with Modifying Computer Software for
the Year 2000."  The costs associated with the replacement of computerized
systems, hardware or equipment will be capitalized and are included in the
above estimate.  These costs do not include any costs associated with the
implementation of contingency plans.

     The Company's Year 2000 program is an ongoing process and the estimate
of costs and completion dates for various components of the program above
are subject to change.  The present cost estimates of the Company's Year
2000 identification, assessment, remediation and testing efforts and the
dates on which the Company believes it will complete such efforts are based
on management's best estimates, which were derived using numerous
assumptions regarding future events, including among other factors the
continued availability of certain resources.  There can be no assurance
that these estimates will prove to be accurate, and actual results could
differ materially from those currently anticipated.  Specific factors that
could cause such material differences include, but are not limited to, the
availability and cost of personnel trained in Year 2000 issues, the ability
to identify, assess, remediate, and test all relevant computer codes,
third-party remediation plans, and similar uncertainties.

     RISKS TO THE COMPANY.  The Government includes certain Year 2000
warranty clauses in its contracts, which the Company executes.  The Company
strives to pass the Government contract clauses on to its product vendors,
however, in some instances vendors refuse to accept such clauses.  There
can be no assurance that the Company will not be materially adversely
effected if the Government were to enforce these clauses and the Company
did not have corresponding protection from such vendors.  In addition, it 
<PAGE>
<PAGE>
                                                                         37
is unknown how Government and other customer spending patterns may be
impacted by Year 2000 issues.  As customers focus on preparing their
business for the Year 2000, information technology budgets may be spent on
remediation efforts, potentially delaying the purchase and implementation
of new systems, thereby creating less demand for the Company's products and
services.  The Year 2000 presents a number of other risks and uncertainties
that could affect the Company, including utilities failures and competition
for personnel skilled in the resolution of Year 2000 issues.

     The failure to correct a material Year 2000 problem could result in
interruption in, or a failure of, certain normal business activities or
operations.  Such failures could materially and adversely affect the
Company's results of operations, liquidity and financial condition.  Due to
the general uncertainty of the Year 2000 readiness of third-party suppliers
and customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material adverse impact on
the Company's results of operations, liquidity or financial condition.

     CONTINGENCY PLAN.  The Company has not yet established a contingency
plan to address the most reasonably likely worst case scenario and such
scenario has not yet been identified.  The Company currently plans to
complete such analysis and contingency planning by December 31, 1999.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995

     The renegotiation of the financial covenants contained in the Credit
Facility, and the statements which are not historical facts contained in
this Management's Discussion and Analysis of Financial Condition, Results
of Operations and Notes to Consolidated Financial Statements, are forward-
looking statements that involve certain risks and uncertainties.  Actual
results may differ materially based on numerous factors, including but not
limited to competition in the government markets, spending patterns of the
Company's customers, general economic and political conditions, success of
negotiations with the Company's Lenders, changes in government procurement
regulations, impact of the Year 2000 issue on the Company's business, and
other risks described in this Annual Report on Form 10-K and in the
Company's other Securities and Exchange Commission filings.
<PAGE>
<PAGE>
                                                                         38
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Consolidated Financial Statements and Schedule of Government
Technology Services, Inc. and Subsidiary are filed as part of this Form
10-K.  Supplemental quarterly financial information is included in Note 9
of Notes to Consolidated Financial Statements.


Index to Financial Statements and Schedule                             Page

FINANCIAL STATEMENTS:

     Reports of Independent Public Accountants. . . . . . . . . . . . . .39

     Consolidated Balance Sheets as of December 31,
          1998 and 1997 . . . . . . . . . . . . . . . . . . . . . . . . .40

     Consolidated Statements of Operations for the years ended
          December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . . .41

     Consolidated Statements of Cash Flows for the years ended
          December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . . .42

     Consolidated Statements of Changes in Stockholders' Equity
          for the years ended December 31, 1998, 1997 and 1996. . . . . .43

     Notes to Consolidated Financial Statements . . . . . . . . . . . . .44

SCHEDULE:

     Schedule II - Valuation and Qualifying Accounts. . . . . . . . . . .63


Schedules not listed above have been omitted because they are not
applicable or the information required to be set forth therein is included
in the financial statements or notes thereto.

<PAGE>
<PAGE>
                                                                         39
                 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders
Government Technology Services, Inc.

     We have audited the accompanying consolidated balance sheets of
Government Technology Services, Inc. and subsidiary as of December 31, 1998
and 1997, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows for each of the three years ended
December 31, 1998.  These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Government
Technology Services, Inc. and subsidiary as of December 31, 1998 and 1997,
and the results of their operations and their cash flows for each of the
three years ended December 31, 1998, in conformity with generally accepted
accounting principles.

     Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole.  The schedule listed in the
index of financial statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements.  This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and in
our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.

                                        ARTHUR ANDERSEN LLP

Washington, D.C.
February 17, 1999
<PAGE>
<PAGE>
                                                                         40
            GOVERNMENT TECHNOLOGY SERVICES, INC. AND SUBSIDIARY

                        CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             December 31,
                                                          -------------------
(In thousands, except share data)                           1998       1997  
                                                          --------   --------
<S>                                                       <C>        <C>
ASSETS

Current assets:
  Cash. . . . . . . . . . . . . . . . . . . . . . . . . . $     39   $    856
  Accounts receivable, net. . . . . . . . . . . . . . . .  106,334     90,905
  Merchandise inventories . . . . . . . . . . . . . . . .   36,544     33,000
  Net deferred taxes and other. . . . . . . . . . . . . .    3,099      3,423
                                                          --------   --------
     Total current assets . . . . . . . . . . . . . . . .  146,016    128,184

Property and equipment, net . . . . . . . . . . . . . . .   11,381      8,217
Intangible assets, net. . . . . . . . . . . . . . . . . .      114        534
Net deferred taxes and other. . . . . . . . . . . . . . .    3,579        529
                                                          --------   --------

     Total assets . . . . . . . . . . . . . . . . . . . . $161,090   $137,464
                                                          ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable to banks. . . . . . . . . . . . . . . . . $ 14,889   $ 21,569
  Accounts payable. . . . . . . . . . . . . . . . . . . .   75,806     67,720
  Accrued liabilities . . . . . . . . . . . . . . . . . .   13,115      8,035
                                                          --------   --------
     Total current liabilities. . . . . . . . . . . . . .  103,810     97,324

Other liabilities . . . . . . . . . . . . . . . . . . . .    1,956        266
                                                          --------   --------

     Total liabilities. . . . . . . . . . . . . . . . . .  105,766     97,590
                                                          --------   --------

Commitments and contingencies

Stockholders' equity:
  Preferred Stock - $0.25 par value, 680,850 shares
     authorized; none issued or outstanding . . . . . . .        -          -
  Common Stock - $0.005 par value, 20,000,000 shares
     authorized, 9,806,084 issued and 9,799,490
     outstanding at December 31, 1998; and 10,000,000
     shares authorized, 6,806,084 shares issued and
     6,756,180 outstanding at December 31, 1997 . . . . .       49         34
  Capital in excess of par value. . . . . . . . . . . . .   45,712     33,086
  Retained earnings . . . . . . . . . . . . . . . . . . .    9,634      7,295
  Treasury stock, 6,594 shares at December 31, 1998
     and 49,904 shares at December 31, 1997, at cost. . .      (71)      (541)
                                                          --------   --------

     Total stockholders' equity . . . . . . . . . . . . .   55,324     39,874
                                                          --------   --------

     Total liabilities and stockholders' equity . . . . . $161,090   $137,464
                                                          ========   ========
</TABLE>

               The accompanying notes are an integral part
               of these consolidated financial statements.
<PAGE>
<PAGE>
                                                                         41
            GOVERNMENT TECHNOLOGY SERVICES, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               For the years ended
                                                                   December 31,
                                                          ------------------------------
(In thousands, except per share amounts)                    1998       1997       1996  
                                                          --------   --------   --------
<S>                                                       <C>        <C>        <C>

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . $605,884   $486,377   $491,642

Cost of sales . . . . . . . . . . . . . . . . . . . . . .  554,247    450,454    458,510
                                                          --------   --------   --------

Gross margin. . . . . . . . . . . . . . . . . . . . . . .   51,637     35,923     33,132

Operating expenses. . . . . . . . . . . . . . . . . . . .   48,321     40,479     51,464
                                                          --------   --------   --------

Income (loss) from operations . . . . . . . . . . . . . .    3,316     (4,556)   (18,332)

Interest expense, net of interest income of
    $508, $325 and $265, respectively . . . . . . . . . .      977        548      1,537
                                                          --------   --------   --------

Income (loss) before taxes. . . . . . . . . . . . . . . .    2,339     (5,104)   (19,869)

Income tax benefit. . . . . . . . . . . . . . . . . . . .        -          -     (2,031)
                                                          --------   --------   --------

Net income (loss) . . . . . . . . . . . . . . . . . . . . $  2,339   $ (5,104)  $(17,838)
                                                          ========   ========   ========

Basic net income (loss) per share . . . . . . . . . . . . $   0.27   $  (0.76)  $  (2.67)
                                                          ========   ========   ========

Diluted net income (loss) per share . . . . . . . . . . . $   0.26   $  (0.76)  $  (2.67)
                                                          ========   ========   ========

Basic weighted average shares outstanding . . . . . . . .    8,700      6,733      6,690
                                                          ========   ========   ========

Diluted weighted average shares outstanding . . . . . . .    8,909      6,733      6,690
                                                          ========   ========   ========
</TABLE>


               The accompanying notes are an integral part
               of these consolidated financial statements.

<PAGE>
<PAGE>
                                                                         42
            GOVERNMENT TECHNOLOGY SERVICES, INC. AND SUBSIDIARY

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                               For the years ended
                                                                   December 31,
                                                          ------------------------------
(In thousands)                                              1998       1997       1996  
                                                          --------   --------   --------
<S>                                                       <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) . . . . . . . . . . . . . . . . . . . . $  2,339   $ (5,104)  $(17,838)
                                                          --------   --------   --------
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation and amortization . . . . . . . . . . . . .    3,661      3,539     12,618
  (Gain) loss on disposal of property and equipment . . .                (340)       839
  Stock compensation. . . . . . . . . . . . . . . . . . .                   -        (13)
  (Decrease) increase in cash due to changes in
    assets and liabilities:
     Accounts receivable. . . . . . . . . . . . . . . . .  (15,429)      (789)    13,049
     Merchandise inventories. . . . . . . . . . . . . . .    9,408     (1,156)    32,671
     Deferred income taxes and intangible assets. . . . .   (2,306)     2,466      3,158
     Accounts payable . . . . . . . . . . . . . . . . . .    8,086       (987)     4,647
     Accrued liabilities. . . . . . . . . . . . . . . . .    3,333     (2,206)    (1,685)
     Other liabilities. . . . . . . . . . . . . . . . . .      634     (1,111)      (465)
     Other. . . . . . . . . . . . . . . . . . . . . . . .      805      2,641     (1,788)
                                                          --------   --------   --------
       Net cash provided by (used in) operating
          activities. . . . . . . . . . . . . . . . . . .   10,531     (3,047)    45,193
                                                          --------   --------   --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cost of property and equipment. . . . . . . . . . . . .   (4,827)    (2,377)    (4,770)
  Payments related to purchase of BTG Division. . . . . .   (7,826)         -          -
  Proceeds from sales of  property and equipment. . . . .        -        361         53
                                                          --------   --------   --------
       Net cash used in investing activities. . . . . . .  (12,653)    (2,016)    (4,717)
                                                          --------   --------   --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from (payments of) bank notes, net . . . . . .    1,146      5,741    (40,668)
  Proceeds from exercises of stock options and warrants .      159        130        222
                                                          --------   --------   --------
       Net cash provided by (used in) financing
          activities. . . . . . . . . . . . . . . . . . .    1,305      5,871    (40,446)
                                                          --------   --------   --------

Net (decrease) increase in cash . . . . . . . . . . . . .     (817)       808         30
Cash at beginning of year . . . . . . . . . . . . . . . .      856         48         18
                                                          --------   --------   --------
Cash at end of year . . . . . . . . . . . . . . . . . . . $     39   $    856   $     48
                                                          ========   ========   ========
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
     Interest . . . . . . . . . . . . . . . . . . . . . . $  2,114   $  2,744   $  4,756
     Income taxes . . . . . . . . . . . . . . . . . . . . $  2,553   $      7   $     20

Supplemental disclosure of non-cash activities:
     During 1998, Company issued 15,375 shares of preferred stock in exchange for $12.952 million of inventory and other assets in
connection with the acquisition of the BTG Division.  The shares of preferred stock were subsequently converted during 1998 to 3.0
million shares of common stock.
     In December 1998, the company capitalized as leasehold improvements and deferred rent the amount of $2 million, which
represents the build-out allowance relative to the leasing of its new corporate headquarters (see Note 7).

</TABLE>

               The accompanying notes are an integral part
               of these consolidated financial statements.
<PAGE>
<PAGE>
                                                                         43
            GOVERNMENT TECHNOLOGY SERVICES, INC. AND SUBSIDIARY

        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                             For the years ended December 31, 1998, 1997 and 1996
                                              ----------------------------------------------------------------------------------
                                                Preferred Stock        Common Stock       Capital                         Total
                                              ------------------    ------------------      in                            Stock-
                                               Shares     Shares                          Excess    Retained  Treasury   holders'
(In thousands)                                 Issued     Amount     Issued    Amount     of Par    Earnings   Stock      Equity
                                              --------   --------   --------  --------   --------   --------  --------   --------
<S>                                           <C>        <C>        <C>       <C>        <C>        <C>       <C>        <C>

Balance, December 31, 1995. . . . . . . . . .        -   $      -      6,806  $      34  $ 33,611   $ 30,237  $  (1,405)$  62,477

Stock awards and options exercised. . . . . .        -          -          -          -      (316)         -        525       209

Net loss. . . . . . . . . . . . . . . . . . .        -          -          -          -         -    (17,838)         -   (17,838)
                                              --------   --------   --------  --------   --------   --------  --------   --------



Balance, December 31, 1996. . . . . . . . . .        -   $      -      6,806  $      34  $ 33,295   $ 12,399  $    (880) $ 44,848

Stock awards and options exercised. . . . . .        -          -          -          -      (209)         -        339       130

Net loss. . . . . . . . . . . . . . . . . . .        -          -          -          -         -     (5,104)         -    (5,104)
                                              --------   --------   --------  --------   --------   --------  --------   --------



Balance, December 31, 1997. . . . . . . . . .        -   $      -      6,806  $      34  $ 33,086   $  7,295  $    (541) $ 39,874

Stock awards and options exercised. . . . . .        -          -          -          -      (326)         -        470       144

Acquisition of BTG Division -
     issuance of Preferred Stock. . . . . . .   15,375     15,375          -          -         -          -          -         -

Acquisition of BTG Division -
     conversion of Preferred Stock
     into Common Stock. . . . . . . . . . . .  (15,375)   (15,375)     3,000         15    12,952          -          -    12,967

Net income. . . . . . . . . . . . . . . . . .        -          -          -          -         -      2,339          -     2,339
                                              --------   --------   --------  --------   --------   --------  --------   --------



Balance, December 31, 1998. . . . . . . . . .        -   $      -      9,806  $      49  $ 45,712   $  9,634  $     (71) $ 55,324
                                              ========   ========   ========  ========   ========   ========  ========   ========
</TABLE>


               The accompanying notes are an integral part
               of these consolidated financial statements.
<PAGE>
<PAGE>
                                                                         44
            GOVERNMENT TECHNOLOGY SERVICES, INC. AND SUBSIDIARY

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Government Technology Services, Inc. ("GTSI") operates in a single
business segment and resells microcomputer and workstation hardware,
software and peripherals to agencies of federal, state and local
governments.  Business activities also include sales to systems
integrators, prime contractors and other companies reselling information
technology to various government agencies.  In August 1994, GTSI acquired
all of the outstanding shares of common stock of Falcon Microsystems, Inc.
("Falcon").  GTSI and Falcon are hereinafter referred to as the "Company."

ACQUISITION OF BTG DIVISION

     On February 12, 1998, the Company entered into and closed on an Asset
Purchase Agreement with BTG, Inc. and two of its subsidiaries
(collectively, "BTG") under which the Company acquired substantially all of
the assets of the BTG division that resells computer hardware, software and
integrated systems to the Government (the "BTG Division").  The acquired
assets consisted primarily of inventory and rights under certain contracts
and intangible personal property, along with furniture, fixtures, supplies
and equipment.  In addition, the Company assumed certain liabilities under
specified contracts of BTG as well as certain liabilities arising from the
ownership or operation of the acquired assets after the closing.  The
Company paid at closing $7,325,265 in cash (after a $174,735 adjustment for
accrued vacation liability and satisfaction of an outstanding invoice owed
by BTG) and issued 15,375 shares, having a liquidation preference of
$15,375,000, of a new series of preferred stock designated as Series C 8%
Cumulative Redeemable Preferred Stock ("Series C Preferred Stock").  The
Company paid an additional $500,000 in cash upon the release of liens on
certain items of equipment which are part of the acquired assets.  A
portion of the consideration, $800,000 in cash and 1,538 shares of Series C
Preferred Stock, was held under an escrow agreement to secure BTG's
indemnification obligations under the Asset Purchase Agreement.  Under the
Asset Purchase Agreement, BTG was obligated to repay to the Company up to
$4.5 million to the extent that there was a shortfall in the amounts that
the Company received from dispositions of certain inventory acquired.

     The acquisition of the BTG Division was accounted for using the
purchase method of accounting.  The purchase price was allocated to
tangible assets based on fair market value.  The financial statements
include the results of operation of the BTG Division since the acquisition
date.


<PAGE>
<PAGE>
                                                                         45
     The following table sets forth the unaudited pro forma results of
operations of the Company and the BTG Division for the years ended December
31, 1998 and 1997, assuming the acquisition occurred on January 1, 1997. 
Net income for 1998 excludes approximately $1 million of nonrecurring cost
and $270,000 of interest expense directly attributable to the acquisition.

     (In thousands, except per share data)      (unaudited)
                                              1998       1997
                                            --------   --------

     Revenues . . . . . . . . . . . . . . . $647,021   $913,923

     Net income (loss). . . . . . . . . . . $  1,970   $ (6,763)

     Basic income (loss) per share. . . . . $   0.23   $  (0.78)

     Diluted  income (loss) per share . . . $   0.22   $  (0.78)

     The pro forma results are not indicative of the results of operations
had the acquisition taken place on January 1, 1997.

     Subsequent to the closing, BTG delivered to the Company certain other
inventory ("Surplus Inventory").  By letter dated May 15, 1998, the Company
and BTG agreed that BTG would invoice GTSI an aggregate of $3,912,419 for
Surplus Inventory.  In addition, BTG agreed to pay to the Company $1
million on June 30, 1998, which constituted full and complete payment for
any inventory shortfall as described in the Asset Purchase Agreement, as
well as $250,000 for costs associated with processing the Surplus
Inventory.

     Pursuant to the Asset Purchase Agreement, the Company agreed to
convene a meeting of stockholders no later than January 1, 1999 to approve
a proposal to convert the Series C Preferred Stock into 3,000,000 shares of
Common Stock (the "Conversion Proposal"), and a proposal to amend the
Company's Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 10,000,000 to 20,000,000 (the "Charter
Amendment Proposal").  At the Company's annual meeting of stockholders held
on May 12, 1998, the Company's stockholders approved the Conversion
Proposal and the Charter Amendment Proposal.  The Series C Preferred Stock
was converted automatically into 3,000,000 shares of Common Stock valued at
$5.125 per share and which, pursuant to the exemption provided under
Section 4(2) of the Securities Act of 1933, as amended ("Securities Act"),
were not registered under the Securities Act.

     On February 10, 1999, the Company entered into subsequent agreements
with BTG.  The agreements relate to the reacquisition of stock by GTSI from
BTG, the terms of certain contracts and the relationship of the parties 
<PAGE>
<PAGE>
                                                                         46
going forward.  Pursuant to the agreements, GTSI reacquired 600,000 shares
of its stock from BTG.  Of the 600,000 shares, 200,000 were tendered to
GTSI at no cost and 400,000 were purchased by GTSI for $5.00 per share,
using a three-year, 8% interest bearing note from BTG with the principal
repaid in three annual installments of $500,000, $500,000 and $1,000,000,
respectively.  As part of the agreements, GTSI has an exclusive five-year
option to purchase the remaining 1.3 million shares of GTSI stock held by
BTG for $5.25 per share.  Under the February 12, 1998 Asset Purchase
Agreement, BTG is precluded from selling any of its holdings, with certain
limited exceptions, to a third party for six years without GTSI's prior
consent.  Under the February 10, 1999 agreement, GTSI must consent to a
sale by BTG of their stock to any third party.  If GTSI consents to such a
sale, BTG is obligated to pay GTSI $0.50 per share on any shares sold by
BTG.

     As a result of the agreement, BTG transferred to GTSI all of the cash
portion of the February 12, 1998 escrow, totaling $827,219, and BTG's
ownership interest in GTSI was reduced to 13.3%.  Consequently, BTG
forfeited its right to representation on the GTSI Board and Dr. Edward H.
Bersoff, Chief Executive Officer of BTG, resigned from the GTSI Board.  The
agreements also provide that BTG will novate certain contracts that GTSI
had been performing in the capacity of a subcontractor, and halts all
royalty payments by GTSI to BTG after December 31, 1998.  For a discussion
of major contracts acquired with the BTG Division, see "Formal Bids" on
page 10.

1. ACCOUNTING POLICIES

     Significant accounting policies of the Company are summarized below:

     BASIS OF CONSOLIDATION.  The consolidated financial statements include
the accounts of GTSI and its wholly-owned subsidiary, Falcon.  All
significant inter-company accounts and transactions are eliminated in
consolidation.

     ACCOUNTING ESTIMATES.  The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the financial statements, and the reported
amounts of revenues and expenses during the reporting periods.  Actual
results could differ from those estimates and the Company periodically re-
evaluates the recorded values of all assets and liabilities.


<PAGE>
<PAGE>
                                                                         47
     REVENUE RECOGNITION.  The Company recognizes revenue upon shipment of
products and/or acceptance of services rendered.

     FINANCIAL INSTRUMENTS.  At December 31, 1998, 1997 and 1996, the
recorded values of financial instruments such as accounts receivable and
payable and notes payable to banks approximated their fair values, based on
the short-term maturities of these instruments.

     ACCOUNTS RECEIVABLE.  Accounts receivable principally represents
amounts collectible from the Federal Government and prime contractors to
the Federal Government.  Other accounts receivable result from items billed
to suppliers under various agreements involving the sale of their products.
The Company performs ongoing credit evaluations of its non-governmental
customers but generally does not require collateral to support any
outstanding obligation owed to GTSI. Allowances for potential uncollectible
amounts are estimated and deducted from total accounts receivable.

     INVENTORIES.  Inventories are valued at the lower of cost or market. 
Cost is determined using a weighted average method.

     PROPERTY AND EQUIPMENT.  Property and equipment are stated at cost
less accumulated depreciation.  Depreciation and amortization are
calculated using the straight-line method over estimated useful lives
ranging from three to ten years.  Leasehold improvements are amortized
using the straight-line method over the terms of the leases or their
estimated useful lives, whichever is shorter.

     INTANGIBLE ASSETS.  Intangible assets are recorded at cost and
amortized using the straight-line method over the estimated useful lives.

     IMPAIRMENT OF LONG-LIVED ASSETS.  To determine recoverability of its
long-lived assets, the Company evaluates the probability that future
undiscounted net cash flows, without interest charges, will be less than
the carrying amount of the assets.  It is reasonably possible that future
undiscounted net cash flows, without interest charges, will be less than
the carrying amount of the assets.  Impairment is measured at fair value. 
During the fourth quarter of 1996, the Company recorded a charge of
approximately $9.1 million related to the impairment of intangible assets
acquired as part of the acquisition of Falcon in 1994.

     INCOME TAXES.  Deferred income taxes are recognized based on the
estimated future tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.  Valuation allowances are established
when necessary to reduce deferred tax assets to amounts expected to be 
<PAGE>
<PAGE>
                                                                         48
realized.  Income tax expense represents the current tax provision for the
period and the change during the period in deferred tax assets and
liabilities.

     EARNINGS PER SHARE.  Effective December 31, 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") 128, "Earnings Per
Share," which requires dual presentation of basic and diluted earnings per
share on the face of the income statement for all periods presented.  Basic
earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period.  Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings
of the entity.  Diluted earnings per share is computed similarly to fully
diluted earnings per share pursuant to Accounting Principles Bulletin No.
15.  Options to purchase approximately 284,000 and 368,000 weighted average
shares of Common Stock at December 31, 1997 and 1996, respectively, were
not included in the computation of earnings per share due to their anti-
dilutive effect.

     MARKETING DEVELOPMENT AND COOPERATIVE ADVERTISING FUNDS.  Certain
vendors provide the Company with sales incentive programs. Generally, the
funds received under these programs are determined based on the Company's
purchases and/or sales of the vendor's product.  The funds are earned upon
performance of specific promotional programs or upon completion of
predetermined objectives dictated by the vendor.  Once earned, the funds
reduce associated expenses of promotional programs.

     CHECK OVERDRAFTS.  Included in accounts payable at December 31, 1998,
1997 and 1996, are approximately $7.4 million, $2.0 million and $20.6
million, respectively, which represent checks that have been issued but
have yet to clear the bank.

     RECLASSIFICATIONS.  Certain amounts from prior years have been
reclassified to conform to the current year financial statement
presentation.


<PAGE>
<PAGE>
                                                                         49
2. ACCOUNTS RECEIVABLE

     The composition of accounts receivable as of December 31, 1998 and
1997 is as follows (in thousands):

                                              1998       1997
                                            --------   --------

     Trade accounts receivable. . . . . . . $ 93,750   $ 79,879
     Vendor and other receivables . . . . .   18,564     15,119
                                            --------   --------
                                             112,314     94,998
     Less allowance for uncollectible
       accounts . . . . . . . . . . . . . .   (5,980)    (4,093)
                                            --------   --------

     Accounts receivable, net . . . . . . . $106,334   $ 90,905
                                            ========   ========

3. PROPERTY AND EQUIPMENT

     The composition of property and equipment as of December 31, 1998 and
1997 is as follows (in thousands):

                                              1998       1997
                                            --------   --------

     Office furniture and equipment . . . . $  9,519   $  8,665
     Computer software. . . . . . . . . . .    6,300      6,108
     Leasehold improvements . . . . . . . .    4,578      2,509
                                            --------   --------
                                              20,397     17,282
     Less accumulated depreciation and
       amortization . . . . . . . . . . . .   (9,016)    (9,065)
                                            --------   --------

     Property and equipment, net. . . . . . $ 11,381   $  8,217
                                            ========   ========

     Depreciation and amortization expense was $3,661, $3,539 and $12,618
in 1998, 1997 and 1996, respectively.


<PAGE>
<PAGE>
                                                                         50
4. NOTES PAYABLE TO BANKS

     On May 2, 1996, the Company executed a three-year credit facility with
a bank (the "Principal Lender") for $40.0 million and a one-year credit
facility with the Other Lenders for an additional $55.0 million
(collectively, the "Credit Facility").  Additionally, on June 27, 1996, the
Company executed a separate $10.0 million facility with the Principal
Lender for inventory financing of vendor products (the "Wholesale Financing
Facility").  Interest under the inventory financing facility is accrued at
a rate equal to prime plus 3.00% (11.25% at December 31, 1996).  On August
23, 1996, the Company and its banks executed Amendment No. 1 to the Credit
Facility, which modified certain quarterly financial covenants.

     On July 28, 1997, the Company and its banks executed the Second
Amended and Restated Business Credit and Security Agreement (the "Credit
Agreement").  The agreement modified some of the terms and conditions
contained in the Credit Facility and effectively eliminated the Company's
default condition with certain 1996 year-end financial covenants. The total
amount available under the Credit Facility was reduced from a total of $95
million to $60 million, with an additional $30 million reduction during the
period February 1 through July 31 of each year.  Further, the Wholesale
Financing Facility was increased from $10 million to $20 million, with a
$10 million reduction during the period March 1 through July 31 of each
year.  Other modifications included the revision of the Credit Facility's
term to one year with a one-year automatic renewal, the addition of an
unused line fee, an increase in the interest rate accrued against
outstanding borrowings, and the modification of all financial covenants.

     At December 31, 1997, the Company was not in compliance with the
annual covenant covering Net Income and the fourth quarter covenant related
to Tangible Net Worth.  On February 3, 1998, the Company obtained waivers
from the agent for all covenant violations at December 31, 1997.  Amounts
due to the lenders as of December 31, 1997 are classified as current
liabilities and the available portion of the Credit Facility at December
31, 1997 was approximately $18.7 million.

     On February 11, 1998, the Credit Agreement was revised to, among other
things, limit the total amount available under the facility to $60 million
for an additional two months.  The total available under the facility was
reduced to $30 million only during the period April 1, 1998 to July 31,
1998.  As for the Wholesale Financing Facility, the amount available under
the agreement remained at $20 million and was to be used solely for
inventory purchases.  The amount available was reduced to $10 million only
during the period April 1, 1998 to July 31, 1998.  All other material terms
of both facilities remained the same.


<PAGE>
<PAGE>
                                                                         51
     On July 2, 1998, the Company and its banks executed separate
amendments adjusting, among other things, the seasonality of the total
amount available under the Credit Facility and the Wholesale Financing
Facility, respectively, in any calendar year.  The limit of the Credit
Facility will increase to $75 million during the period October 1 through
January 31.  During the periods February 1 through April 30 and July 1
through September 30, the total amount available under the Credit Facility
will be limited to $50 million.  During the period May 1 through June 30,
the total amount available under the Credit Facility will be limited to $30
million.  In addition, the interest rate under the Credit Facility was
amended to a rate of LIBOR plus 2.45%, payable quarterly; reducing to LIBOR
plus 2.25% if, commencing with the fiscal quarter ending September 30,
1998, the Company achieves certain quarterly financial covenants.  At
September 30, 1998, the Company was in compliance with all quarterly
financial covenants set forth in the Credit Agreement.  As a result, on
October 28, 1998, when the Company delivered its certified financial
statements to the Principal Lender, the interest rate was reduced to LIBOR
plus 2.25%.  Prior to this event, the interest rate under the Credit
Agreement was LIBOR plus 2.45% (7.83% at December 31, 1998).  On August 14,
1998, the limit of the Wholesale Financing Facility was increased via
temporary overline limit of up to $10,000,000 through January 31, 1999. 
The limit of the Wholesale Financing Facility will remain at $20 million
during the period June 1 through January 31, and decrease to $10 million
during the period February 1 through May 31, of any calendar year.  All
other material terms of both facilities remained the same.  At December 31,
1998, the Company was in compliance with all financial covenants set forth
in the credit facility.

     Amounts due to the Lenders as of December 31, 1998 are classified as
current liabilities and the available portion of the Credit Facility at
December 31, 1998 was approximately $24.4 million.

     Borrowing is limited to 80% of eligible accounts receivable.  The
Credit Facility is substantially secured by all of the operating assets of
the Company.  Current obligations are first funded and then all cash
receipts are automatically applied to reduce outstanding borrowings.  The
Credit Facility also contains certain covenants that include restrictions
on the payment of dividends and the repurchase of the Company's Common
Stock, as well as provisions specifying compliance with certain quarterly
and annual financial statistical ratios.


<PAGE>
<PAGE>
                                                                         52
     The following information pertains to the notes payable for the years
ended December 31, 1998, 1997 and 1996 (dollars in thousands):

                                              1998       1997       1996
                                            --------   --------   --------

     Weighted average interest rate . . . .     8.2%       8.0%       7.6%

     Weighted average borrowings. . . . . . $ 12,500   $ 18,600   $ 29,600

5. INCOME TAXES

     The components of the benefit for income taxes for the years ended
December 31, 1998, 1997 and 1996 are as follows (in thousands):

                                              1998       1997       1996
                                            --------   --------   --------
     Current taxes:
       Federal. . . . . . . . . . . . . . . $  1,443   $ (2,191)  $ (4,579)
       State. . . . . . . . . . . . . . . .      297       (275)      (610)
                                            --------   --------   --------

                                               1,740     (2,466)    (5,189)
     Deferred taxes:
       Federal. . . . . . . . . . . . . . .   (1,443)     2,191      2,848
       State. . . . . . . . . . . . . . . .     (297)       275        310
                                            --------   --------   --------

                                              (1,740)     2,466      3,158
                                            --------   --------   --------

     Income tax benefit . . . . . . . . . .        -          -     (2,031)
                                            ========   ========   ========

     Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities and the
amounts used for income tax purposes.  In 1998 and 1997, the Company
determined that $4.9 million and $7.0 million, respectively, of net
deferred tax assets were not recoverable.  Accordingly, valuation
allowances were recorded against the applicable net deferred tax assets.

<PAGE>
<PAGE>
                                                                         53
     Significant components of the Company's deferred taxes as of December
31, 1998 and 1997 were as follows (in thousands):

                                                          December 31,
                                                       -------------------
                                                         1998       1997
                                                       --------   --------
     Deferred tax assets:
       Accounts receivable and inventory 
            allowances. . . . . . . . . . . . . . . .  $  2,393   $  2,195
          Intangible assets . . . . . . . . . . . . .     1,777      2,029
          Accrued warranty and other contract costs .     1,720        564
          Restructuring accrual . . . . . . . . . . .         -        170
          Bid and proposal costs. . . . . . . . . . .       332        356
          Vacation accrual. . . . . . . . . . . . . .       231        163
          Deferred compensation . . . . . . . . . . .        47         82
          Rent abatement. . . . . . . . . . . . . . .        65         73
          NOL carryforwards . . . . . . . . . . . . .         -      1,717
          Other reserves. . . . . . . . . . . . . . .       314          -
          Other . . . . . . . . . . . . . . . . . . .         1         10
                                                       --------   --------

               Total deferred tax assets. . . . . . .     6,880      7,359
                                                       --------   --------

     Deferred tax liabilities:
          Depreciation. . . . . . . . . . . . . . . .       215        381
          Rent abatement. . . . . . . . . . . . . . .         -          9
                                                       --------   --------

               Total deferred tax liabilities . . . .       215        390
                                                       --------   --------

     Net deferred tax assets. . . . . . . . . . . . .     6,665      6,969
     Valuation allowance. . . . . . . . . . . . . . .    (4,925)    (6,969)
                                                       --------   --------

     Net deferred tax assets reported . . . . . . . .  $  1,740   $      -
                                                       ========   ========
<PAGE>
<PAGE>
                                                                         54
     The Company's tax benefit for the years ended December 31, 1998 and
1997 differs from the statutory rate for Federal income taxes as a result
of the following factors:

                                              1998       1997
                                            --------   --------

     Statutory rate . . . . . . . . . . . .   34.0%      34.0%    
     State income taxes, net of
       Federal tax benefit. . . . . . . . .    4.2        3.7     
     Valuation allowance. . . . . . . . . .  (36.4)     (35.7)    
     Other. . . . . . . . . . . . . . . . .   (1.8)      (2.0)    
                                            --------   --------

                                               -          -       
                                            ========   ========

<PAGE>
<PAGE>
                                                                         55
6. STOCKHOLDERS' EQUITY

     STOCK OPTIONS AND WARRANTS.  The Company has two combination incentive
and non-statutory stock option plans, the "1996 Plan" and the "1994 Plan,"
that provide for the granting of options to employees (both plans) and non-
employee directors (only under the 1996 Plan) to purchase up to 1,600,000
and 300,000 shares, respectively, of the Company's common stock.  In
addition, in May 1997 the Company's Board of Directors adopted the 1997
Non-Officer Stock Option Plan (the "1997 Plan") under Section (i)(1)(A) of
The Nasdaq Stock Market's National Market Rules.  The 1997 Plan provides
for the granting of non-statutory stock options only to employees other
than officers and directors to purchase up to 300,000 shares of the
Company's common stock.  Until its expiration on March 15, 1996, the
Company had another combination incentive and non-statutory stock option
plan, the "1986 Plan," that provided for the granting of options to
employees to purchase up to 1,100,000 shares of the Company's common stock. 
Under the 1997, 1996, 1994 and 1986 Plans, options have a term of up to ten
years, generally vest over four years and option prices are required to be
at not less than 100% of the fair market value of the Company's common
stock at the date of grant and, except in the case of non-employee
directors, must be approved by the Board of Directors or its Compensation
Committee.  Options under the 1997, 1996, 1994 and 1986 plans were as
follows:

<TABLE>
<CAPTION>
                                                           Number                   Weighted     Weighted
                                                             of        Exercise      Average      Average
                                                           Option        Price        Price      Remaining
                                                           shares      per share    per share      Life
------------------------------------------------------------------------------------------------------------ 
<S>                                                      <C>         <C>            <C>              <C>
1997 Plan:
  Outstanding at December 31, 1996. . . . . . . . . . .          -              -          -
     Granted. . . . . . . . . . . . . . . . . . . . . .    131,675   $ 4.88- 5.50   $   4.98
     Forfeited or canceled. . . . . . . . . . . . . . .    (12,333)          4.88       4.88
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1997. . . . . . . . . . .    119,342     4.88- 5.50       5.00
     Granted. . . . . . . . . . . . . . . . . . . . . .    239,000     3.63- 5.38       4.90
     Forfeited or canceled. . . . . . . . . . . . . . .    (62,167)    4.88- 5.50       5.07
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1998. . . . . . . . . . .    296,175   $ 3.63- 5.38   $   4.90         5.3
------------------------------------------------------------------------------------------------------------ 
1996 Plan:
  Outstanding at December 31, 1995. . . . . . . . . . .          -              -          -
     Granted. . . . . . . . . . . . . . . . . . . . . .    237,000   $ 5.13- 7.31   $   5.34
     Forfeited or canceled. . . . . . . . . . . . . . .          -              -          -
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1996. . . . . . . . . . .    237,000     5.13- 7.31       5.34
     Granted. . . . . . . . . . . . . . . . . . . . . .    358,000     4.88- 5.44       5.13
     Forfeited or canceled. . . . . . . . . . . . . . .   (195,500)    4.88- 6.13       5.21
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1997. . . . . . . . . . .    399,500     4.88- 7.31       5.21
     Granted. . . . . . . . . . . . . . . . . . . . . .    223,750     4.50- 5.25       4.88
     Forfeited or canceled. . . . . . . . . . . . . . .    (50,500)    5.00- 7.31       5.58
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1998. . . . . . . . . . .    572,750   $ 4.50- 5.44   $   5.05         7.7
------------------------------------------------------------------------------------------------------------ 
<PAGE>
<PAGE>
                                                                         56
<CAPTION>
                                                           Number                   Weighted     Weighted
                                                             of        Exercise      Average      Average
                                                           Option        Price        Price      Remaining
                                                           shares      per share    per share      Life
------------------------------------------------------------------------------------------------------------ 
<S>                                                      <C>         <C>            <C>              <C>
1994 Plan:
  Outstanding at December 31, 1995. . . . . . . . . . .    173,000   $ 3.50-12.88   $   8.28
     Granted. . . . . . . . . . . . . . . . . . . . . .    162,500     3.25-12.88       5.46
     Forfeited or canceled. . . . . . . . . . . . . . .    (44,000)    3.50-12.88       8.11
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1996. . . . . . . . . . .    291,500     3.25-13.44       6.68
     Granted. . . . . . . . . . . . . . . . . . . . . .    116,000     5.19- 5.31       5.23               
     Forfeited or canceled. . . . . . . . . . . . . . .   (172,300)    3.50- 6.13       5.30
     Exercised. . . . . . . . . . . . . . . . . . . . .     (2,700)          3.50       3.50
  Outstanding at December 31, 1997. . . . . . . . . . .    232,500     3.25-13.44       7.02
     Granted. . . . . . . . . . . . . . . . . . . . . .     80,000     4.53- 5.00       4.81
     Forfeited or canceled. . . . . . . . . . . . . . .    (26,000)    3.50- 5.19       4.21
     Exercised. . . . . . . . . . . . . . . . . . . . .    (15,000)          3.50       3.50
  Outstanding at December 31, 1998. . . . . . . . . . .    271,500   $ 3.25-13.44   $   6.83         5.2
------------------------------------------------------------------------------------------------------------ 
1986 Plan:
  Outstanding at December 31, 1995. . . . . . . . . . .    579,888   $ 3.50-14.25   $   9.30
     Granted. . . . . . . . . . . . . . . . . . . . . .     20,000           3.25       3.25
     Forfeited or canceled. . . . . . . . . . . . . . .   (470,038)    3.50-12.50       9.95
     Exercised. . . . . . . . . . . . . . . . . . . . .    (17,550)    3.50- 5.50       5.05
  Outstanding at December 31, 1996. . . . . . . . . . .    112,300     3.50-14.25       6.12
     Granted. . . . . . . . . . . . . . . . . . . . . .          -              -          -
     Forfeited or canceled. . . . . . . . . . . . . . .    (27,800)    6.50-10.25       9.65
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1997. . . . . . . . . . .     84,500     3.50-14.25       4.95
     Granted. . . . . . . . . . . . . . . . . . . . . .          -              -          -
     Forfeited or canceled. . . . . . . . . . . . . . .    (13,000)          3.25       3.25
     Exercised. . . . . . . . . . . . . . . . . . . . .     (7,000)          3.25       3.25
  Outstanding at December 31, 1998. . . . . . . . . . .     64,500   $ 3.50-14.25   $   5.48         5.7
------------------------------------------------------------------------------------------------------------ 
Nonstatutory Stock Options:
  Outstanding at December 31, 1995. . . . . . . . . . .    995,000   $ 3.75-10.50   $   4.10
     Granted. . . . . . . . . . . . . . . . . . . . . .    110,000           6.13       6.13
     Forfeited or canceled. . . . . . . . . . . . . . .          -              -          -
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1996. . . . . . . . . . . 1,105,000    3.75-10.50     4.35    
     Granted. . . . . . . . . . . . . . . . . . . . . .    150,000     5.13- 5.25       5.17
     Forfeited or canceled. . . . . . . . . . . . . . .          -              -          -
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1997. . . . . . . . . . .  1,255,000     3.75-10.50       4.67
     Granted. . . . . . . . . . . . . . . . . . . . . .     81,000           4.88       4.88
     Forfeited or canceled. . . . . . . . . . . . . . .    (20,000)          6.13       6.13
     Exercised. . . . . . . . . . . . . . . . . . . . .          -              -          -
  Outstanding at December 31, 1998. . . . . . . . . . .  1,316,000   $ 3.75-10.50   $   4.61         6.2
------------------------------------------------------------------------------------------------------------ 
FOR ALL PLANS:
  Outstanding at December 31, 1998. . . . . . . . . . .  2,520,925   $ 3.25-14.25   $   5.00         6.3
------------------------------------------------------------------------------------------------------------ 
</TABLE>

<PAGE>
<PAGE>
                                                                         57
    OUTSTANDING AND EXERCISABLE BY PRICE RANGE AS OF DECEMBER 31, 1998

<TABLE>
<CAPTION>
                            Options Outstanding                                          Options Exercisable        
---------------------------------------------------------------------------     -----------------------------------
                                           Weighted                 
                                            Average             Weighted                                Weighted
   Range of             Number             Remaining             Average             Number              Average
   Exercise           Outstanding         Contractual           Exercise           Exercisable          Exercise
    Prices            at 12/31/98         Life-Years              Price            at 12/31/98            Price     
---------------     ---------------     ---------------     ---------------     ---------------     ---------------
<S>                       <C>                  <C>              <C>                     <C>             <C>

$ 3.25- $  4.78           1,081,500           6.9               $  3.80                 988,925         $  3.75
  4.79-    7.13           1,252,925           6.1                  5.12                 747,518            5.13
  7.14-   10.25              16,000           4.0                  8.60                   9,550            9.14
 10.26-   14.25             170,500           4.6                 11.46                 140,900           11.52     
---------------     ---------------     ---------------     ---------------     ---------------     ---------------

$ 3.25-  $14.25           2,520,925           6.3               $  5.00               1,886,893         $  4.91     
===============     ===============     ===============     ===============     ===============     ===============
</TABLE>


     The Company adopted the disclosure requirements of SFAS 123,
"Accounting for Stock-Based Compensation," effective for the Company's
December 31, 1996 financial statements.  The Company applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting
for its plans, as allowed under SFAS 123. Accordingly, no compensation cost
has been recognized for stock option and stock purchase plans.  If
compensation cost for the Company's stock-based compensation plans had been
determined on the fair value at the grant dates for 1998, 1997 and 1996
awards under those plans consistent with the method in SFAS 123, the
Company's net loss and net loss per share would have increased to the pro
forma amounts (in thousands, except net loss per share amounts) indicated
below.  Because the SFAS 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.

                                              1998       1997       1996
                                            --------   --------   --------

     Net loss - pro forma . . . . . . . . . $  2,255   $ (5,411)  $(18,818)

     Net loss per share -
       pro forma (basic). . . . . . . . . . $   0.26   $  (0.80)  $  (2.81)

     Net loss per share -
       pro forma (diluted). . . . . . . . . $   0.25   $  (0.80)  $  (2.81)


     The fair value of each option is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used
for grants in 1998:  no dividend yield, 70% volatility, a risk-free
interest rate of 3.77%, and an expected life of eight years; and the
following assumptions used for grants in 1997 and 1996:  no dividend yield,
70% volatility, risk-free interest rates ranging from 5.74% to 6.90% and
expected lives of three to five years.

<PAGE>
<PAGE>
                                                                         58

     At December 31, 1998, in the 1997 Plan options for 116,400 shares were
exercisable and 3,825 options were available for grant; in the 1996 Plan
options for 429,746 shares were exercisable and 1,027,250 options were
available for grant; in the 1994 Plan options for 162,131 shares were
exercisable and 10,800 options were available for grant; and in the 1986
Plan options for 63,450 shares were exercisable.

     STOCK PURCHASE PLAN.  The Company has established an Employee Stock
Purchase Plan ("ESPP").  Eligible employees may elect to set aside, through
payroll deduction, up to 15% of their compensation to purchase common stock
of the Company.  The maximum number of shares that an eligible employee may
purchase during any offering period is equal to 5% of such employee's
compensation for the 12 calendar-month period prior to the commencement of
an offering period divided by 85% of the fair market value of a share of
common stock on the first day of the offering period.  The ESPP is
implemented through one offering during each six-month period beginning
January 1 and July 1.  The ESPP purchase price is 85% of the lower of the
fair market value of a share of common stock on the first day or the last
day of the offering period.  In the offering periods ended June 30 and
December 31, 1998, employees purchased 9,367 and 11,943 shares,
respectively, at prices of $4.04 and $3.85, respectively.  In the offering
periods ended June 30 and December 31, 1997, employees purchased 13,126 and
15,435 shares, respectively, at prices of $4.25 and $4.20, respectively. 
In the offering periods ended June 30 and December 31, 1996, employees
purchased 22,786 and 10,122 shares, respectively, at prices of $3.72 and
$4.78, respectively.  The weighted average fair market value of shares
under the ESPP was $3.93, $4.22 and $4.76 in 1998, 1997 and 1996,
respectively.  The Company has reserved 250,000 shares of common stock for
the ESPP, of which 72,551 were available for future issuance as of December
31, 1998.
     
     RIGHTS PLAN.  On December 19, 1994, the Board of Directors of the
Company authorized and declared a dividend of one preferred stock purchase
right (a "Right") for each outstanding share of the Company's common stock
payable to stockholders of record at the close of business on January 3,
1995.  Each Right entitled the common stockholder to purchase, in certain
circumstances generally relating to a change in control of the Company, one
one-thousandth of a share of the Company's Series B Junior Participating
Cumulative Preferred Stock, par value $0.25 per share (the "Preferred
Shares") at an exercise price of $40, subject to adjustment. 
Alternatively, the Right entitled the holder to purchase common stock of
the Company having a market value equal to two times the exercise price, or
to purchase shares of common stock of the acquiring corporation having a
market value equal to two times the exercise price.  The Preferred Shares
conferred to holders certain rights as to dividends, voting and liquidation

<PAGE>
<PAGE>
                                                                         59
in preference to common stockholders.  The Rights were non-voting, were not
presently exercisable and traded in tandem with the common stock.  The
Rights were redeemable, in whole but not in part, by the Company at $0.01
per Right in accordance with the Rights Plan.

     The Rights were scheduled to expire on January 3, 1997, unless earlier
redeemed or exchanged.  On November 14, 1996, the Board of Directors of the
Company extended the Rights Plan until the stockholders' vote, at the
annual meeting of stockholders on May 6, 1997, on a proposed three-year
extension of such Rights Plan.  At the annual meeting held on May 6, 1997,
the proposal for such three-year extension of the Rights Plan was defeated.

7.   COMMITMENTS AND CONTINGENCIES

     During the fourth quarter of 1997, the Company recorded an additional
accrual of $1.1 million to account for estimated obligations associated
with state sales tax activity occurring during the years 1992 though 1995. 
All outstanding obligations at December 31, 1997 were settled in 1998. 
State sales tax laws generally require collection from customers of sales
tax unless such customers provide valid sales tax exemption certificates. 
Sales tax exemption certificates are customarily issued to those companies
that resell products to the federal government.

     The Company is occasionally a defendant in litigation incidental to
its business.  The Company believes that none of such litigation currently
pending against it, individually or in the aggregate, will have a material
adverse effect on the Company's financial condition or results of
operations.

     The Company leases office and warehouse space and various equipment
under non-cancelable operating leases.

     In November 1988, the Company executed a ten-year lease for its
corporate headquarters that comprises approximately 120,000 square feet of
office space and 14,000 square feet of warehouse space.  The Company also
entered into a nine-year lease for 55,170 square feet of office space in
two buildings beginning December 1, 1989.  The lease for the entire
facility expired on November 30, 1998.  In October 1997, the Company
executed a ten-year lease for a new administrative facility consisting of
approximately 100,500 square feet of new office space in Chantilly,
Virginia.  The agreement has one five-year option period and commenced on
December 1, 1998.  The Company is obligated under the lease agreement to
provide to the Landlord a Letter of Credit ("LOC") in the amount of $2.0
million as a security deposit for all tenant requested improvements
associated with the lease.  This deposit will be reduced by 10%, per year,
over the life of the lease.    The Company has recorded leasehold
improvements in the amount of $2.0 million, as well as a liability for 
<PAGE>
<PAGE>
                                                                         60
deferred rent of $2.0 million in conjunction with the build-out
improvements.  The asset and liability will be amortized over the life of
the lease.  The Company also subleases a 20,000 square foot distribution
center in Chattanooga, Tennessee.  The sublease expires March 31, 1999. 
Rent expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $2.8 million, $2.7 million and $3.6 million, respectively.
The Company also maintains a sales office in Germany and has entered into a
lease agreement. Collective future minimum lease payments as of December
31, 1998 are as follows (in thousands):

                                            Operating
     Year ending December 31,                Leases
     ------------------------               --------

          1999. . . . . . . . . . . . . . . $  2,054
          2000. . . . . . . . . . . . . . .    2,077
          2001. . . . . . . . . . . . . . .    2,095
          2002. . . . . . . . . . . . . . .    2,152
          2003. . . . . . . . . . . . . . .    2,210
          Thereafter. . . . . . . . . . . .    7,366
                                            --------

     Total minimum lease payments . . . . . $ 17,954
                                            ========

8. 401(K) PLAN

     Effective April 1991, the Company adopted the Employees' 401(k)
Investment Plan (the "Plan"), a savings and investment plan intended to be
qualified under Section 401 of the Internal Revenue Code (the "Code").  All
employees of the Company who are at least 21 years of age and have
completed at least six months of employment with the Company are eligible
to participate.  The Plan is voluntary and allows participating employees
to make pretax contributions, subject to limitations under the Code, of a
percentage (not to exceed 15%) of their total compensation.  Employee
contributions are fully vested at all times.  The Company, in its sole
discretion, may make contributions in amounts, if any, as may be determined
by the Board of Directors for the benefit of all participants.  In 1998,
the Company committed to contribute a total of $101,034 to the plan for
1998.  No contributions were made in prior years.


<PAGE>
<PAGE>
                                                                         61
9.   SEGMENT REPORTING

     In June 1997, the Financial Accounting Standards Board issued SFAS
131, "Disclosures about Segments of an Enterprise and Related Information,"
which requires certain information about operating segments in the
financial statements and in condensed financial statements of interim
periods.  The Company has determined that through December 31, 1998, it
operated as one business segment as defined by SFAS 131.  In addition, the
Company aggregates and reports revenues from products which have similar
economic characteristics in their nature, production, and distribution
process.  The primary customer of the Company is the federal Government,
which under SFAS 131 is considered a single customer.

<PAGE>
<PAGE>
                                                                         62
10. QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following tables set forth selected unaudited quarterly financial
data and the percentages such items represent of sales.  The quarterly
financial data reflect, in the opinion of the Company, all normal and
recurring adjustments necessary to present fairly the results of operations
for such periods.  Results of any one or more quarters are not necessarily
indicative of annual results or continuing trends.

<TABLE>
<CAPTION>
                                                                                  1998 Quarters Ended
                                                      ----------------------------------------------------------------------------
(In thousands, except per share data)                     March 31,           June 30,         September 30,        December 31,
                                                      ----------------    ----------------    ----------------    ----------------
<S>                                                   <C>       <C>       <C>       <C>       <C>        <C>      <C>       <C>
Sales . . . . . . . . . . . . . . . . . . . . . . .   $ 99,094  100.0%    $136,901  100.0%    $ 196,029  100.0%   $173,860  100.0%
Gross margin. . . . . . . . . . . . . . . . . . . .      8,540    8.6       12,365    9.0        17,815    9.1      12,917    7.4
Operating expenses. . . . . . . . . . . . . . . . .     11,602   11.7       11,789    8.6        13,535    6.9      11,394    6.6
(Loss) income from operations . . . . . . . . . . .     (3,062)  (3.1)         576    0.4         4,280    2.2       1,523    0.9
Interest expense, net . . . . . . . . . . . . . . .        447    0.5          408    0.3           320    0.2        (198)  (0.1)
(Loss) income before income taxes . . . . . . . . .     (3,509)  (3.6)         168    0.1         3,960    2.0       1,721    1.0
Net (loss) income . . . . . . . . . . . . . . . . .     (3,509)  (3.6)         168    0.1         3,960    2.0       1,721    1.0
Basic net (loss) income per share . . . . . . . . .     $(0.52)             $(0.02)               $0.40             $(0.18)
Diluted net (loss) income per share . . . . . . . .      (0.52)              (0.02)                0.40              (0.17)
Basic weighted average shares
  outstanding . . . . . . . . . . . . . . . . . . .      6,756               8,422                9,788              9,778     
Diluted weighted average shares
  outstanding . . . . . . . . . . . . . . . . . . .      6,756               8,631                9,849              9,845     


<CAPTION>
                                                                                  1997 Quarters Ended
                                                      ----------------------------------------------------------------------------
(In thousands, except per share data)                     March 31,           June 30,         September 30,        December 31,
                                                      ----------------    ----------------    ----------------    ----------------
<S>                                                   <C>       <C>       <C>       <C>       <C>        <C>      <C>       <C>
Sales . . . . . . . . . . . . . . . . . . . . . . .   $ 88,407  100.0%    $ 94,464  100.0%    $ 161,759  100.0%   $141,747  100.0%
Gross margin. . . . . . . . . . . . . . . . . . . .      7,134    8.1        6,443    6.8        11,595    7.2      10,751    7.6
Operating expenses. . . . . . . . . . . . . . . . .     10,116   11.5        9,771   10.3         9,629    6.0      10,963    7.7
(Loss) income from operations . . . . . . . . . . .     (2,982)  (3.4)      (3,328)  (3.5)        1,966    1.2        (212)   0.1
Interest expense, net . . . . . . . . . . . . . . .        422    0.5         (341)  (0.3)           75    0.0         391    0.3
(Loss) income before income taxes . . . . . . . . .     (3,404)  (3.9)      (2,987)  (3.2)        1,891    1.2        (603)  (0.4)
Net (loss) income . . . . . . . . . . . . . . . . .     (3,404)  (3.9)      (2,987)  (3.2)        1,891    1.2        (603)  (0.4)
Basic net (loss) income per share . . . . . . . . .     $(0.51)             $(0.44)               $0.28             $(0.09)
Diluted net (loss) income per share . . . . . . . .     $(0.51)             $(0.44)               $0.27             $(0.09)
Basic weighted average shares
     outstanding. . . . . . . . . . . . . . . . . .      6,725               6,725                6,740              6,741
Diluted weighted average shares
     outstanding. . . . . . . . . . . . . . . . . .      6,725               6,725                7,048              6,741     

</TABLE>
<PAGE>
<PAGE>
                                                                         63
                   GOVERNMENT TECHNOLOGY SERVICES, INC.

              SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                          (Dollars in Thousands)


<TABLE>
<CAPTION>
                                                                      Balance    Charged                 Balance
                                                                         at         to                      at
                                                                     Beginning  Costs and                 End of
Description                                                          of Period  Expenses  Deductions(1)   Period  
------------------------------------------------------------------   ---------  --------- -------------  --------
<S>                                                                  <C>        <C>          <C>         <C>

Year ended December 31, 1998:

    Allowance for bad debts . . . . . . . . . . . . . . . . . . . .  $  4,093   $  2,097     $  (210)    $   5,980

    Allowance for slow-moving and obsolete
       inventory. . . . . . . . . . . . . . . . . . . . . . . . . .     2,849      2,517      (3,310)        2,056

Year ended December 31, 1997:

    Allowance for bad debts . . . . . . . . . . . . . . . . . . . .  $  4,535   $  2,800     $(3,242)    $   4,093

    Allowance for slow-moving and obsolete
       inventory. . . . . . . . . . . . . . . . . . . . . . . . . .     4,566      6,766      (8,483)        2,849

Year ended December 31, 1996:

    Allowance for bad debts . . . . . . . . . . . . . . . . . . . .  $  4,268   $  2,761     $(2,494)    $   4,535

    Allowance for slow-moving and obsolete
       inventory. . . . . . . . . . . . . . . . . . . . . . . . . .     8,250      1,591      (5,275)        4,566







______________

(1)  Adjustments and amounts written off during the period.

</TABLE>
<PAGE>
<PAGE>
                                                                         64
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
          ACCOUNTING AND FINANCIAL DISCLOSURE.

     Incorporated by reference to the Registrant's Form 8-K filed with the
Commission on June 17, 1996.


                                 PART  III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information required by this Item is incorporated by reference to
the sections of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 18, 1999, entitled "Election of
Directors -- Nominees," "Executive Officers" and "Common Stock Ownership of
Principal Stockholders and Management -- Section 16(a) Beneficial Ownership
Reporting Compliance," to be filed with the Commission.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information required by this Item is incorporated by reference to
the sections of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 18, 1999, entitled "Election of
Directors -- Compensation of Directors" and "Executive Compensation and
Other Information," to be filed with the Commission.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT.

     The information required by this Item is incorporated by reference to
the section of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 18, 1999, entitled "Common Stock
Ownership of Principal Stockholders and Management," to be filed with the
Commission.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this Item is incorporated by reference to
the sections of the Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 18, 1999, entitled "Election of
Directors -- Nominees" and "Executive Compensation and Other Information --
Compensation Committee Interlocks and Insider Participation," to be filed
with the Commission.


<PAGE>
<PAGE>
                                                                         65
                                 PART  IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
           REPORTS ON FORM 8-K.

(A)  (1)   FINANCIAL STATEMENTS

           See the Index included in Item 8 on Page 38 of this Form 10-K.

     (2)   FINANCIAL STATEMENT SCHEDULES

           See the Index included in Item 8 on Page 38 of this Form 10-K.

     (3)   EXHIBITS

     2.1   Stock Purchase Agreement by and among the Registrant, Falcon
           Microsystems, Inc. and M. Dendy Young dated August 16,
           1994(2)(11)

     3.1   Certificate of Incorporation, as amended(3)(6)(13)(18)

     3.2   Bylaws, as amended

     4.1   Rights Agreement dated as of January 3, 1995 by and between the
           Registrant and First Union National Bank of North Carolina, as
           Rights Agent, which includes as Exhibit B thereto the form of
           Rights Certificate(13)

     10.1  Amended and Restated 1986 Stock Option Plan,(4) including forms
           of Stock Option Agreements and Stock Purchase Agreement(1)(3)

     10.2  Employee Stock Purchase Plan, as amended to date(1)(6)

     10.3  GSA Schedule B/C Award/Contract No. GS00K95AGS6407 dated April
           1, 1996, issued by the General Services Administration to the
           Registrant for the three-year period ending March 31,
           1999(2)(16), and amendment thereto dated November 26, 1997(19)

     10.4  GSA Schedule A Award/Contract No. GS00K94AGS5681 dated October
           1, 1993, issued by the General Services Administration to the
           Registrant, and Modifications during 1993(2)(9); and
           Modifications during the quarter ended December 31, 1994(12)


<PAGE>
<PAGE>
                                                                         66
     10.5  Deed of Lease Agreement I dated as of November 17, 1987 between
           the Registrant and Enterprise Center Limited Partnership Number
           Two covering part of the Registrant's facilities in Chantilly,
           Virginia, as amended by Amendment No. One dated December 14,
           1988(3)

     10.6  Deed of Lease Agreement II dated as of November 17, 1987
           between the Registrant and Enterprise Center Limited
           Partnership Number Two covering part of the Registrant's
           facilities in Chantilly, Virginia, as amended by Amendment No.
           One dated December 14, 1988(3)

     10.7  Lease dated March 31, 1993 between the Registrant and West 50
           Associates covering office and warehouse facilities(9); and
           Amendment thereto dated September 21, 1995(15)

     10.8  Letter Agreement dated September 17, 1990, as amended, between
           the Registrant and R. M. Rickenbach(1)(3)

     10.9  Warrant of the Registrant dated December 6, 1990 issued to
           Lawrence J. Schoenberg(1)(6)

     10.10 Nonstatutory Stock Option Agreement dated October 9, 1992
           between the Registrant and Frank H. Slovenec(1)(6)

     10.11 Officer Severance Plan, as amended to date(15)

     10.12 GTSI Employees' 401(k) Investment Plan(3); and Amendment No.
           1(5); Amendment No. 2 and Amendment No. 3 thereto(15)

     10.13 IBM Business Partner Agreement (Dealer Profile, Dealer Exhibit,
           Dealer/Retailer Attachment and Remarketer General Terms)
           between IBM and the Registrant, effective January 1994(9)

     10.14 U.S. Navy Standard Desktop Computer Companion Contract No.
           N66032-91-D-0002 dated February 8, 1991; Modification thereof
           dated June 28, 1991(4); Modifications during 1992(6); and
           Modifications during 1993(2)(9)

     10.15 Credit Agreement, dated as of November 17, 1994, by and among
           the Registrant and Falcon Microsystems, Inc., as Borrowers; The
           Lenders Parties Thereto From Time To Time; and Mellon Bank,
           N.A., as Agent(12); and Amendment thereto dated December 29,
           1995(15) (see also Exhibit 10.24)


<PAGE>
<PAGE>
                                                                         67
     10.16 Stock Bonus Agreement dated August 25, 1993 between the
           Registrant and R. M. Rickenbach(1)(8)

     10.17 Stock Bonus Agreement dated August 25, 1993 between the
           Registrant and Frank H. Slovenec(1)(8)

     10.18 Authorized Apple Dealer Sales Agreement between Apple Computer,
           Inc. and the Registrant, effective April 1993(7)

     10.19 U.S. Air Force Desktop IV Microsystems Contract No.
           F01620-93-D-0001 dated February 2, 1993; Modifications during
           1993(2)(9); and Modifications during the quarter ended March
           31, 1994(10); and Modifications during the quarter ended June
           30, 1995(14)

     10.20 National Aeronautics and Space Administration Scientific &
           Engineering Workstation Procurement Contract No. NAS5-37008
           dated February 19, 1993; Modifications during 1993(2)(9); and
           Modifications during the quarter ended March 31, 1994(10)

     10.21 Stock Bonus Agreement dated November 16, 1994 between the
           Registrant and R. M. Rickenbach(1)(12)

     10.22 Stock Bonus Agreement dated November 16, 1994 between the
           Registrant and Frank H. Slovenec(1)(12)

     10.23 Stock Bonus Agreement dated November 16, 1994 between the
           Registrant and Thomas L. Smudz(1)(12)

     10.24 Business Credit and Security Agreement dated as of December 29,
           1995 among the Registrant, certain Lenders named therein, and
           Deutsche Financial Services Corporation, as a Lender and as
           Agent; and Amendment thereto dated March 29, 1996(15)

     10.25 Lease dated August 11, 1995 between the Registrant and Security
           Capital Industrial Trust covering new distribution center
           facility(15)

     10.26 Letter agreement dated January 16, 1996 between the Registrant
           and Microsoft Corporation(15)

     10.27 Employment Agreement dated December 18, 1995 between the
           Registrant and M. Dendy Young(1)(15)


<PAGE>
<PAGE>
                                                                         68
     10.28 Employment Agreement dated December 18, 1995 between the
           Registrant and Peter E. Janke(1)(15)

     10.29 Settlement Agreement between the Registrant and the U.S. Air
           Force with respect to the Desktop IV Microsystems Contract No.
           F01620-93-D-0001(2)(17)

     10.30 Asset Purchase Agreement dated as of February 12, 1998 among
           the Registrant, BTG, Inc., BTG Technology Systems, Inc. and
           Concept Automation, Inc. of America (excluding attachments and
           exhibits)(18)

     10.31 Standstill Agreement between the Registrant and BTG, Inc. dated
           as of February 12, 1998(18)

     10.32 Certificate of Designations, Preferences and Rights of Series C
           8% Cumulative Redeemable Convertible Preferred Stock of the
           Registrant filed February 12, 1998 with the Secretary of State
           of Delaware(18)

     10.33 1994 Stock Option Plan, as amended to date(1)(19)

     10.34 1996 Stock Option Plan(1)(19)

     10.35 Employment Agreement dated January 1, 1998 between the
           Registrant and M. Dendy Young(1)(19)

     10.36 Lease dated December 10, 1997 between the Registrant and Petula
           Associates, Ltd. covering new headquarters facility (excluding
           attachments and exhibits)(19)

     10.37 Second Amended and Restated Business Credit and Security
           Agreement, dated as of July 28, 1997, among the Registrant,
           Certain Lenders Named [in such agreement], and Deutsche
           Financial Services Corporation, as a Lender and as Agent
           (excluding attachments and exhibits)(19)

     10.38 Amendment of Certificate of Incorporation filed May 12, 1998
           with the Secretary of State of Delaware(20)

     10.39 Letter Agreement between the Registrant and BTG, Inc. executed
           on May 18, 1998(21)

     10.40 Standstill Agreement between the Registrant and Linwood A.
           ("Chip") Lacy, Jr. dated July 29, 1998(22)


<PAGE>
<PAGE>
                                                                         69
     10.41 Amendment, dated as of July 2, 1998, to Second Amended and
           Restated Business Credit and Security Agreement, dated as of
           July 28, 1997, among the Registrant, Certain Lenders Named [in
           such agreement], and Deutsche Financial Services Corporation,
           as a Lender and as Agent(23)

     10.42 Amendment, dated as of July 2, 1998, to Agreement for Wholesale
           Financing dated as of June 27, 1996, among the Registrant and
           Deutsche Financial Services Corporation(23)

     10.43 Agreement among the Registrant, BTG, Inc., BTG Technology
           Systems, Inc. and Concept Automation, Inc. of America dated
           February 10, 1999

     10.44 Stock Transfer Agreement between the Registrant and BTG, Inc.
           dated February 10, 1999

     11.1  Computation of Earnings Per Share

     23.1  Consent of Arthur Andersen LLP

     27.1  Financial Data Schedule

________________________

     (1)   Constitutes a management contract or compensatory plan or
           arrangement required to be filed as an exhibit to this Form
           10-K.

     (2)   Confidential treatment has been granted for portions of this
           exhibit, and such confidential portions have been removed from
           this exhibit pursuant to Rule 24b-2 of the Securities Exchange
           Act of 1934, as amended.

     (3)   Incorporated by reference to the Registrant's Registration
           Statement on Form S-1 (Registration No. 33-41351) filed with
           the Commission on June 21, 1991.

     (4)   Incorporated by reference to Pre-effective Amendment No. 3 to
           the Registrant's Registration Statement on Form S-1
           (Registration No. 33-41351) filed with the Commission on
           September 20, 1991.


<PAGE>
<PAGE>
                                                                         70
     (5)   Incorporated by reference to the Registrant's Registration
           Statement on Form S-8 (Registration No. 33-55090) filed with
           the Commission on November 25, 1992.

     (6)   Incorporated by reference to the Registrant's Annual Report on
           Form 10-K (File No. 0-19394) for the year ended December 31,
           1992.

     (7)   Incorporated by reference to the Registrant's Quarterly Report
           on Form 10-Q (File No. 0-19394) for the quarter ended March 31,
           1993.

     (8)   Incorporated by reference to the Registrant's Quarterly Report
           on Form 10-Q (File No. 0-19394) for the quarter ended September
           30, 1993.

     (9)   Incorporated by reference to the Registrant's Annual Report on
           Form 10-K (File No. 0-19394) for the year ended December 31,
           1993.

     (10)  Incorporated by reference to the Registrant's Quarterly Report
           on Form 10-Q (File No. 0-19394) for the quarter ended March 31,
           1994.

     (11)  Incorporated by reference to the Registrant's Current Report on
           Form 8-K filed with the Commission on August 31, 1994, as
           amended by Form 8-K/A No. 1 filed with the Commission on
           October 31, 1994.

     (12)  Incorporated by reference to the Registrant's Annual Report on
           Form 10-K (File No. 0-19394) for the year ended December 31,
           1994.

     (13)  Incorporated by reference to the Registrant's Current Report on
           Form 8-K filed with the Commission on January 17, 1995.

     (14)  Incorporated by reference to the Registrant's Quarterly Report
           on Form 10-Q (File No. 0-19394) for the quarter ended June 30,
           1995.

     (15)  Incorporated by reference to the Registrant's Annual Report on
           Form 10-K (File No. 0-19394) for the year ended December 31,
           1995.


<PAGE>
<PAGE>
                                                                         71
     (16)  Incorporated by reference to the Registrant's Quarterly Report
           on Form 10-Q (File No. 0-19394) for the quarter ended March 31,
           1996.

     (17)  Incorporated by reference to the Registrant's Annual Report on
           Form 10-K (File No. 0-19394) for the year ended December 31,
           1996.

     (18)  Incorporated by reference to the Registrant's Current Report on
           Form 8-K filed with the Commission on February 12, 1998.

     (19)  Incorporated by reference to the Registrant's Annual Report on
           Form 10-K (File No. 0-19394) for the year ended December 31,
           1997.

     (20)  Incorporated by reference to the Registrant's Current Report on
           Form 8-K filed with the Commission on May 18, 1998.

     (21)  Incorporated by reference to the Registrant's Current Report on
           Form 8-K filed with the Commission on May 21, 1998.

     (22)  Incorporated by reference to the Registrant's Current Report on
           Form 8-K filed with the Commission on August 5, 1998.

     (23)  Incorporated by reference to the Registrant's Quarterly Report
           on Form 10-Q (File No. 0-19394) for the quarter ended June 30,
           1998.


(B)  REPORTS ON FORM 8-K

           None.

(C)  EXHIBITS

           See the list of Exhibits in Item 14(a)(3) beginning on Page 65
           of this Form 10-K.

(D)  FINANCIAL STATEMENT SCHEDULES

           See the Index included in Item 8 on Page 38 of this Form 10-K.

<PAGE>
<PAGE>
                                                                         72
                                SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Chantilly, Commonwealth of Virginia.

                                     GOVERNMENT TECHNOLOGY SERVICES, INC.



Dated:  March 31, 1999               By:         /s/ M. Dendy Young
                                          --------------------------------
                                                   M. Dendy Young,
                                                    Chairman and
                                               Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

         Signature                   Title                        Date
         ---------                   -----                        ----



      /s/ Dendy Young        Chairman and                    March 31, 1999
---------------------------  Chief Executive Officer
        Dendy Young          (Principal Executive Officer)
                             and a Director


  /s/ Stephen L. Waechter    Senior Vice President and       March 31, 1999
---------------------------  Chief Financial Officer
    Stephen L. Waechter      (Principal Financial and
                             Accounting Officer)


    /s/  Tania Amochaev      Director                        March 31, 1999
---------------------------
      Tania Amochaev



<PAGE>
<PAGE>
                                                                         73
         Signature                   Title                        Date
         ---------                   -----                        ----



   /s/  Gerald W. Ebker      Director                        March 31, 1999
---------------------------
      Gerald W. Ebker



     /s/  Lee Johnson        Director                        March 31, 1999
---------------------------
        Lee Johnson



     /s/ Steven Kelman       Director                        March 31, 1999
---------------------------
   Steven Kelman, Ph. D.



    /s/  James J. Leto       Director                        March 31, 1999
---------------------------
       James J. Leto



/s/ Lawrence J. Schoenberg   Chairman Emeritus               March 31, 1999
---------------------------
  Lawrence J. Schoenberg



    /s/  John M. Toups       Director                        March 31, 1999
---------------------------
       John M. Toups

<PAGE>
<PAGE>
                                                                         74
                             INDEX TO EXHIBITS
===========================================================================
 EXHIBIT  |
 NUMBER   | DESCRIPTION
---------------------------------------------------------------------------
  3.2     | Bylaws, as amended
---------------------------------------------------------------------------
  10.43   | Agreement among the Registrant, BTG, Inc., BTG Technology 
            Systems, Inc. and Concept Automation, Inc. of America dated 
            February 10, 1999
---------------------------------------------------------------------------
  10.44   | Stock Transfer Agreement between the Registrant and BTG, Inc. 
            dated February 10, 1999
---------------------------------------------------------------------------
  11.1    | Computation of Earnings Per Share
---------------------------------------------------------------------------
  23.1    | Consent of Arthur Andersen LLP
---------------------------------------------------------------------------
  27.1    | Financial Data Schedule
===========================================================================