Jacobs growth strategy focused on IT

Company focuses acquisitions on IT

After making two key acquisitions in 2010 to strengthen its IT services, Jacobs Engineering Group Inc. will continue an acquisition strategy that expands its presence in the government IT services market.

“Within the federal market, a part of our acquisition focus will be in the IT arena,” said Jacobs President and CEO Craig Martin.

Jacobs provides a wide spectrum of professional technical services to industry and government, including scientific and specialty consulting. It also provides services for all aspects of engineering and construction, and operations and maintenance. Budget pressures will likely force federal and state governments to continue cutting back on spending, but less so for IT services, which makes IT an attractive area for growth, Martin said.
 
In October, Jacobs closed its acquisition of TechTeam Government Solutions Inc. for $59 million; the same month, the company announced the acquisition of Sula Systems Ltd., a small United Kingdom-based firm that provides high-end systems engineering and consulting services.

“These are not big acquisitions relative to our size, but they provide a lot of leverage for supporting government IT,” Martin said. “Our historic IT capabilities have been in [the Defense Department], particularly with the Army and the Marine Corps. The TechTeam acquisition gives us a stronger position with health care and other federal customers.”

Jacobs is the No. 20 company on Washington Technology's 2010 Top 100 list with $1.7 billion in IT and related professional services contracts. Government represents about 24 percent of business for Jacobs, which reported $9.9 billion in revenue and earnings of $246 million in fiscal 2010, which ended in October.

“We’ve had a very good year in our federal business,” Martin said, citing new contract awards for a variety of technical services. In March 2011, Jacobs was awarded a five-year contract worth up to $500 million to provide test, evaluation and support at NASA’s White Sands Test Facility located in Las Cruces, N.M. Also in March, the company was awarded a follow-on contract to provide research operations and support services for the U.S. Air Force Research Laboratory at Edwards Air Force Base in California. That contract is worth about $87 million over five years. In the same month, Jacobs won a three-year contract worth up to $63 million to provide a diverse array of program management, engineering and quality support services to the Army’s Program Manager Mine Resistant Ambush Protected vehicle program.

The company also received the 2010 NASA George M. Low Award for its work providing engineering, science, operations and maintenance, and manufacturing services in support of space exploration programs at the Johnson Space Center in Houston. The Low Award recognizes NASA contractors that provide premier quality and performance.

Jacobs’ work supporting NASA and government research labs points to other areas of potential growth for the company. As the government becomes more careful about avoiding organizational conflicts of interest, Jacobs’ scientific and engineering capabilities can provide the government with needed acquisition expertise. “We don’t manufacture or sell hardware of any kind, so we can act as an honest broker in helping agencies with their acquisitions,” Martin said.

The company also has extensive experience designing and building data centers, especially in the private sector, where it has helped companies consolidate and build more efficient data centers. With the federal government aiming to close at least 800 of its nearly 2,100 data centers by 2015, Martin sees an opportunity for Jacobs to help agencies achieve their consolidation goals.

Another area for potential growth is helping the government take advantage of its sophisticated testing facilities, such as wind and jet engine tunnels, by charging private-sector companies to use the facilities. Such programs already exist, but they could be expanded to generate more revenue for the government and provide needed testing capabilities to industry, Martin said.

Jacobs saw its revenue decline from $11.5 billion in 2009 to $9.9 billion in 2010, but Martin said some of Jacobs’ commercial markets, such as the oil refining market, are beginning to recover. Overall, he sees signs that both commercial and government markets are recovering, though slowly. But regardless of how the markets perform, Jacobs will look for opportunities to grow. “Our business is about taking market share from our competitors rather than riding the market cycles ups and down,” Martin said.

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