Inside ICF's rise in the federal market

Contractor narrows its focus and vaults 33 spots on Top 100 list

“We’re not all things to all people,” says Sudhakar Kesavan, chairman and chief executive officer of ICF International Inc., explaining how the company made a quantum leap of 33 places on the 2010 Washington Technology Top 100.

IFC, which in 2009 ranked No. 99, jumped to No. 66 this year with $340.8 million in prime contracts in fiscal 2009 as measured by Washington Technology's analysis of federal procurement data.

Kesavan said ICF growth in the federal market comes from concentrating on three core strengths – energy, health and homeland security, with energy and health accounting for almost 90 percent of its revenue.

Some of last year’s numbers help explain ICF's strong position.

ICF’s overall revenue declined in 2009, dropping from $697.4 million in 2008 to $674.4 million in 2009. But that is due in part to the phase-out of the $5.9 billion Road Home contract, a federally funded initiative in Louisiana begun in 2006 to help residents rebuild following Hurricanes Katrina and Rita. That contract ended in June 2009.

In 2008, that contract represented $264.8 million of ICF's revenue. In 2009, the contract only contributed $60.4 million in revenue.

As that huge contract ended, ICF saw other parts of its business flourish.

Growth in its core markets in 2009 was 42 percent, hitting $614 million, compared to $432.6 million in 2008.

Key contract wins last year included an Army ID/IQ human resources support award with a program ceiling of $1.3 billion, a $4.9 million Coast Guard contract for strategic human capital support services, and a $9.9 million contract from the Housing and Urban Development Department to assist with income certification and rent calculation processes.

And in December, ICF completed its acquisition of Jacob & Sundstrom, an information technology firm specializing in government cybersecurity and identity management services.

Kesavan said he believes the government will continue to closely watch its contracting dollars, but a substantial portion of its allocations will go into the three key areas “where we have enormous expertise and breadth.”

“We think there is an enormous national security imperative, for example, on the energy front,” he added.

Despite the debate on climate change, the country wants to reduce its dependence on certain sources of foreign oil, he said. “One way of doing it is to make sure we become more energy efficient. So the government is going to do whatever it takes to make that happen,” he said.

ICF is advising the government on energy conservation. “So I think that for us the market looks pretty good,” Kesavan said.

His optimism was seconded by Bill Loomis, managing director at Stifel Nicolaus investment banking firm.

“ICF remains very well positioned to benefit from increased spending and changes in energy, climate, environment, transportation, health and human services,” Loomis wrote in a recent company analysis.

“ICF is increasingly being able to leverage its strong domain knowledge in these areas to provide consulting, implementation and post-implementation services, often using IT as a critical part of the solution,” he said.

“ICF’s cyber security also offers strong opportunities to sell across ICF’s customer base, including into critical infrastructure areas such as energy,” he added.

If those assessments hold true, ICF might reach Kesavan’s stated goal of reaching $1 billion in revenue within the next two to three years.

“We’re certainly hoping that we can get to that level and then we can potentially compete with the bigger companies in our areas,” he said.

Nevertheless, Kesavan conceded that the federal government will “be a tough market to be in primarily because of all these budget pressures.”

ICF has already amassed a number of big contracts in 2010, including two from the Centers for Disease Control and Prevention in Atlanta.

One is an $11.6 million contract for technical assistance and training to help the CDC combat obesity and reduce tobacco use. The other is a $19 million contract for ICF’s Macro International subsidiary to help the CDC improve its cancer data collection processes.

“We’ve been in Atlanta for many, many years and have an understanding of how CDC works,” Kesavan said. “We believe that’s a growth area for us.”

He added that he also expects increased government spending for the National Institutes of Health and other government health care facilities.

With an eye on continued company growth, Kesavan recently gave up his title of president in favor of what he called broader leadership with more clearly defined roles.

He will concentrate on meeting clients, formulating strategy and allocating resources while his chief operating officer and newly named president, John Wasson, will oversee daily operations including the delivery of services.

“The specificity of roles also sends a signal that we are serious about growing into a large company,” Kesavan said. “I think that my having all the roles doesn’t quite convey that message. How much can one person do?”

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