Small Business Administration Pushes To Revitalize 8(a) Program
Washington Technology's annual list of the top 25 information technology 8(a) companies uses data compiled by Federal Sources Inc., a market research firm in McLean, Va.
The Small Business Administration's 8(a) program is feeling the strain of competition from other government procurement vehicles, but SBA officials contend the program remains strong. David Stewart, CEO Lurita Doan, President Ken Chainani, President Allan Camaisa, Chairman and CEO Hilton Augustine Jr. President and CEO Hilton Augustine Jr. President and CEO
"When you compare 8(a) spending to overall government spending, what you see is that the 8(a) program is not only holding its own but is doing reasonably well," said David "D.J." Caulfield, a program and policy analyst at the SBA.
The 8(a) program, named for a section of the Small Business Act, is an initiative to help socially and economically disadvantaged citizens, including African, Asian, Hispanic and Native Americans, gain access to the economic mainstream. Qualifying companies receive federal government contracting preferences in the form of set-asides and restricted competitions for up to nine years.
Last year, the SBA enacted several changes to make the 8(a) program more attractive to federal buyers. One significant change, implemented in May 1998, allows agencies to deal directly with 8(a) firms to purchase goods and services. Previously, the SBA acted as an intermediary. The "delegation of authority" agreements the SBA signed with 26 federal agencies cut the approval time for 8(a) contracts from weeks to days.
During the first half of fiscal 1999, 8(a) spending totaled $2.6 billion, or 3 percent of total federal spending of $85.6 billion. That compares to 8(a) spending of $2.9 billion, or 2.8 percent of total federal spending of $101.7 billion, for the same period in fiscal 1997.
The 8(a) program's share of contracts has stayed fairly constant in the face of declining federal procurement, Caulfield said.
However, information technology contracts with 8(a) firms fell significantly last year, dipping 43 percent from $2 billion in 1997 to $1.4 billion in 1998. At the same time, overall 8(a) spending rose from $6.4 billion in 1997 to $6.5 billion last year.
The drop in IT contracts is sizable considering that more than one-third of 8(a) certified companies sell IT products and services. About 1,800 of the 5,100 companies in the program identify themselves as having an IT specialty.
Bob Dornan, senior vice president of Federal Sources Inc., a McLean, Va., market research firm, said 8(a) companies are facing stiff competition from indefinite delivery, indefinite quantity contracts and the General Services Administration schedules.
"Altruism aside, one of the many motivations in the past to use the 8(a) program was because it was the quickest game in town. But now you have IDIQs and GSA schedules you can buy through," Dornan said. "Everyone I talk to is lamenting the decline in the 8(a) program."
The federal government has moved to help 8(a) companies by restricting contract bundling and by finding ways to encourage prime contractors to subcontract work to the 8(a)s, Dornan said. For instance, the SBA is promoting performance evaluation credits for prime contractors that hire 8(a) companies.
Caulfield said procurement reform has had a major impact on the 8(a) program, but also said the agency is taking steps to keep the program competitive.
"You hear comments that the 8(a) program is losing its competitive edge, and there are lots of dire predictions, but the numbers tell a different story," he said.
SBA officials have visited more than 50 cities since November 1998 to promote 8(a) companies, Caulfield said. Agency officials are using the briefings to explain the many SBA programs, including the 8(a), HUBZone and small disadvantaged business programs, to federal contracting officers as well as vendors.
"We felt the need to go out and bring everyone up to speed on all of our programs," Caulfield said.
However, SBA efforts such as the very small disadvantaged business program and the HUBZones (short for Historically Underutilized Business Zones) could divert contracts from the 8(a) program, Dornan said.
The top 25 information technology 8(a) companies in a ranking by Washington Technology received prime contract obligations last year totaling $464 million. The ranking did not include the many graduated 8(a) companies still working off their contract backlogs.
? Patrick Seitz
Top 25 8(a) Contractors ChartWashington Technology's annual list of the top 25 information technology 8(a) companies uses data compiled by Federal Sources Inc., a market research firm in McLean, Va.
Companies are ranked according to prime contract obligations, which is the amount the government has allocated to pay for a specified product or service in its annual budget. This does not necessarily indicate the amount of money spent or the potential value of the contract.
Federal Sources obtained its figures in a computer analysis of General Services Administration data for fiscal 1998, which ended Sept. 30, 1998.
The executive branch of the federal government is required to report actions on contracts exceeding $25,000 to the GSA's Federal Procurement Data Center. The agencies categorize the work being performed by assigning it a product or service code.
The ranking is based only on prime contracts, so subcontract dollars that go to a company are not counted. The ranking also does not include 8(a) contract amounts less than $25,000, nor does it include classified business with the intelligence community.
In addition, the top 25 list includes only those companies whose official graduation date from the Small Business Administration's 8(a) program is after the publication date.
St. Louis, Mo.
www.wwt.com
Prime Contracts: $47.1 million
World Wide Technology Inc. has launched a Web site for federal procurement officers to make relatively small purchases of computer products using government purchasing cards or credit cards.
The St. Louis-based systems integrator debuted its Fedbuy.com portal in late July and only recently started publicizing it, said David Steward, WWT's chief executive officer.
Fedbuy.com offers federal agencies the convenience of buying more than 100,000 information technology products off the Web using IMPAC cards or credit cards, he said. IMPAC cards, also known as International Merchant Purchase Authorization Cards, typically have spending limits of $2,500 to $25,000, sometimes higher, Steward said.
Fedbuy.com and its companion Web site for telecommunications products, Telcobuy.com, are the latest feathers in the cap for WWT, a diversified IT company that has experienced a blistering growth rate in recent years.
The 300-employee company should generate revenue of $350 million to $400 million this year, Steward said. That compares to $201 million in sales last year.
World Wide Technology ranked No. 1 on Washington Technology's list of the top 25 8(a) companies this year. The black-owned company racked up $47 million in prime contract obligations through the Small Business Administration's 8(a) program in fiscal 1998.
Revenue from 8(a) contracts will provide less than 20 percent of WWT's total sales, Steward said. Federal business overall will account for roughly half of total sales, he said.
Founded in 1990, WWT provides Internet solutions, information technology products and services to commercial, federal government and telecommunications customers. Its expertise ranges from e-business and enterprise resource planning to database and document management.
Steward said the company's telecom division will make up at least 40 percent of sales this year vs. about 25 percent last year. WWT has contracts with Bell Atlantic Corp., New York; GTE Corp., Irving, Texas; and SBC Communications Inc., San Antonio.
But the business Steward is most excited about now is the company's federal buying portals.
The timing is right to roll out the Web sites, he said. "People are just now getting acclimated in how to buy through e-commerce," Steward said. "Our customers had requested an easier way to make IT purchases."
Plus, WWT is launching the Web sites during the federal government's peak buying season for IT, the last three months of the fiscal year, which ends Sept. 30, Steward said.
The company expects sales of $15 million to $20 million through the Web sites this year, he said. Steward is counting on current WWT customers, such as the departments of Agriculture, Defense and Treasury, to get Fedbuy.com rolling.
Steward claims Fedbuy.com is more advanced than similar Web sites, including FedCenter run by Digital Commerce Corp. of Reston, Va., and that of Government Technology Services Inc. of Chantilly, Va.
Users of Fedbuy.com can query the system for such information as order status, detailed shipping data and buying patterns. The system is especially well-suited for federal buyers overseas because the virtual store is open 24 hours a day, seven days a week.
"While we're asleep here, customers in Europe can be buying off the Web and checking on the status of an order," he said.
What's more, sales through the Web site can be counted toward an agency's minority business quotas, he said.
? Patrick SeitzUniband Inc.
Belcourt, N.D.
www.uniband.com
Prime Contracts: $45.2 million
Uniband Inc., an 11-year-old Belcourt, N.D., data-entry service provider, did so well in the 8(a) program that it graduated early, more than a year before its scheduled graduation date of May 1, 2000.
Uniband officials realized in August 1998 that the company had grown too large to be eligible much longer for contracts through the Small Business Administration's 8(a) program. "We exceeded the size standards last summer and graduated in February 1999," said Ray Poitra, chief executive officer.
Contracts from the Internal Revenue Service, the Social Security Administration and other agencies put the company's three-year average annual revenue for certain service categories above the SBA limit of $18 million, said Poitra. Among the company's big wins were a 1995 contract from the Indian Health Service worth $25 million over five years, and a 1996 contract from the Immigration and Naturalization Service worth $99 million over five years.
"We were hoping that we could work something out where we would not graduate," he said. Poitra had hoped the Native American-owned company's status as a tribal entity might work in its favor. "But that did not hold any water. The rules are the rules, and we fell outside of them," he said.
Uniband's revenue in both 1997 and 1998 was about $44 million, Poitra said. This year, it will probably drop to about $30 million because Uniband cannot work on two new 8(a) contracts it lost when it graduated, he said. Uniband provides data entry and information technology support services.
Even though Uniband is out of the program, all of its public sector work, which accounts for 70 percent of overall business, comes from 8(a) contracts. Uniband is in the final year of the Indian Health Service contract and the third year of the Immigration and Naturalization Services contract.
"We plan to continue bidding on government contracts," said Poitra. "Just because we are out of the 8(a) program does not mean we will not do government contracts. We are going to continue to bid and seek out government work."
Poitra said the company's 8(a) work will last another two years.
"We are probably going to be lasting longer than a lot of 8(a) firms do when they graduate, because usually within the first year or year and a half after graduation a lot of their 8(a) work expires," said Poitra.
He noted that his company has teamed with Laducer & Associates Inc., an 8(a) business in Mandan, N.D., on a $2 million IRS contract that Laducer won. "We have work for five years out from right now because of that contract," said Poitra. "We hope to continue to pick up work like that."
Uniband also has signed on to the SBA's mentor-prot?g? program. Poitra said Uniband has chosen a prot?g? but is not yet ready to announce the name of that company.
"We hope to work with them so they have a smooth introduction into the 8(a) arena," said Poitra. "We will help them seek out new work, and Uniband will subcontract some of the work they get."
Uniband also has applied for a General Service Administration schedule, is putting together a bid team to identify potential projects and it is looking for partners.
"Hopefully, we will be able to acquire some contracts by being listed with GSA," said Poitra. "We cannot negotiate like we could in the 8(a) program. We have to bid on the work now."
Uniband recently hired a business development coordinator to work with the company's newly created bid team to identify potential business, said Poitra.
"We meet about once a week to select the projects we are going to bid," he said. As a group, the team orders the solicitations, looks through the statements, puts together a bid and then appoints someone to be responsible for it.
Marianne DunnNorthern Nef Inc.
Colorado Springs, Colo.
www.nnef.com
Prime Contracts: $25.1 million
In the last 15 months, officials at Northern Nef Inc. have snagged a valuable partnership with Sun Microsystems Inc. and won a Defense Department contract to integrate the Army's urban training services.
The contracts are examples of paths the Colorado Springs, Colo., company is pursuing to broaden its information technology portfolio.
"I guess diversity is kind of the story at Northern," said Ken Dyer, Northern's executive vice president and one of the first three employees to join the company when it was founded 12 years ago.
In June 1998, Northern signed an agreement with Sun Microsystems of Palo Alto, Calif., to resell Sun's line of computers and servers and provide services such as system design, integration and maintenance. Northern has since formed a dedicated division for its Sun practice called Sun Solutions, which has seven employees, reaped $4 million in revenue and added $100,000 to the company's bottom line. "It's really amazing," Dyer said.
Northern's portfolio also includes engineering services, satellite communications, IT services, computer-based training and simulation and range instrument systems support.
Northern had $33 million in revenue last year and expects to top $40 million this year, according to Charlie Coon, Northern's director of marketing and another of the company's original three employees.
Daucey Brewington, a member of the Lumbee tribe of North Carolina, founded Northern in 1987. A graduate of the U.S. Air Force Academy, Brewington now is the company's president.
Northern started out by offering training and analysis for the Air Force and the Federal Aviation Administration. In fact, technology training was 100 percent of the company's revenue for the first few years, Dyer said. Northern's first project, for example, was to develop training programs and complete organizational design work for the Air Force Space Command in 1987.
Northern joined the Small Business Administration's 8(a) program in 1991 and soon branched out to offer additional services. Coon credits the move toward expanded services to a 1994 partnership with Science Applications International Corp., San Diego, which taught Northern how to provide a wide range of IT services to the government.
"We've been able to be very competitive as a result of our relationship with SAIC," Coon said. SAIC remains one of the company's primary partners.
About half of Northern's business is with the private sector and the other half is government-related. About 65 percent of its business is from services and 35 percent is product sales.
Last year, Northern had $25 million in prime contracts and now is working to develop a network of integrator partners, besides SAIC, which includes ITT Industries Inc., White Plains, N.Y.; Lockheed Martin Corp., Bethesda, Md.; and Titan Corp., San Diego.
"That's one of our future strategies, to continue to develop partnerships with larger companies," Coon said. "It eases a lot of the concern the government has partnering with small, disadvantaged businesses."
The company's customers include the Air Force Space Command, Bureau of Reclamation, Department of Energy, FAA and the General Services Administration. Northern's primary office is in Colorado Springs; it has satellite offices in Ankara, Turkey; Dhahran, Saudi Arabia; Mechanicsburg, Pa.; North Bend and Richland, Wash.; Oklahoma City; and Washington, D.C.
Another new, key area for the company is military operations in urban terrain (MOUT), a growing priority in combat training that teaches soldiers and police officers how to fight in urban settings. In October 1998, Northern won a prime contract, which it bid as a small business and not as an 8(a) company, to oversee integration of the Army's five-year MOUT-ITS contract. So far, Northern has received one task order, a one-year deal worth $2 million to use IT to integrate various aspects of MOUT training. Subcontractors on the deal include ITT and TRW Inc., Cleveland.
Also, in August 1998, Northern was one of several vendors named as prime on a five-year contract to provide engineering and technology support services to the Army Space Command. The deal has been worth $3 million to Northern so far.
Northern graduates from the 8(a) program in February 2000.
Richard McCaffery
Winchester, Va.
www.ntmi.com
Prime Contracts: $24.6 million
For Lurita Doan, starting her own company in 1990 was not just about finding a way to make a good living. It was about setting an example.
"I had just had my first child, and I didn't want my daughter to grow up seeing me taking orders from other people," said Doan, who is founder and president of New Technology Management Inc., an information technology and telecom services company in Winchester, Va.
So with $5, Doan went to her local Kinko's, "ran off some stationary and claimed to be in business," she said, laughing at the memory.
For the first few years, Doan was the sole employee, and she spent her days walking the halls of agencies, "sweating blood, begging and pleading" for work. "I was haunting those offices week after week," she said.
Doan said she does not handle rejection well, so in the early days she concentrated on agencies that had offices near the National Mall in Washington. That way, on a disappointing day she could slip into one of the nearby museums and regroup, she said.
Her tenacity has paid off. From her first $16,000 job to work on servers for the Department of Agriculture, Doan has built a business with close to $27 million in 1999 revenue. The company currently has 143 employees.
The company provides services such as systems integration, telecommunication and network services, facilities management and user support and training.
Among NTMI's major customers are the Agriculture Department, the Army, Immigration and Naturalization Service, the Internal Revenue Service, the Navy and U.S. Customs Service.
Doan said the Navy has been a wonderful customer. In fact, it was a subcontracting job to Sysorex in 1994 for the Navy that allowed her to hire her first employees, she said. For that job, Doan said she had to install 350 Unix servers across Europe.
"I didn't know how to act in business, so I brought my daughter with me," she said. "She went with me to Italy, Greece, Germany, all over Europe. I'd set up the playpen in the computer room with me."
Being in the 8(a) program and working with the Small Business Administration and the General Services Administration have been major pluses for the company, Doan said. "The SBA was wonderful, because I was totally clueless," she said.
The 8(a) contracts account for about a third of the company's revenue, and NTMI already is preparing for its graduation in 2003, Doan said.
"We are trying to do more full and open competitions, and we are using the GSA schedule because it offers us a lot of flexibility," she said. "Getting services on the schedule was huge for a company like us."
She also credits GSA's Federal Acquisition Services for Technology program with helping the company grow. Under this program contract, NTMI provides services such as system design and installation, development of integration plans, acquisition of hardware and software, testing and training.
Looking ahead, Doan said she wants to see her company do more work in what she calls exotic technologies, such as the work the company has done with remote sensing and surveillance with the Customs Service.
"We are really deploying some bleeding-edge devices," she said.
John O'Rielly, assistant director of the Arizona Customs Management Center in Tucson, said he has worked with NTMI for about a year on the Remote Watch Plus program. The program uses cameras at border crossings to monitor people and vehicles crossing the border. The challenging part was that the system had to be accessible via the Web and across regular analog phone lines, he said.
NTMI is helping the Customs Service standardize equipment and operations at each border crossing. "Each crossing has a surveillance system but they are inconsistent, with each having different vendors and equipment," he said. "NTMI's people have been very flexible."
Even with her company growing rapidly, Doan said she has no plans to make acquisitions or be acquired, or even to get too big.
"I think we'll always be in the $25 million to $50 million range," she said. "I like our easy-going lifestyle."
? Nick WakemanCrown Communications Inc.
Washington, D.C.
www.crownci.com
Prime Contracts: $21.8 million
Washington-based Crown Communications Inc. has cut back its dependence on 8(a) contracts as it nears its March 8, 2000, graduation date, said David Budin, the company's vice president of corporate development.
"We are working on developing a strategic plan to build our strengths and use that as a source of incremental growth in new areas," he said.
When Afzal Khan founded the company in 1987, it provided local area and wide area network systems for commercial clients. Then in 1991, the business underwent a drastic change when it was approved for the Small Business Administration's 8(a) program.
The company switched its focus from office automation and local area network development to air traffic control and aviation projects, Budin said.
The core business now spans three divisions: human factors and operational analysis, systems development and engineering, and facilities and operations management. The first two groups handle most of the company's government work.
In 1997, the company reported revenue of $13.3 million, and last year it reached about $16 million, Budin said. For 1999, the company is projecting revenue of $17 million, he said.
Public-sector work accounts for 95 percent of Crown Communications' business, with between 30 percent and 40 percent stemming from 8(a) contracts, he said. The majority of its government business comes from the Federal Aviation Administration.
"We are focusing on doing systems development or analytic work in the aviation and air traffic control field," said Budin. "That is our primary focus."
Currently, he said, the company is on two major FAA contracts as a subcontractor to Computer Sciences Corp. of El Segundo, Calif. Crown also is helping to develop the graphical user interface for the FAA's Terminal Radar Approach Controls Automation System contract.
With its reputation firmly established from the FAA contracts, Crown is gearing up to compete for other federal business, Budin said.
"Our growth plan is to extend our work in the command and control environment to include working in the Department of Defense and also continuing the small bit of work we now have with NASA," said Budin.
Crown has 140 employees and offices in Atlanta, Atlantic City, N.J., Denver, Los Angeles, Seattle and Washington, D.C., said Budin.
The company has partnered with several major government contractors, according to Budin. In addition to CSC, the company has worked on projects with Booz-Allen & Hamilton Inc. of McLean, Va., and Science Applications International Corp. of San Diego.
Budin said 8(a) companies today are developing niches and focusing on specialties much earlier than they have before.
"There are a few other 8(a)s who do something similar to us, but I cannot say they compete with us on a regular basis," he said.
Marianne Dunn
Falls Church, Va.
www.fcbs.com
Prime Contracts: $21.6 million
FC Business Systems Inc. of Falls Church, Va., will graduate from the Small Business Administration's 8(a) program later this month, starting a phase in the company's history that executives have been planning for three and one-half years.
Ken Chainani, president of FC Business Systems, said the information technology services company prepared for the transition by forming marketing and proposals groups to become more competitive.
The 350-employee company specializes in network support and management, software development and systems implementation and integration.
The company receives about 75 percent of its revenue from 8(a) contracts, which are reserved for small, disadvantaged businesses. FC Business Systems took in $28 million in revenue in 1998 and expects to post $35 million in sales this year.
"We expect to grow for the next three to four years," Chainani said. "We have invested heavily in marketing and in our ability to make proposals. When we do lose some of the 8(a) business that we have, the growth rate will slow."
All of the company's business is with the federal government, he said. Customers include the Army, Coast Guard, Federal Aviation Administration and the Transportation Department.
FC Business Systems intends to focus exclusively on the federal market for at least the next three years, he said.
The company now is broadening its scope by concentrating more on the growing markets for information system assurance and enterprise resource planning, Chainani said. FC Business Systems already is working with ERP software vendor Oracle Corp. of Redwood Shores, Calif., on three projects, he said.
Chainani, a native of India, founded FC Business Systems in 1984 as a retailer of Apple computer products. In 1989, the company shifted its focus to the federal government market for computer services and network support.
The timing could not have been better. The company left the retail computer industry just as computer superstores, such as CompUSA, were putting the independent stores out of business, Chainani said.
Even though FC Business Systems gets most of its revenue from 8(a) contracts, nearly half of its contracts are won competitively, Chainani said. Winning a contract in a competition restricted to 8(a) companies can be more difficult than an open competition. Some of the smaller 8(a) firms have little overhead because they are operated out of people's homes, he said.
Joining the 8(a) program helped FC Business Systems get a good start in the federal market, he said. However, the program has been losing its value because of the many purchasing vehicles open to federal procurement officers, including the General Services Administration schedules and governmentwide acquisition contracts, he said.
"I think the 8(a) days are numbered. It doesn't seem to have the political support it once did," Chainani said.
FC Business Systems has provided information technology products and services through the GSA schedules and Federal Systems Integration and Management Center, the Department of Transportation's Information Technology Omnibus Procurement contract, and the FAA's Broad Information Technology Services contract.
The company received $21.6 million in prime contract obligations under the 8(a) program in 1998, according to information provided by the Federal Procurement Data Center.
? Patrick Seitz
Colorado Springs, Colo.
www.space-mark.com
Prime Contracts: $21.2 million
Space Mark Inc. has hit the ground running in pursuit of new contracts since outgrowing the criteria for a major piece of its 8(a) business a year and a half ago.
Since December, the Colorado Springs, Colo., company has won $16.2 million in government contracts. Four of the six awards it won in open competition; one was a small business set-aside contract and the other was a Small Business Administration 8(a) award.
In addition, Space Mark is on a team that won a $500 million Army combat support services contract in July. Its partners are Holmes & Narver Inc. of Orange, Calif., and Research Analysis and Maintenance Inc. of El Paso, Texas. For the 10-year contract, Space Mark and its partners formed a separate company, Combat Support Associates, in which Space Mark has a 20 percent stake, according to Michael Wilson, Space Mark's director of business development. The separate company will perform maintenance and operating services for tanks and track vehicles at Camp Doha, an Army facility in Kuwait.
It was a nice win for the company, considering that Space Mark no longer competes for facilities services support contracts as an 8(a) firm. On March 31, 1998, the company's revenue exceeded the level permitted for services support contacts under the 8(a) program. Space Mark had $68.7 million in revenue that year and, under the guidelines, companies that generate more than $24 million in services support contracts for three straight years can no longer compete as an 8(a) in that area.
Now the company competes with the big players. "Most of the contracts we've won in the last year have been full and open contracts," said Chief Financial Officer Kevin Thomas.
Founded in 1990, Space Mark is owned by the Aleut Corp., a Native American firm based in Anchorage, Alaska. Space Mark specializes in logistics, telecommunications, satellite and space shuttle support and facility operations and maintenance.
This last category is an area that demonstrates Space Mark's broad capabilities. The company manages buildings, installs and operates HVAC and fire control systems and oversees supply warehouses on numerous military bases. It even issues field packs for military training operations.
Ninety percent of Space Mark's revenue is from government contracts with customers including the Air Force, Army and Coast Guard, NASA and the National Science Foundation.
The company has grown fast: Until last year, revenue grew 85 percent annually. Revenue dipped slightly to $64.6 million for the year ended March 31, largely because of its move to the open market against competitors such as Lockheed Martin Corp., Bethesda, Md., and ITT Industries Inc., White Plains, N.Y., Thomas said.
The company's operating margins have gotten leaner with the increased competition, shrinking from $4.4 million in fiscal 1998 to $1.9 million in fiscal 1999, Thomas said. Space Mark chalked up $21.2 million in prime contract obligations as an 8(a) company last year. "It has been a good year, but a lean year," he said.
Despite competition, Thomas expects a strong rebound this year with revenue around $70 million. Part of the boost, he said, should come from one of three contracts the company plans to bid in the coming months. Thomas declined to disclose the contracts for competitive reasons, but said each is worth between $10 million and $25 million annually, enough to push the company over the $70 million mark.
The 900-employee company has expanded overseas and launched an acquisition strategy aimed at adding software, engineering and architectural capabilities to its arsenal, Thomas said. In early July, Space Mark signed an agreement to buy Eden Technologies Pty. Ltd., of Sydney, Australia, for an undisclosed sum. The deal was expected to close in August.
With 40 employees and revenue of $2.6 million last year, Eden makes asset management software used by the navies in Australia and New Zealand. Space Mark expects to use the acquisition to get a foothold in those markets for its contract services business and other specialties.
And in May, Space Mark bought a 30 percent stake in Kewi.net of Englewood, Colo., for $550,000. Kewi.net makes software that helps organizations move from client-server architectures to Web-based systems.
? Richard McCaffery
San Diego, Calif.
www.htshq.com
Prime Contracts: $18.4 million
Systems integrator High Technology Solutions Inc. of San Diego is relying on both its experience with federal government customers and acquisitions to expand its integration and Internet services into the commercial market.
The company ranks eighth among Washington Technology's top 25 8(a) information technology companies this year, accumulating almost $18.5 million in prime contract obligations from the Small Business Administration's 8(a) program in fiscal 1998.
Founded in 1990, the company has grown to 400 employees and has yearly sales of nearly $40 million. As of May, the company had a funded backlog approaching $200 million, according to a company statement.
Allan Camaisa, chairman and chief executive officer of HTS, started the company after graduating from the U.S. Naval Academy and serving seven years as a Navy surface line officer. In 1998, Camaisa was named San Diego's Internet Software Entrepreneur of the Year by Ernst & Young International of New York.
Camaisa and other HTS officials declined to be interviewed for this article. Information was gathered from the company's Web site and other public sources.
The company has received contracts from the departments of Defense and Veterans Affairs, and the General Services Administration. Navy work has been especially lucrative for the company, and includes a $6.5 million set-aside contract with the weapons division of the Naval Air Warfare Center, Point Mugu, Calif.
The company provides engineering and technical services in support of the Air Intercept Department, according to Input, an IT services marketing firm in Vienna, Va. The contract was awarded in 1994 and is due to expire soon.
HTS also has a set-aside contract valued at up to $15 million to gather and process data for rockets, missiles, satellites and other air, land and sea vehicles for the weapons division of the Naval Air Warfare Center, according to Input. This contract was awarded in 1997 and expires in 2001.
In 1994, the company formed its interactive media division, and in 1996 purchased TouchMedia of Costa Mesa, Calif., a maker of interactive, touch-screen kiosks with multimedia electronic content. HTS has been asked to design and install information kiosks for the California Department of Veterans Affairs, the Riverside County Economic Development Agency and Workforce Development Board, the Long Beach Career Transition Center in California, and the New Mexico Department of Tourism.
In September 1998, HTS purchased Multimedia Resources Inc., a Portland, Ore., company that specializes in large-scale interactive Web sites and touch-screen kiosks for the health care marketplace.
"We were looking for new commercial markets in which to leverage our kiosk development software and capabilities, and we identified health care as a strong growth industry," said Camaisa in a prepared statement explaining the purchase of Multimedia, which became HTS' interactive health care division. Terms of the deal were not disclosed.
Interactive health care customers have included Blue Cross-Blue Shield of Georgia, Florida, Massachusetts and Oregon, according to HTS. In Georgia, for example, the company built for Blue Cross-Blue Shield a consumer-oriented Web site that includes information about plans and services as well as health and wellness content. In addition, the consumer site also serves as a gateway to three password-protected extranet sites that provide specialized information for brokers, medical providers and employer accounts.
To further expand its commercial reach, HTS in February purchased Maxwell Interactive, a division of Maxwell Technologies Inc. of San Diego. Maxwell Interactive "brings commercial marketing talent, IT programming skills and experience in computer-based training to HTS," company officials said in announcing the purchase. Among its services, Maxwell Interactive provides CD-ROM and Web-based training for employees and educational products for students in elementary school through high school. Terms of the deal were not disclosed.
? Steve LeSueur
Bethesda, Md.
www.gmsi.com
Prime Contracts: $17.7 million
Hilton Augustine Jr., president and chief executive officer of Global Management Systems Inc., plans to grow his business through acquisitions.
In July 1998, GMSI of Bethesda, Md., expanded its offerings by acquiring Cam Communications, a provider of telephone and data management systems and networking solutions in Fairfax, Va. Terms of the deal were not disclosed. Before the purchase, GMSI worked with subcontractors to provide phone system installations and cable and wiring services.
"From a technology standpoint, pulling cables is not that advanced and we did not do that," said Augustine. "But now we have capabilities from pulling cables through design and installation to the higher-end stuff, like consulting."
When GMSI was approved as an 8(a) firm by the Small Business Administration in 1989, Augustine's one-man show had less than $150,000 in annual revenue. In 1998, the black-owned company, which now has about 500 employees, posted revenue of $24 million. Augustine expects 1999 revenue to hit $34 million.
"We started as a systems integration company in the home automation market, and the name of the company in 1989 was Global Home Management Inc.," said Augustine. "For three years, we focused on 'Jetson' kind of stuff: integrating the computer with the heating, lighting and air conditioning."
However, that market never took off. "It was hard to hit the mass market because everything was custom and expensive," he said. "The 8(a) [status] brought a chance to hit the mass market in a commodity, systems integration, in the office market instead of the home market."
In fiscal 1998, 95 percent of the company's business was with the government. In 1999, he said, it has dropped slightly to 90 percent. As the company nears its March 8, 2000, graduation date, Augustine said the amount of public-sector business will continue to decrease, but not disappear.
"The 8(a) portion of the business will taper off slowly over the next three years, and it will be replaced by commercial business," he said. "At four years out of the program, we should be at 50 percent commercial and 50 percent federal. Of that federal business, about 20 percent will be 8(a) work." GMSI will continue to perform work on previously awarded 8(a) contracts for several years.
Most of the company's business comes from the Department of Defense. Its first federal contract was a $100,000 award from the Air National Guard at Andrews Air Force Base in Maryland.
"It was a big contract for me, because I was still working out of my home," he said. He also was waiting for the 8(a) approval. His first 8(a) contract was awarded in 1991 by the Food and Drug Administration. Under the nearly $3 million, five-year contract, GMSI ran the network help desk for the FDA's Rockville, Md., offices.
Today, GMSI has contracts with a host of other federal customers, including the departments of Commerce, Energy, Justice and Treasury and the Internal Revenue Service.
In April, GMSI teamed with Computer Sciences Corp. of El Segundo, Calif., on a multiple-award, indefinite delivery, indefinite quantity contract for the U.S. Census Bureau's Information Technology Services Project. The contract has an expected value of $150 million over its one-year base and four one-year options. Under the contract, GMSI will be responsible for systems design and programming, studies, analyses and document preparation, systems integration and communications and operations.
Augustine now is looking for his next challenge. He said the company last year secured a $10 million line of credit with Crestar Bank. Half of that will be used to cover operating costs, with the remainder set aside for acquisitions.
"We are very fortunate, because we are financially strong and we have always been profitable," said Augustine. "I get a call every week from someone trying to buy me. But why should we be bought? Why shouldn't we get big ourselves by doing a buy?"
Eventually, he said, he would like to take GMSI public.
"We want to do a couple more acquisitions and hope the market is either staying exciting or has taken a dip and is coming back up," he said. "In the meantime, if some larger company says they like what we are doing and are willing to pay any price to have it, we want to be able to entertain that offer as well."
? Marianne DunnGeorge G. Sharp Inc.
New York, N.Y.
www.georgesharp.com
Prime Contracts: $17.5 million
Look for naval engineering and ship design company George G. Sharp Inc. to branch further into information technology services as the Navy downsizes and the market shrinks for ship design engineering, said Allen Chinn, president of the 79-year-old company.
In June, the New York-based firm won a General Services Administration schedule for IT services that includes network design, database planning and design, systems analysis, programming, project management, Y2K analysis and legacy system conversion and implementation. And in August, the company was awarded a GSA Management Organization and Business Improvement Services contract.
"It's going to be easier for the customer to get to [us]," said Kay Young, George Sharp's contract administrator.
Under its GSA schedule, the company in June won a $125,000 task order to provide the Naval Surface Warfare Center in Bethesda, Md., with computer-based training services. It is called the Common Design and Computer Generation of Damage Scenarios contract, and George Sharp is the prime on that award, Young said.
Founded in 1920, George Sharp has designed more than 1,500 ship constructions and 300 ship conversions for the marine industry. It also offers ship repair, maintenance and telecommunications services.
While its major customer is the Navy, other government customers include the National Oceanic and Atmospheric Administration and the U.S. Air Force Academy. About 95 percent of its business comes from the public sector, Chinn said.
In addition to design and training services, George Sharp runs warehouse operations at Navy bases in Norfolk, Va., San Diego and elsewhere. About 700 of the company's 900 employees work in Navy warehouses stocking, ordering and shipping parts for ships and planes.
The company had sales of $50 million last year and expects a slight drop in 1999 as a result of Navy downsizing, Chinn said. The company last year had $17.5 million in prime contract obligations under the Small Business Administration's 8(a) program, from which it will graduate in January 2000.
As a result of the fast-approaching graduation and decline in ship design work, George Sharp is expanding further into areas such as electronic commerce, Web design and Web site hosting. This month, the company will launch Town24.com Inc., an Internet shopping site that has been under construction since last fall.
George Sharp currently has memorandums of understanding with about 80 stores, including six major retailers and one airline, said Chinn. Executives expect to generate revenue from the sale of advertisements on the site. "We think there's a niche for us," Chinn said.
How did a company founded in 1920 with a specialty in ship design end up designing an online retail business? In addition to ship design, the company has offered safety, firefighting and survivability training to the Navy for more than 20 years. Those services include IT training and computer services work, like converting paper-based training manuals into computer documents.
In 1997, the company formed Sharp Ideas, which helps government agencies and commercial companies prepare and host Web sites. The company is designing a Web site for Glitter Wrap Inc., a Rockaway, N.J., company that sells wrapping paper and ribbons.
But there is still work on ships to be done. In May, George Sharp won a three-year, $1.9 million contract to design three passenger ferries for New York City. "We're out there hunting for new work," Chinn said. "We're trying to diversify as much as possible," he said.
Richard McCaffery11
Madison Research Corp.
Prime Contracts: $17.3 million
401 Wynn Drive
Huntsville, Ala. 35805
www.madisonresearch.com
12
Universal Systems & Technology Inc. (Unitech)
Prime Contracts: $16.8 million
12450 Fair Lakes Circle, Suite 625
Fairfax, Va. 22033
www.unitech1.com
13
Remtech Services Inc.
Prime Contracts: $14.8 million
804 Middle Ground Blvd., Suite A
Newport News, Va. 23606
www.remtech.com
14
STG Inc.
Prime Contracts: $14.6 million
11250 Waples Mill Road South Tower,
Suite 400
Fairfax, Va. 22030
www.stginc.com
15
Information Systems Support Inc.
Prime Contracts: $14.3 million
6903 Rockledge Drive, Suite 510
Bethesda, Md. 20817
www.iss-md.com
16
CSSI Inc.
Prime Contracts: $13.8 million
600 Maryland Ave. SW, Suite 890
Washington, D.C. 20024
www.cssiinc.com
17
Planning Technologies Inc.
Prime Contracts: $13.5 million
2872 Woodcock Blvd., Suite 150
Atlanta, Ga. 30341
www.planningtech.com
18
Caelum Research Corp.
Prime Contracts: $13.2 million
1700 Research Blvd., Suite 100
Rockville, Md. 20850
www.caelum.com
19
Technology Planning &
Management Corp.
Prime Contracts: $13.2 million
4815 Emperor Blvd., Suite 310
Durham, N.C. 27703
www.tpmc.com
20
West Electronics Inc.
Prime Contracts: $12.9 million
PO Box 577/Industrial Park
Poplar, Mont. 59255
www.westelectronics.com
21
DataCom Sciences Inc.
Prime Contracts: $12.7 million
1806 N. Shartel
Oklahoma City, Okla. 73103
www.datacomsciences.com
22
Computer & Hi-tech
Management Inc.
Prime Contracts: $12.0 million
412 Investors Place, Suite 102
Virginia Beach, Va. 23452
www.chm.net
23
Communications Products Inc.
Prime Contracts: $11.8 million
7301 E. 90th St., Suite 111
Indianapolis, Ind. 46256
www.commprod.com
24
Eagle Group International Inc.
Prime Contracts: $11.7 million
3475 N. Desert Drive, Building 1,
Suite 100
Atlanta, Ga. 30344
www.eaglegroupint.com
25
Force 3 Inc.
Prime Contracts: $11.5 million
2147 Priest Bridge Drive, Suite 1
Crofton, Md. 21114
www.force3.com