Companies 1-10

For the seventh year in a row, Lockheed Martin Corp. is No. 1 on Top 100 list, as the company used its breadth and depth of expertise and market reach to move forward, despite some tough times."I think our largest strength just comes in the form of size. We have huge groups of talented people," said Bob Coutts, executive vice president of Lockheed Martin's systems integration business area. "We're probably one of the most, if not the most, technically competent companies [in the market]." The company employs about 130,000 people, he said.Financially, the world's largest defense contractor realized $25.3 billion in 2000 revenue, almost flat compared to 1999 revenue of $25.5 billion. The company saw a net loss of $519 million, compared to 1998's $382 million in net earnings (which had plunged from 1998 earnings of $1 billion).While 2000 was a low year for Lockheed Martin, the company should be improving from here on out, said aerospace analyst Paul Nesbit, principal at JSA Research, Newport, R.I."They've got a handle on their problems financially," he said. "They really lost it when they made so many purchases [over the past several years]. They lost control on the management side, but now they've regained that.""A year ago, 18 months ago, Lockheed Martin was very extended, [and] our debt to equity ratio was very unattractive," Coutts said. "You're looking at a corporation who has essentially reduced net debt by somewhere between $3 billion and $4 billion."The company's rebound is reflected in its stock price, which has almost doubled from its 52-week low below $20 in April 2000. Lockheed's annual report states its backlog of business has grown 23 percent, to some $56 billion, while a spokesman said the company won more than $37 billion in new contracts from the government last year. Lockheed Martin's prospects aren't completely rosy, Nesbit said. "They still have problems in their space business, particularly satellites, and global telecommunications services. They're not making any money," he said. "If they had an easy way out, they'd probably get out, but it's not that easy."Coutts estimated that systems integration work for the federal government probably makes up well over $2 billion in corporate revenue, with the company realizing an internal growth rate of 15 percent to 18 percent on its IT projects.He said Lockheed Martin's IT businesses exist inside four different parts of the company: systems integration (the largest group), space, technology and services, and global telecommunications.Among its big victories in 2000, Lockheed Martin won the Air Force's Integrated Space Command and Control contract, a $1.5 billion, 15-year program to modernize the service's air, missile and space command and control systems used by the North American Aerospace Defense Command and the U.S. Space Command. "That was our most major win," Coutts said.The company also won a $118 million contract with the FBI to provide automated identification and information technology services for the agency's Criminal Justice Information Services division in Clarksburg, W.Va.And the company holds a valuable spot on numerous governmentwide, multiple-award contracts, including the National Institutes of Health's ImageWorld II electronic imaging and services contract, the Information Technology Omnibus Procurement II contract handled by the Transportation Department, and the General Services Administration's Millennia vehicle.But Lockheed Martin didn't succeed in all its competitive efforts. Electronic Data Systems Corp., Plano, Texas, landed the big plum in government IT deals last year, the $6.9 billion Navy-Marine Corps Intranet contract, while Lockheed's team, headed by IBM Corp. of Armonk, N.Y., finished out of the money."Probably our big [disappointment] was not being on any of the teams for NMCI," Coutts said. "We were trying to cover our bases. Beyond that, but not at that scale, I'm sure we lost some $5 million or $10 million [contracts]."Over the years, the company has enjoyed the most success in the Defense Department, Coutts said, while on the civil agency side Lockheed Martin has provided services for the FAA, the Justice Department through its FBI contracts, "and quite a bit of Health and Human Services."Prospects for the upcoming year include the Department of Housing and Urban Development's recompete of its 11-year-old Integrated Information Processing Services contract, for which Lockheed Martin is the incumbent. The new contract, renamed HITS for HUD Information Technology Services, will potentially be worth up to $1 billion. The request for proposal may be released this July.Through the GSA's Millennia vehicle, Lockheed Martin is hoping to win part or all of the FBI's Trilogy project, the three-year, $400 million effort to modernize the capabilities and functions of the agency's legacy equipment and related IT capabilities into an integrated, advanced IT infrastructure.The company also has teamed with IBM on the $2 billion, 15-year Customs Modernization contract. The award is due soon.Lockheed Martin has some interesting competitive challenges ahead. The Boeing Co. announced early this year that its Air Traffic Control unit intends to propose a complete overhaul of the FAA's approach to solving capacity and air traffic control problems.At the same time, Raytheon Co. has formally protested the FAA's decision to award Lockheed Martin the contract for the agency's En Route Automation Modernization program, a 10-year contract worth hundreds of millions of dollars.For its part, Lockheed Martin has challenged Raytheon's work on the FAA's Standard Terminal Automation Replacement System project, recommending that its own Common ARTS air traffic control system be used instead.There are government agencies where Lockheed Martin does not yet have a presence, Coutts said. The company is looking for opportunities to remedy that."Probably the places we're not covering as much as we'd like to are Agriculture, Veterans Affairs, Interior, Education, Labor and the State Department," he said.Listing the company's plans points up another of its strengths, Coutts said: Lockheed Martin is prepared to bid on work as a prime contractor or to work with other major systems integrators in a subcontracting role."We're basically looking for wins," he said.XXXSPLITXXX-The marriage of Northrop Grumman Corp. and Litton Industries Inc. brings together two already strong players in the government information technology market and creates an even more formidable competitor.Northrop Grumman of Los Angeles closed its $5.1 billion acquisition April 3 and has begun melding Litton's IT units, PRC Inc. and TASC Inc. with its existing IT business, Logicon Inc.Combined, they are expecting to be a $4-billion-a-year IT company with capabilities in command and control systems, information security, intelligence, health care IT, Defense Department outsourcing and state and local business.Individually, Northrop Grumman and Litton were consistently ranked among the top companies on Washington Technology's annual Top 100 list. Their merger now pushes them to the No. 2 spot, with more than $1.6 billion in prime contracting dollars.Overall, the new Northrop Grumman will be a $15 billion company that, in addition to IT businesses, has shipbuilding, defense electronics, commercial electronics and aerospace units."We think we can bring all this together and become a powerhouse," said Kent Kresa, chairman, president and chief executive officer of Northrop Grumman.With Litton on board, Northrop Grumman will have 80,000 employees and facilities in 44 states and 61 international offices.Pulling all that together into a single company is the biggest challenge Northrop Grumman faces in the coming year, said Richard Knop, co-managing partner of the Windsor Group LLC, an investment bank in Middleburg, Va."They are going to be going through some significant integration issues," Knop said.The plan announced by Kresa and other company officials has Litton, based in Woodland Hills, Calif., operating in the short term as a separate unit of Northrop Grumman. Within 60 days of the acquisition, the company will have formed a plan on how to integrate the companies, and that plan will be completed within a year.All of the IT business will be consolidated under Herbert Anderson, corporate vice president, president and CEO of Logicon, based in Herndon, Va."The first thing this does is that it brings us a highly skilled work force," Anderson said. "We are getting many very talented people, and that is really going to help us."Northrop Grumman and its IT unit, Logicon, also are picking up new capabilities in areas where the company previously played a minor role, such as intelligence, postal systems and enterprise resource planning software implementation, he said. Logicon also will be strengthening its capabilities in systems integration, command and control, logistics, information assurance, training and simulation and program management. All of these areas have strong growth in the federal market, Anderson said."Now we have a full range of capabilities to go after just about any program," he said.The acquisition also is bringing new customers, especially with the Navy, Anderson said.With the addition of Litton's IT business, the Defense Department remains Northrop Grumman's largest IT customer with $2.5 billion in revenue, followed by federal civilian with $1.2 billion. The state and local market accounts for another $130 million in revenue. Commercial customers pull in $220 million, and the international market is worth about $30 million.Anderson said he sees defense and intelligence work as continuing to grow, but not at the pace of the other markets the company is pursuing.The Litton acquisition is not the only one that Northrop Grumman, and Logicon in particular, will be integrating. In the past year, Northrop Grumman has made other IT-related acquisitions, buying Federal Data Corp., Sterling Software Inc.'s federal unit and the federal business of Comptek Research Inc."They have really transformed themselves into a tier-one player," Knop said.Northrop Grumman is in a much stronger position to compete against the likes of Lockheed Martin Corp., BAE Systems Plc, General Dynamics and Boeing Co., he said.Besides making acquisitions, the Logicon unit also pulled in important contract wins. Among these was a $46 million contract to develop command and control systems for the Space and Naval Warfare Systems Command. The company also was one of several winners of large task order contracts. One was the General Services Administration's smart-card contract, awarded to five companies and worth $1.5 billion over 10 years.A second was the Defense Department's I-Assure contract for information assurance services. Eleven companies won a piece of that contract, worth $1.5 billion over seven years.The company's commercial business also got a boost in March 2001 when Northrop Grumman won a four-year, $107 million IT outsourcing contract with Vought Aircraft Industries Inc. In July 2000, Vought was formed when Northrop Grumman sold its aerostructures business to the Carlyle Group. Litton also is bringing several recent contract wins to Northrop Grumman. For example, in October 2000, the TASC unit won a $170 million contract with the National Reconnaissance Office to provide system engineering, integration and program management.The PRC unit won a $110 million contract with the Treasury Department to implement PeopleSoft's HR Connect ERP software. The unit also won a $98 million blanket purchase agreement to supply technical support services to the Bureau of Land Management.PRC also brings strong software development skills and is one of the few government IT contractors that has reach level 5 rating by the Software Engineering Institute."That is a major discriminator for us," Anderson said.Litton holds several of the same contracts that Northrop Grumman also won, including the GSA Smart Card and the Defense Department I-Assure contracts.Integrating all the IT pieces may create a lull in the growth of Northrop Grumman's information technology business, but Anderson said he is confident the company would still reach a growth rate of better than 10 percent in the coming year.The challenge for the company is determining the best way to realign while maintaining a high level of customer satisfaction, he said.There are different company cultures and loyalties that need to be won. "At all levels, we have people issues to address," he said.XXXSPLITXXX-Many federal agencies talk about outsourcing as the wave of the future, but at NASA, the future arrived nearly five years ago.When the space agency awarded a six-year, $9 billion contract in October 1996 to the United Space Alliance LLC, the goal wasn't just to outsource back-office operations, such as data centers and desktop computers. The contract also covers critical mission and maintenance operations, such as astronaut training, daily operations of the shuttle and upgrading launch vehicles. In other words, the United Space Alliance is pretty much running the place.The lucrative contract generated $1.6 billion in 2000 for the United Space Alliance, a company formed and jointly owned by Boeing Co. and Lockheed Martin Corp. The revenue was good enough to give the alliance the No. 3 ranking on Washington Technology's Top 100 list this year.While not an information technology contract per se, IT runs through much of the work being done under the Space Flight Operations Contract and is responsible for much of the cost savings NASA has realized, said William Capel, chief financial officer for the United Space Alliance.IT is important in two aspects, he said. First, information technology, such as new software development, is playing a critical role in upgrading the shuttles from 1960s and 1970s technology to early 21st-century technology, he said. For example, new power units rely more on computer hardware and software. "Main engine monitoring is heavily dependent on software and state of the art computer programming," he said.Two of the shuttles, Atlantis and Columbia, have received cockpit upgrades that have replaced analog displays with computer displays that are more flexible and reliable. Flight avionics also are being upgraded, which also entails new IT capabilities."We are doing things with software we couldn't do before," he said.Information technology also has played a critical role in the cost savings through the consolidation of contracts under the alliance, Capel said. Before the Space Flight contract, known as SFOC, there were several purchasing systems being used for operations at Johnson Space Center in Houston and the Kennedy Space Center in Florida. There also were several financial systems in place. Those have been consolidated into single systems, he said."Everybody is on the same system, everybody is integrated," he said. Cost savings also were realized by consolidating contractor management. SFOC brought together a dozen major contracts. "You had 12 different contracts with 12 different IT infrastructures. Now we have only one," he said.In the past, when each of those contractors completed its portion of a task, it had to be handed off to the next contractor. Those hand-offs still exist, but managing them is much more complicated and time consuming when they are between different prime contractors and not an internal hand-off within a single organization, he said.But operational efficiency has not been achieved at the expense of shuttle safety, Capel said. The SFOC work is structured as a performance-based contract, and 80 percent of the alliance's revenue is tied to meeting safety standards, according to alliance documents.Over the past eight months, the alliance got to strut its stuff as far as the efficiency and safety of its operations are concerned. It will continue to do so into the foreseeable future, because the pace of shuttle flights has picked up now that problems with the Russian portion of the space station have been solved."Our flight schedule is heavily driven by the space station," he said.Delays and funding problems with the Russian space agency had reduced shuttle flights to less than once every three months, he said. But in the past eight months, there have been five flights, the most recent one launching April 19. Two more flights are scheduled for this summer.To ramp up so quickly from such a low rate is a source of pride for NASA and the alliance, Capel said."Other than weather delays, we have launched absolutely on time," he said. And being on time is critical for space station launches, because there is only a five-minute window to get the shuttle up so it can rendezvous with the station. If the launch doesn't happen within that window, it has to be delayed until the next day, Capel said.The alliance also will oversee a $1.5 billion upgrade program to the shuttles. Other upgrade programs, especially to the infrastructure at the Kennedy and Johnson space centers, are being developed. The centers' infrastructures were built to support the Apollo program, Capel said.An upgrade program for the shuttle likely will be needed now that NASA has announced plans to abandon development of the X-33, which was to replace the shuttle. The shuttles will need to fly through 2022, which they are capable of, Capel said. "There is plenty of life left in them," he said.But the alliance and NASA need to develop an upgrade program similar to what is used to upgrade military and commercial planes. For example, the B-52 bomber, which dates back to the 1950s, is still flying, he said.The alliance also is beginning discussions with NASA about extending the contract, which is scheduled to expire in September 2002. There are two, two-year options that NASA can exercise. The discussions could result in pushing the length of the contract beyond 2006, Capel said.The organization also is looking beyond NASA to similar opportunities that the Air Force is developing in Colorado Springs, Colo., for its satellite operations. "We are working with Lockheed Martin and Boeing to look at other opportunities, but these are always on a case by case basis," Capel said.XXXSPLITXXX-Computer Sciences Corp.'s successes among civilian and military agencies have enabled the company to continue its stay among the top five spots on Washington Technology's Top 100 list. Since the inception of the list in 1994, the company has never ranked lower than No. 5. This year, the El Segundo, Calif.-based company ranks fourth.CSC's civil sector had revenue of $995 million in 2000, up from $823 million, while the defense sector posted revenue of $1.8 billion, up from $1.4 billion. Together, the government sectors posted a 15 percent increase in revenue."They're growing at a rate faster than the federal IT market," said Kevin Plexico, executive vice president at Input Inc., Chantilly, Va.On the defense side, CSC was selected as one of 12 prime contractors for the Army Aviation and Missile Command's Omnibus 2000 Support Services program, worth $2.5 billion over 10 years. Of the three separate contracts for technical, logistics and programmatics, CSC was selected as the prime contractor for the technical contract. Other big wins for the defense side were a five-year, $352 million contract from the Air Force Education and Training Command to provide base operations support at Lackland Air Force Base outside San Antonio, and a 10-year, $183 million contract for information technology support from Headquarters, U.S. European Command.The defense side won 61 percent of all the dollars for which it bid in 2000, said Austin Yerks, senior vice president of business development for defense. The company has about 11,000 employees in its defense unit, and about 4,000 employees in its civilian unit. CSC is now in the second year of a logistics modernization contract for the Army and hopes to capture similar opportunities on the defense side, Yerks said.As impressive as these wins are for CSC, the company was taken aback when Electronic Data Systems Corp. won the Navy-Marine Corps Intranet contract by bidding a substantially lower price, said Albert Nekimken, vice president of research at Input. He said CSC will have to make some pricing adjustments to remain competitive. "It's pretty clear that CSC's No. 1 challenge is going to be price competition," he said.On the civilian side, the company also had some big wins. One was a $329 million en route software development contract for the Federal Aviation Administration. Under the contract, a three-year deal with two one-year options, CSC will provide engineering and analysis, software development, deployment and maintenance and network system design for about a half dozen critical systems. Another was a $190 million, two-year contract with three one-year options for technical support services for the Transportation Department's John A. Volpe National Transportation Systems Center, Cambridge, Mass. Under the contract, CSC will provide detailed technology assessments, requirements analysis, concept development, architecture design and alternatives analysis, software development, testing and integration, system training and maintenance and system operational support for both transportation and logistics management information systems. The company also won a pair of 10-year, $100 million contracts to assist the State Department, Bureau of Consular Affairs and U.S. embassies and consulates around the world with visa information and support services. Under the contracts, CSC will implement electronic government solutions to improve visa processing and issuance services, and operate customer contact centers with integrated voice response systems, live operators, automated fax-back systems and Web services. These will support a variety of consular office services, including the issuance of visas for travel to the United States.One of the company's key strengths in the civilian sector is the breadth of its offerings, said Patrick Ways, senior vice president for civilian business development. While most of CSC's competitors are focused either on management consultation, systems integration or maintenance, "we're heavy in all three areas," Ways said.CSC's acquisition of Nichols Research Corp. in 1999 has allowed it to put some distance between itself and its competitors by capturing work in the supercomputer marketplace. "We hunt everyday to find something to differentiate [ourselves] from others," said Yerks, who said that CSC's supercomputer business has allowed it to gain a competitive advantage in the crowded federal IT market.The federal government has about 30 installations around the country that use supercomputers, and these machines require updating every two years or so, he said. CSC has two existing supercomputer contracts with NASA. "It's a very robust marketplace, worth $2 billion a year," Yerks said.In the defense and intelligence arena, one of the major opportunities CSC will be pursuing this year is the 10-year, $5 billion National Security Agency's Groundbreaker IT outsourcing contract, Yerks said. Another defense opportunity is the 14-year, $2.5 billion Joint Technical Ranges contract that involves multiple site services and test and training services at several missile ranges.In the civilian arena, CSC plans to compete for the 10-year, $600 million data center conversion at the Commerce Department, Ways said. Another is the five-year, $399 million contract for Health Care Financing Administration Facilities Management, an expansion of work that includes systems engineering and programming, database administration and procurement.Although losing the NMCI contract was disappointing, it was not detrimental to CSC federal business. Indeed, the company's civilian pipeline is $7 billion for this fiscal year, more than twice the size of last year's pipeline, said Ways. "Our biggest problem right now is not having enough resources in people or [bid and proposal] to address that pipeline," said Ways. "It's a good problem to have, because it allows us to be more selective about what we pursue."Still, when CSC goes after a contract such as NMCI, it likes to win. "My biggest challenge is prioritizing the major programs we go after," Yerks said. "My team's challenge is to select those that have the highest win probability."Some recent proclamations made by members of the Bush administration have led CSC to believe the political climate for privatization will be more favorable than it has been in the past, said both Yerks and Ways. If this proves to be the case, CSC is one of the systems integrators most likely to gain from it."In the defense space, I believe we are the premier offerer for large enterprisewide outsourcing or systems modernization," Yerks said. "So I am pretty bullish about the next couple of years."XXXSPLITXXX-Although information technology represents less than a tenth of the revenue generated by the multifaceted Raytheon Co., the IT portion of the company's business has been growing and is set to advance further in 2001, company officials said.If the growth is realized ? and there is no reason to believe it won't be ? IT will provide a bright spot for a corporation whose revenue and profits have fallen in each of the last two years and whose net debt still stood at a hefty $9.1 billion at the end of 2000.Raytheon has been grappling with problems created by an acquisition binge that resulted in what Paul Nisbet of JSA Research called a mishmash of operations and management, financial control and quality systems."They're recovering from indigestion ... but they have a long way to go," he said.In contrast, the company's IT business has been racking up some important successes. Raytheon is a key player on the Electronic Data Systems Corp. team that won the $6.9 billion Navy-Marine Corps Intranet contract in October 2000. Raytheon will design, implement and manage the security aspects of the vast NMCI network.The work is valued at $300 million to $500 million, depending on whether three one-year options on the basic five-year contract are exercised, according to Frank Marchilena, president of Raytheon's Command, Control Communication and Information Systems.Marchilena said one of Raytheon's particular strengths is in IT security. "When it comes to information assurance and network security, we believe we're one of the best out there," he said.That capability stems mostly from the company's long-term work for defense and other "three-letter" agencies that deal with highly classified and secure programs. "We've done a lot of work on those various areas and brought that work into our expertise in the unclassified world," Marchilena said.One such derivative, launched last June, is Raytheon's SilentRunner product, a passive, multifunctional, real-time network discovery and analysis tool designed to safeguard an agency's or company's information assets. The system, which operates within a company's firewall where most cybercrime takes place, identifies risks and network vulnerabilities and alerts management to a potential loss of data. "We think we understand network system security," Marchilena said.That part of Raytheon's business is about to be spun off as a separate company that will operate as a subsidiary of the command and control unit. Marchilena said the classified world presents Raytheon with its single biggest opportunity for information technology. He estimated that the "tasking, processing exploitation and dissemination" of information offers a market of $6 billion to $12 billion over the next five years."The systems won't be the same, but different agencies will be seeking to do something like this," he said.Besides security, Raytheon focuses a lot of its IT work on large data processing and transaction-based systems. "We build some fantastic systems to process data," Marchilena said, "and we've taken those kinds of software systems and moved them to the unclassified world."Key contracts include loan processing and tracking for the Education Department and architecture-building for the National Oceanic and Atmospheric Administration.The company also is involved in government supply-chain management using Industrial Prime Vendor, a program that employs a forecasting mechanism and just-in-time delivery to supply needed hardware to defense units to eliminate storage and obsolescence costs. Under a contract with the Defense Supply Center Philadelphia, the company has been selected in six of seven competitions to automate the buying process for parts required by Navy and Marine Corps logistics depots.According to Marchilena, about 60 percent of Raytheon's information technology work is centered in his unit, and 30 percent resides in the Raytheon Technical Services Co., headed by Phil LePore. The two units often work together, with the command and control unit more product-oriented, and the other more service-oriented.Both are involved in an IT competition for the FBI on a project called Trilogy, also known as "e-FBI." The program involves two awards, one for infrastructure and one for applications, to be made this spring."We're doing product development and building the infrastructure; they'll do the installation and operation," Marchilena said. There is a similar split in the company's extensive work for the Federal Aviation Administration, which is not considered information technology, per se.Earlier this year, Technical Services was selected to provide IT work to NASA Langley Research Center under the General Services Administration's Millennia contract. Raytheon is teamed with several companies to provide IT work under the consolidated IT services contract. The task order, valued as high as $183 million, includes a one-year base period and seven one-year options. It is the fourth GSA task order awarded Raytheon under Millennia.Total revenue for the command and control unit last year was down 9 percent to $3.4 billion, primarily because of divestitures and delays in international orders. Ongoing business was up, though, as was the backlog. Marchilena is projecting conservatively that sales will be up 8 percent in 2001. He estimated his unit's pure IT business at about $1 billion a year.Raytheon is more known for its missiles and missile defense systems, other military systems, satellite systems, radars and air traffic control systems and commercial and military aircraft, a lot of which also comes under Marchilena's unit. That presents him with a challenge."Most don't look at Raytheon as an IT company," he said. "We're in the top 20. The real thing is to let people know what we do, let people know we have these core capabilities."Like the Navy and Marine Corps, other government agencies likely will outsource more or all of their information technology needs in the future, said Marchilena. "The FBI is sort of going the same way," he said. Marchilena said he expects that IT outsourcing by federal agencies eventually will amount to tens of billions of dollars annually. "They have discovered what businesses have, that it's better to have experts do IT than to try to do it yourself," he said.XXXSPLITXXX-Strong operating performance in the government market contributed to Science Applications International Corp.'s 32nd consecutive year of record results. While its $5.9 billion in fiscal 2000 revenue represents a 7 percent rise compared to last year's 17 percent growth rate, net earnings jumped from $620 million to $2.1 billion ? a more than 200 percent increase in earnings.The largest employee-owned research and engineering firm in the United States attributes the bulk of its earnings gain to the sale of Network Solutions Inc., which garnered $4 billion on a pre-tax basis. But its 12.5 percent growth in federal business was also a strong contributor, said Duane Andrews, corporate executive vice president of SAIC. He also noted that SAIC's federal business has seen compound annual growth of 12.5 percent each year for the past five years.The record results helped bump up SAIC to 296 on the Fortune 500, up from 313 last year. SAIC also moved up Top 100 list, from No. 9 last year to No. 6. Sales to the federal government account for about 54 percent of SAIC's revenue. Defense Department sales account for 33 percent of corporate revenue, while civilian agencies bring in approximately 21 percent. "It's interesting," Andrews said. "Two years ago we saw high growth in civil agency business, and moderate [growth] in defense. This year, we're having to make up for Y2K revenues, so civil agency growth dropped to about 6 percent, and Department of Defense is up over 12 percent."The year included several large contract wins and recompetes, although it was also marred by the loss of a recompete opportunity on an Army Total Engineering and Integration Services contract that the company had held for several years. SAIC's ability to grow its federal business at 12.5 percent while federal budgets rose just 5 percent means SAIC is capturing marketshare from its competition. Those ranks include firms growing through acquisition and traditional hardware firms expanding into the information technology space, such as Los Angeles-based Northrop Grumman, said Andrews.SAIC's employee-owned status gives the firm some advantage over those competitors, since they are not subject to the same scrutiny as a public company, said Thomas Meagher, vice president of equity research for BB&T Capital Markets, Richmond, Va.But its decentralized structure, while enabling flexibility, can impede the company's response to requests for proposals, because disparate units must closely coordinate to respond to an opportunity. It is unclear how the downturn in the economy will affect the breakdown of SAIC's government vs. commercial business. Conventional wisdom suggests federal budgets are set, while commercial opportunities are more likely to be delayed. Yet, those budgets also limit the amount of federal growth opportunity, Andrews said.SAIC's dominance can be attributed in part to its strength in complex solutions, Andrews said. Projects such as its Army STRICOM (Simulation, Training and Instrumentation Command) Omnibus contract involve "some of the most sophisticated software development going on in government," he said. "With our strong science and engineering base, we're often turned to to solve that extra technical problem," that other competitors can't handle. "They're known for doing a quality job as an across-the-board IT and engineering services provider," BB&T's Meagher said.Noteworthy wins over the past year include:? The aforementioned STRICOM Omnibus Awards for live, virtual and constructive training products and services for all levels, from individual soldiers to large combat organizations. The entire contract has a ceiling value of $4 billion over eight years. ? An award for technical, programmatic and logistics work under an Army Aviation and Missile Command contract with a potential value of $1.25 billion. SAIC is providing advisory and assistance services in support of AMCOM and Program Executive Officers.? An Air Force Space and Missile Systems Center Engineering, Analysis, Design and Development II contract with a ceiling value of $496 million. SAIC and its teammates are providing systems engineering and integration for advanced space development and warfighter exploitation.? A blanket purchase agreement from the Air Force as a result of the Technical Acquisition Support Services competition to provide technical advisory and assistance support to the Air Force SMC. The BPA has a ceiling value of $300 million for SAIC and its teammates.? A 10-year, $271 million Federal Systems Integration and Management Center contract to provide IT services to the Army Personnel Command. SAIC has spent nearly two years integrating its acquisition of Boeing Information Services into the firm, a process that is now largely complete. The past year also included a number of smaller acquisitions. A third of SAIC's growth in the federal space can be attributed to its acquisitions, while the other two-thirds come from internal growth, Andrews said. Now that the Boeing unit has been absorbed, SAIC is turning its attention to large acquisition opportunities, firms in the $150 million to $250 million range offering high-end technical solutions that fit with SAIC's imprint, he said.The company's strength in areas such as high-end research and development play right into a government trend toward devoting more budget to R&D and outsourcing. Also affecting SAIC's business is the government's increasing use of contract vehicles that combine a variety of IT tasks under a single contract.On the one hand, "the more you bundle, the more business we can get," Andrews said. But omnibus contracts also entail more mini-competitions within those contracts, creating more work for the bidders.Andrews says the company is poised to address hot-topic IT issues such as e-government and information assurance, although "there is not a lot of money flowing" into these yet. Particularly with e-government, "it's mostly rhetoric, but little money."Information security is a top challenge for the Defense Department, which could lead to more dollars being devoted to an area that has thus far seen some activity but slow growth, Andrews said. He expects e-government initiatives to increase over the next year as government "gets serious" about it. E-government projects require more systems integration and package use than true research and development efforts, he said.XXXSPLITXXX-As winner of the mammoth Navy-Marine Corps Intranet contract last year, Electronic Data Systems Corp. snagged the largest, most sought-after government information technology outsourcing deal in history.The $4.1 billion, five-year contract has three one-year options that could bring its total value to $6.9 billion. It is a commercial-sector type, enterprisewide deal to provide the Navy and Marine Corps with secure, universal access to voice, video and data exchange services. Being deployed in phases, NMCI eventually will replace a patchwork of several hundred networks at more than 300 Navy and Marine Corps bases in the United States and its territories, plus Iceland. The program will provide service for more than 360,000 Navy, Marine Corps and civilian personnel.Contract terms are demanding and ambitious. The Navy expects initial operating capability by the end of this year and full operating capability by the end of 2003.EDS' major partners on NMCI are Raytheon Co., WorldCom Inc. and WAM!NET Inc., with hardware and software to be provided by Dell Computer Corp., Dolch Computer Systems Inc., Microsoft Corp. and Cisco Systems Inc. The company also made a 40 percent commitment to small businesses and minority- and women-owned businesses.The NMCI team, called Information Strike Force, expects it to take about five months for a site to transition to NMCI. The team is focusing initially on those sites included in the first increment of NMCI orders as well as the facilities where the network operation centers and two help desks will be located. At the point of transition, the responsibility for operating the "as-is" environment shifts from the government and its local contractors to the EDS team, according to Rick Rosenburg, NMCI program executive for Information Strike Force. However, the strike force team will use existing contractors and personnel until new equipment is rolled out and a move to the NMCI environment is achieved, a process expected to take another three to five months.As of mid-March, the EDS-led team has assumed responsibility for about 42,235 computer seats in operations throughout the country. The first seats are scheduled to move to the NMCI environment in June."It is on course," said Albert Edmonds, president of EDS Federal since the beginning of April. "User customers are giving good feedback, and some of the implementation is ahead of schedule." Congress is requiring the EDS team to conduct formal testing and evaluation to confirm that what is provided to the Navy performs as advertised; then, NMCI can advance beyond 15 percent of total expected users. EDS expects that go-ahead to allow them to take responsibility for more seats by October. "Once we get clearance, we will roll out the whole program," Edmonds said. Rosenburg describes NMCI as "a true services contract," not a vehicle to procure hardware or software. The work establishes performance parameters in more than three dozen service-level agreements for things such as security and network performance and downtime. The team's performance on these metrics will determine whether it is rewarded or penalized. The team will share in cost savings with the Navy and Marine Corps.Edmonds took over at EDS Federal from Bill Dvoranchik, who retired after 30 years. Edmonds most recently was vice president in charge of EDS' Government Global Industry Group, but had been vice president and chief operating officer of EDS Federal during 1999 and part of 1998.EDS Federal had about $1 billion in revenue last year, Edmonds said. All the company's government work, which includes global, federal, state and local, accounted for about $4 billion in revenue in 2000, just over one-fifth of EDS' total revenue.Among the EDS wins last year was a five-year, $13.8 million contract to eBreviate, an EDS company, from the Navy to provide more than a dozen online auctions a month. Primary users will be customers served by the Naval Supply Systems Command, although other Defense Department agencies may and have begun to use the contract.The first auction was held April 5 on behalf of the Department of Veterans Affairs, which was seeking prescription medicines for VA hospitals.The auctions are designed to streamline the procurement process, reducing lead times and bottom-line costs. The bidder offering the lowest price wins.EDS also was one of five companies chosen by the General Services Administration to compete under a 10-year, $1.5 billion contract to provide smart access identification cards to federal agencies. EDS is one of the larger contractors on GSA IT schedules.Although EDS Federal had some disappointments last year ? it lost out on the business systems modernization of Defense Logistics Agency to Accenture Ltd. ? its business nevertheless grew 14 percent in 2000. It is expected to grow 22 percent in 2001. Other contracts EDS is competing for are the modernization of U.S. Customs Service and a $750 million contract to manage information systems for Defense Information Systems Agency.According to Edmonds, EDS created the environment of outsourcing and then lost its way a bit, but now has established itself in the market space with a new approach and way of doing business. Because the federal work force is shrinking, aging and increasingly mobile, Edmonds expects other federal agencies to want similar kinds of innovative outsourcing contracts such as NMCI."The government is getting to the point where it is looking for partnership rather than provision of service under a contract," he said. "They'll look for service-level agreements. If we don't provide the service level for you, don't pay. In some cases, we'll share the profits."Edmonds is confident EDS will play a major role in helping government become more efficient and in the burgeoning electronic government arena. "I believe in e-government," he said, "but we want to do more than take what is on the desktop and go on the Internet."You can put garbage online," he said. EDS is offering what it calls "thought leadership.""We want to help [governments] think through their problems, and then solve them, and only go online if it's to their advantage," Edmonds said, adding that some things may be better done on the desktop.XXXSPLITXXX-TRW Inc. is counting on its ability to move people and technologies between its government and commercial businesses to drive the company's growth in the information technology arena.Unlike its competitors, the Cleveland company has not created separate units for its commercial and government work. And this, the company believes, helps it provide better solutions to its customers."I recognize this is somewhat controversial in the community," said Donald Winter, president and chief executive officer of TRW Systems, regarding the decision not to have separate government and commercial units. But "more and more of our customers from the defense community are looking for the best ideas that come out of the civil and commercial side," and vice versa, he said. For example, Picture PipeLine, a secure communications network developed for the film industry, has applications in the defense industry, he said. The same system that allows producers to edit and enhance video in real time from locations around the globe could also allow military officials to plan operations or conduct a training exercise.TRW Systems had $3.2 billion in sales during fiscal 2000. Eighty-six percent of sales were to government; 14 percent to commercial enterprises. Its federal government IT business grew more than 13 percent.But the company's IT, aerospace and defense businesses have been overshadowed by its automotive business, which brought in $11 billion of the company's $17 billion in revenue last year. Company officials are trying to change that, said Tom Meagher, vice president of equity research at BB&T Capital Markets of Richmond, Va."They are really trying to get out there and get Wall Street to pay more attention to that $6 billion of IT," Meagher said.David Cote, who became TRW's chief executive in February, said a strategic review might result in eliminating some parts of the automotive business, according to a recent report in the Financial Times. Realigning TRW to focus on higher growth areas such as IT and defense could be a one- to three-year effort, Meagher said.TRW has some catching up to do as its IT competition becomes bigger and stronger, said Richard Knop, managing partner of the Windsor Group in Middleburg, Va. "TRW generally has not been as aggressive in building their systems integration and technology group as some of the other defense companies: Northrop Grumman, Lockheed Martin," Knop said. "However, TRW is now focused on growing IT under their new CEO." Cote came on board as president and chief operating officer in November 1999 from General Electric Co. of Fairfield, Conn.TRW seeks to grow its IT business through repeatable sales and by offering end-to-end solutions, Winter said. "One my objectives here is to be able to get multiple benefit out of investments, he said. "And what we've found is that we can often take much of what we have developed for the defense community over the years in terms of command and control and move it into civil systems in terms of law enforcement. There isn't that much difference between some of the command centers we have built for the Army and the 911 systems we are putting into a variety of cities."TRW's long history ? the company turns 100 this year ? is a significant asset in attracting and retaining top employees critical to its success, Winter said. Another advantage is its incumbencies, which stretch from the defense community through the civil federal market and into the state and local government and commercial opportunities.TRW has built its IT business around systems engineering, beginning with work on the Air Force's Intercontinental Ballistic Missile system in 1954. It now manages the entire program. TRW has developed domain knowledge in command, control and communications systems for the military. In January 2000, it won a contract to develop the Army's Force XXI Battle Command Brigade and Below program. Under the contract, worth about $210 million over five years, TRW is integrating secure voice radio networks and secure data radio networks and providing a near real-time, common view of the battlefield via a "tactical Internet" wireless communications system. The system allows military personnel to move critical data such as enemy locations and operations orders between all levels of the deployed force. "We like to engage in areas where clients are undergoing major transformation. The Army is one that's really in a true transformation, trying to figure out a different way to equip, train and fight for the future," Winter said.The United Kingdom is planning a similar transformation through the BOWMAN program, a secure battlefield communications system for the British armed forces. TRW bid on the $2.5 billion contract; a decision is expected in July. TRW's biggest loss last year came on a project similar to BOWMAN and FBCB2. It lost the $1.5 billion Air Force Integrated Space Command and Control contract to Lockheed Martin in September 2000. Lockheed Martin and its teammates will integrate about 40 communications systems into a common infrastructure.But TRW's pursuit of transformational projects resulted in another win last month. It was awarded one of three prime contracts for the first phase of Trailblazer, the National Security Agency's transformation effort. Booz-Allen & Hamilton Inc. and Lockheed Martin were also victorious. The concept studies phase will define the architecture, cost and acquisition approach to NSA's effort. Terms of the contracts were not disclosed.TRW is also developing an internal information assurance system to control employee access to information. It will provide elements of the patent-pending system to commercial clients and the federal government, Winter said. Managing the systems group is challenging because of the diversity of its businesses and the geography of its clients, Winter said, but nonetheless, he's optimistic about TRW's future. "This is a company that started out making bicycle parts a hundred years ago and went from bicycle parts to automobile parts to airplane parts to missiles to satellites and now electronics and IT," he said. "The company has reinvented itself continuously." XXXSPLITXXX-General Dynamics Corp. has historically devoted the bulk of its government business to building airplanes, submarines and tanks. But with the Defense Department increasingly looking to modernize weapon systems, the company in 1999 decided to jump feet first into the information technology arena. General Dynamics purchased three units of GTE Corp.'s Government Systems divisions as well as core capabilities from other companies ? moves that enabled General Dynamics to win several important IT contracts and secure a small foothold in the battlefield management and information assurance fields."The government market is more than a market to us. It is our primary reason for being," stated Kendell Pease, vice president of communications for General Dynamics, which boasts 46,000 employees and reached nearly $10.4 billion in total revenue in 2000. "We know our customers and their needs, and we are focused on delivering the products and services that meet those needs better than anyone else."The company garnered the No. 9 spot on Top 100 in 2001, its second year in a row among the top 10.General Dynamics' pursuit of the $6.9 billion Navy-Marine Corps Intranet contract surprised a lot of people. Although the company lost to Electronic Data Systems Corp., the effort helped raise its profile in the IT arena."We were a long shot, but we showed a tremendous understanding for what the Navy needed, and we were right there until the end," Pease said. "I think we gained great credibility with our customers as a result,"The Defense Department seems to agree, since several military and intelligence agencies gave General Dynamics a chance to show off its new capabilities, selecting it as prime supplier for a number of new IT programs in 2000.Critical wins included the Navy's $91 million Area Air Defense Commander Capability program, a 21st-century battlespace management system that enables deployed battlefield commanders to interactively generate area air-defense plans. General Dynamics is providing an open systems architecture and engineering and manufacturing development services.General Dynamics also captured the Army Tactical Message System (TMS), the Army's implementation of the Defense Messaging System. The initial TMS value is nearly $11 million, but if options for another three years are exercised, the contract will top out at $77 million."We saw those two wins as a high five, a recognition that we read the tea leaves correctly, that we took the right steps," Pease said. "Our customers are telling us that they have the same confidence in us as an information management provider as they do in us as a platform provider." In the information security realm, General Dynamics became the exclusive supplier of NSA-certified Type 1 encryptors, called Taclane and Fastlane, for use by defense and intelligence customers on Internet protocol and asynchronous transfer mode networks. Taclane, which offers confidentiality and end-to-end authentication, is the only type 1 encryptor that provides secure communications in a single device for both types of networks. Fastlane provides high-speed, transparent, low-latency security for multimedia applications. Pease said the company also has become a strong player in the digital certificate market. Digital certificates act as a kind of electronic credit card that allows an organization to establish a user's identity and authorization when doing transactions over the Web.In June 2000, the Defense Department tapped General Dynamics to provide certificate management and directory services for government trading partners in selected Pentagon programs, including the Defense Messaging Systems and the Defense Travel System. Ultimately, as many as 300,000 users could obtain digital certificates from General Dynamics through this effort, called the Interim External Certificate Authority program. The program is considered a critical component in the department's effort to convert from manual contracting and expensive private network-based processes to more cost-effective, widely available solutions using the public Internet.Despite these successes, Byron Callan, a research analyst with Merrill Lynch, said that it's still too early to determine the impact these new capabilities will have on the company. He estimates that IT and management services make up about 18 percent of the total sales for the company, adding there has been additional work awarded than that stated above, but much of it is classified."It's really hard to say how successful they've been as yet, but there haven't been any big negatives coming out of it, and in this kind of environment, that's pretty good," Callan said.Still, he added, information technology has the potential to become "one of the fastest growth parts of their business," depending on how the company fares when faced with larger breakout opportunities down the road.Pease said General Dynamics' goals for its Information Systems and Technology Group this year are more of the same: continuing to pursue opportunities that satisfy their customers needs."The two big questions we always ask before we pursue a contract are: Can we provide what the customer wants, and what do we need to do that?" Pease said. "We don't want to compete where we can't, and there have been opportunities in the past year that we chose to pass for that reason."General Dynamics has laid out a more specific goal as a company: Increase sales from $10.4 billion to over $14 billion by 2004, a growth rate of 25 percent. The company's revenue grew more than 13 percent between 1999 and 2000. But officials believe that given its broader capabilities and the government's needs, that goal is very realistic. "We are well-positioned in the areas that the Defense Department is highlighting as critical to the future of our nation's forces," Pease said.Despite its forays into the IT realm, General Dynamics remains focused on building planes, tanks and submarines. The two disciplines complement each other nicely, Pease said, as the Defense Department looks to modernize its weapons systems and as traditional tanks, for example, become digital tanks."There's nothing more high-tech than a nuclear submarine, and we've been building those forever," Pease said. "It's all high-tech, it's just that we're packaging it differently today. No matter what we're doing, we'll continue to be that supplier, that industry partner that DoD is looking for and that they can continue to count on."XXXSPLITXXX-AT&T Corp. doesn't hold a monolithic grip on the federal telecommunications market the way it used to, but the company still is the government's largest single provider of telecommunications and related services. The telecom giant realized total corporate revenue of almost $66 billion in 2000, up 5.4 percent over 1999 levels. Earnings dropped, however, to $3.2 billion, from $5.4 billion in 1999, and the stock price has steadily declined from its 52-week high of almost $59 in April 2000 to about $22 in April 2001.Nonetheless, the company's financial results are consistent with ? maybe even a little better than ? the overall telecom industry."Prices are falling very rapidly, and as a result the margins are falling," said Susan Kalla, telecom analyst with Blue Stone Capital of New York City. "It's forcing all of the players into retrenchment mode. It's a bidding war that's probably going to continue for some time. [AT&T] is not immune. In some cases, they're driving it." To improve its competitive stance, the company in October 2000 reorganized by creating separate businesses: AT&T Wireless, AT&T Broadband, AT&T Consumer and AT&T Business. "They are instituting a major change internally by restructuring," Kalla said. "AT&T is going to be a survivor."Government markets will remain part of AT&T Business Services in the core company, which also includes AT&T Network Services and AT&T Labs, said Mary Jane McKeever, senior vice president of the division. The corporation employs more than 160,000 people, she said.AT&T does not break out the portion of its business generated by government contracts, but Kalla estimated that it makes up 8 percent to 10 percent of the company's revenue.AT&T has expanded its market presence over the past year, winning a place in half of the 20 Metropolitan Area Acquisition contracts awarded to date by the General Services Administration, including the cities of Boston, Buffalo, N.Y., Chicago, Cleveland, Dallas, Denver, Indianapolis, New York, Philadelphia and San Francisco. Contracts for another seven cities are still to be awarded. "We are quite satisfied with how well the past year has evolved for AT&T Government Markets," McKeever said.Under its MAA contracts, AT&T will provide local telephone service to federal agencies in the various metropolitan regions. But AT&T and other companies holding these deals also will become eligible to compete for long-distance work and other services under the FTS2001 long-distance contract, held by Sprint Corp. and WorldCom Inc. The MAAs and FTS2001 are intended to provide a platform for agencies to add advanced telecom capabilities, including broadband, fixed wireless and other sophisticated technologies, in order to facilitate the federal evolution into e-government. Currently, only Sprint and WorldCom are allowed to provide FTS2001 services to federal agencies, but AT&T has been calling for GSA to end the forbearance period on FTS2001 and open it up to competition among MAA holders as well. Congressional hearings on the FTS2001 contract and implementation of the MAAs have been scheduled for the end of April and mid-June, respectively. "I'm sure they [AT&T] were hoping the MAAs would pan out differently," said Kevin Plexico, executive vice president of Input Inc., a market research firm in Chantilly, Va. "Those are relatively recent awards, so there's a good possibility the MAAs are going to pay off in the future." AT&T also is positioning itself to capitalize on new market developments. The company won the contract to develop and host the federal government's Web portal, FirstGov.gov, and was awarded a contract by the Justice Department to develop the Victims Notification System, McKeever said.Another major opportunity in the pipeline is the Federal Aviation Administration's long-awaited Integrated Communications Systems for the 21st Century contract, commonly called FAA FTI. AT&T is bidding as a prime contractor on the 15-year, $2 billion project. AT&T's first hurdle is to be chosen to continue in the bidding process when the agency names vendors in mid-May who qualify for the second round of evaluations.The contract incumbent is WorldCom, which beat out AT&T on the FTS2001 contract. Other likely prime bidders include Lockheed Martin Corp., Qwest Communications International Inc. and Harris Corp.The company also is pursuing opportunities in the Defense Department's modeling and simulation programs, including leading-edge applications being sought by the Army's Systems Training and Instrumentation Command in Orlando, Fla.Two years ago, AT&T purchased GRC International Inc. for its information technology, engineering and consulting services. In October 2000, the company acquired GCI Inc., a small firm that specializes in the telecom needs of the intelligence community, according to Rick Knop, managing partner of The Windsor Group LLC, formerly Boles Knop & Co. of Middleburg, Va. The purchases were intended to strengthen the company's position in a wide range of systems integration services."AT&T is now a fully integrated provider of IP-based services, communications services, network and information technology engineering, and professional services," McKeever said. The company has built capabilities in several forward-looking areas, such as knowledge management, including intelligent search and electronic records management; and public-key infrastructure, providing certificates to secure e-government activities, she said. The company also has expanded its capabilities in information security and assurance, applying them both to its own infrastructure and on behalf of its government customers."Information assurance is considered one of AT&T's core competencies," McKeever said.All of these areas of expertise "represent major, new initiatives for the government to efficiently leverage technology investments," she said. "Going forward, we are emphasizing information technology, information assurance, e-business applications as our core marketing efforts. We are aggressively providing a complete portfolio of solutions to meet these needs."