From 'Rag-Tag' to Riches

Before Ray Lopez teamed up with Anteon Corp. through the Defense Department's Mentor-Protégé Program, the 35 employees of Engineering Services Network Inc. in Arlington, Va., were a "rag-tag group of technocrats," Lopez said."Technically, we could do a lot of things, [but] we had no idea how to run a business," Lopez said of his staff, most of whom are retired military personnel.Eighteen months later, Lopez said, he and his staff have become competitive business professionals, thanks to guidance from Fairfax, Va., Anteon, a 5,000-employee information technology company. Under the Defense Department program, prime contractors are reimbursed for providing business development and technical assistance to small, disadvantaged businesses and small businesses employing the severely disabled. Anteon's staff has helped Lopez get bank loans and group medical insurance, develop contract proposals, design trade show promotions, train employees and pursue ISO 9000 certification, an international mark of quality products."I would chase bankers ... and now bankers take me to lunch," said Lopez, ESN's president and chief executive officer.Over its 18 months in the program, ESN's revenue grew from $1.7 million to $5.8 million ? a 241 percent increase. Its staff grew to 78, an increase of 178 percent, and Lopez opened three new offices. Also, Anteon and ESN have teamed on contract opportunities worth more than $100 million."If the federal government would open this up to all the federal agencies, it would be outstanding," Lopez said.The 11-year-old pilot program may, in fact, expand beyond the Defense Department. A bill introduced May 10 by Sen. Kit Bond, R-Mo., would expand the program to all federal agencies. Some civil agencies have mentor-protégé programs, including the departments of Transportation and Energy, but only the Defense Department program is federally funded.The program was authorized in the 1991 defense spending bill in response to prime contractors who bemoaned a lack of qualified subcontractors. Congress funds the program with about $30 million annually. Currently, 67 mentor firms and 129 protégé firms participate in partnerships that last one to three years. Expanding the program would reverse some negative effects of procurement reform, which have hindered small businesses' ability to compete in the federal marketplace, said Bond, chairman of the Senate Committee on Small Business."The practice of bundling many small contracts into a single, large package may save time and effort for government contract officers, but it discourages small businesses from going after big contracts," Bond said. "An enhanced mentor-protégé program can help make small businesses competitive players in the government contracting market."Increased opportunities for small businesses will increase competition, resulting in better products at less cost to taxpayers, said committee spokesman Craig Orfield.George Schultz, manager of the Defense Department program, said mentors develop strong, valued suppliers, while protégés learn to work effectively with large firms and win business as a result. The Defense Department benefits from a more stable base of suppliers.Because prime contractors look first to subcontractors they know and trust, protégés have a greater likelihood of winning work in a competitive marketplace, said Scott Ulvi, who manages Anteon's mentor-protégé program."We can help improve the competitiveness of protégés, and then we get more bang for our buck when we bring them on as subcontractors," Ulvi said. Anteon is preparing to bid on a $100 million job with ESN, he said.Protégés also help their mentors win work. One DynCorp protégé is the cornerstone of a contract bid worth several hundred million dollars, said Bardon "Buzz" Blizzard, a vice president with the Reston, Va., prime contractor."They have the credentials and the track record to meet the requirements the customer has. Without them we would be at a distinct disadvantage," he said.Often, government contracts require that specific amounts of work be given to small business partners. Many prime contractors try to exceed that requirement to improve their likelihood of winning the job, said Milton Cooper, retiring president of federal-sector business at Computer Sciences Corp. of El Segundo, Calif."It is a very strong competitive factor," Cooper said. "We say that it's not only the right thing to do, it's the bright thing to do."CSC is pursuing several contracts with protégé Computer Systems Technology Inc. of Huntsville, Ala., said Ed de la Cruz, who oversees three mentor-protégé relationships for CSC."It's all about developing a partnership with a strong company, and therefore being more formidable when we go after new business opportunities," said de la Cruz. "CST has learned much about our culture, how we think and how we do business, and that makes them a better partner," he said. "CST is also strong enough to win some large contracts. CSC may be a subcontractor; it's a win-win situation there."With CSC's assistance, CST already has become a prime contractor, although its mentor-protégé relationship with CSC continues until next year. Last year, CST won a prime spot on the General Services Administration's Millennia Lite contract for information technology and systems integration services, worth $20 billion over 10 years.Bobby Bradley, CST's president and chief executive, said words could not describe her emotions when she learned CST would be competing alongside larger firms for high-end IT work under Millennia Lite, including CSC and Anteon."It's very significant to us. We are still adding people and adding work under that contract," she said.Since July 1999, when the CST-CSC partnership began, the Defense Department has reimbursed CSC $500,000 for services ranging from proposal review to software development and public relations. In return, CST created more than 300 jobs and a tax base of more than $10 million based on salaries alone.Not all evaluations of the program have been glowing, however. A 1998 report from the General Accounting Office said inadequate data made it difficult to evaluate the program. And some prime contractors have chosen to work outside the bureaucracy by creating their own programs.It's not easy to determine why some partnerships are successful and others are not, Schultz said, particularly because each mentor-protégé team sets its own goals. However, revenue and staff growth are indicators of success."If a protégé begins with 12 employees and ends up with 75, you must jump to the conclusion that revenue flow must be a lot higher," he said.One of the most successful protégés, Schultz said, was Soza and Co. Ltd. of Fairfax, Va. The IT, accounting and management consulting firm grew from $6 million in revenue in 1993 to $47 million in 1997 during its work with mentor Electronic Data Systems Corp. of Plano, Texas, Schultz said. Soza has continued growing, garnering $90 million in 1999 revenue, and now the company serves as a mentor.Another protégé, ENSER Corp. of Largo, Fla., increased its sales from $400,000 in 1997 to $5 million today, and its staff from 20 to 38, Schultz said. What's more, as mentor Northrop Grumman Corp. exited production of thermal batteries, the Los Angeles firm transferred the operation to ENSER. "This protégé must be considered pretty solid from the mentor's point of view, because there aren't many firms willing to transfer a production line into a firm they don't own," Schultz said.Blizzard said many government mentor-protégé programs are too restrictive, but if a contract requires DynCorp to participate in a government program, the company will oblige. DynCorp has invested $100,000 in its own program, which was created about a year ago."We made a strategic business decision that it made good business sense for us [to create a program] to bring in technologies that we really can't afford," said Blizzard, vice president for business practices in the firm's Information and Engineering Technology unit. The program also helps DynCorp expand its presence nationwide. For example, the company couldn't afford an office in Iowa but will make connections there through its relationship with protégé Computing Solutions Inc. of Cedar Rapids. "If that business goes on to become a prime on a significant contract, and we are a subcontractor, that helps us recover our costs ? and we're in a market we might not have been in without our investment in the protégé," Blizzard said.SRA International Inc. of Fairfax also sponsors its own mentor-protégé program. Through its independent commitment to three fledgling firms, SRA is returning the favor it was granted by larger firms in its own early days, such as American Management Systems Inc. of Fairfax."People helped us as we were coming along 20 years ago, and part of our culture is helping other people in our industry," said Renato DiPentima, president of consulting and systems integration for SRA."What's in it for us is the feeling we've helped another person and another organization get going and prosper in our industry," he said. "I know it sounds very altruistic, but that's it."