No. 11: Booz Allen faces transition

Booz Allen Hamilton Inc. and other leadinggovernment contractors are facing a series ofuncertainties this year.There are tight budgets, a new administrationin January and growing skepticism ofcontractors on Capitol Hill.For Booz Allen, there is also decidingwhether to keep its commercial and governmentbusinesses together or break up thecompany."We do a lot of work across a broad spectrum,"said Ralph Shrader, chairman andchief executive officer of the McLean, Va.,company that ranks No. 11 on the Top 100with $2.4 billion in 2007 prime contractingrevenue."While the diversity of our business basehas served us well, we need to evaluatewhat the best organizational structure is toserve diverse bases," hesaid.Shrader, who has beenCEO since 1998 and hasput together a string ofyears with double-digitgrowth, said the CarlyleGroup investment firm is apotential buyer. But heemphasized that the separation would happenonly if it were in the best interest of thefirm."The operating models to serve the U.S.government are dramatically different thanthose for the commercial market," he said."We are by nature a management consultant? it's our job to examine opportunities ? sowe've been doing it for ourselves."Shrader downplayed as hype concernsfrom some industry observers that anew administration would make radicalchanges in critical market segmentssuch as the intelligence arena."Early in my [34-year Booz Allen]career, when we were a smaller organizationwith fewer clients, we were muchmore fearful about administrationchanges," he said. "My experience tellsme there may be changes in personalityand priorities, but there will still be avery strong need for the kind of serviceswe provide."Shrader is equally bullish aboutlarge, complex, industry-manageddefense contracts. Congress has passedlegislation banning, beginning in 2010,any so-called lead systems integratorarrangements. Major projects ? suchas the Coast Guard's Deepwater led byLockheed MartinCorp. and NorthropGrumman Corp. andFuture Combat Systemsmanaged by BoeingCo. and ScienceApplicationsInternational Corp. ?have run into trouble.Although Booz Allen has done some similarintegration work, especially developingrequirements for Defense Department spaceprograms, Shrader said the increased congressionaloversight can only benefit bothgovernment and industry. "It's something wewelcome."But such oversight might signal a reboot ofdefense space systems, which in recent yearshave been vexed by cost overruns, technicalfailures and schedule slippage. "Outcomeshave been so disappointing in some casesthat DOD has had to go back to the drawingboard," the Government Accountability Officereported in March."I'm not sure it's a problem with the waythe requirements are being written or withexecution," Shrader said. "My perception iswe're not dealing with requirements problemsbut with implementation problems.On the implementation side, obviouslythere have been issues and disappointments."But, he added, "that's an areawhere we've not been affected greatly asa contractor."