No. 20: United Technologies gains altitude
Aircraft maker refuels with engineering, program support work
- By Michael Hardy
- May 12, 2007
It's hard to fit United Technologies Corp. into a neat little box because it actually is several different companies rolled into one. Recognizable brand names including Otis elevators, Sikorsky helicopters and Carrier climate control systems are all part of the United Technologies family.
But the aircraft units form the base of the company's federal business. Sikorsky helicopters fly combat missions, while Pratt and Whitney engines power military aircraft. The Hartford, Conn., company earned a total of $47.8 billion in revenue in fiscal 2006, partially because of military orders and NASA contracts, according to its financial statements.
Federal Procurement Data System numbers show the strongest revenue growth for United Technologies' federal market in engineering and program support services, primarily through Army and Navy work, said Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc., which compiled the Top 100 list.
The company's work landed it at No. 20 on the Top 100 with about $1.1 billion in prime government services contracts.
"A lot of the growth is tied to re-engineering and modification of those systems that have been the most stressed by the combat environment," he said. "Professional services provided by the [original equipment manufacturer] can help solve the problems encountered in sustaining the inventory deployed to the desert."
Larry Allen, executive vice president of the Coalition for Government Procurement, said the challenge for any defense contractor is to keep a flow of business in less troubled times.
"One of the reason they're showing up [on the Top 100 list] is because of the specialized war materiel that they make," he said. "The government's buying what they're selling. The interesting thing to see is just how high they will stay in the list should peace break out."
The company's diversification helps it stay financially healthy regardless of external factors, said David Manke, vice president of government and international affairs at United Technologies. About 30 years ago, he said, the company's leaders took stock of its position then ? as an aerospace defense contractor drawing half its business from the government ? and began acquiring other kinds of companies to expand the firm's scope.
Another component of United Technologies, Hamilton Sundstrand, makes components for NASA, including spacesuits and power systems, Manke said. In 2005, Lockheed Martin Corp. added Hamilton Sundstrand to its team developing the Orion Crew Exploration Vehicle, which will carry the next generation of astronauts to the moon and Mars.
Contrary to some impressions, Manke said, defense contractors are not always in reactive mode. Weapons systems and other hardware can take years to develop. United Technologies has been working on developing engines for the Joint Strike Fighter and F-22 Raptor fighter planes, and it also manufactures engines for the C-17 cargo and troop transport planes.
"You really have to listen to the customer and figure out their needs," he said. "A little bit, you need to forecast. Our stuff all has longer lead time and lots of technology involved, so we have to talk to the customer for long-term forecasts. Iraq has not been that big a play for us because you have these fifth-generation fighter [aircraft.] Those are five- or 10-year development cycles and then 20 or 30 years of production."
However, current situations make the military think about future needs. For example, he said, helicopters operating in the mountains of Afghanistan sometimes have trouble because the thinner air they encounter at high altitude gives the rotors less to push against and requires more horsepower to keep them in the air. That kind of problem goes into the future planning process and can have an effect on what the military asks for in forthcoming contracts.
The federal government remains an important market for United Technologies, even though it now accounts for only about 20 percent of the company's sales, Manke said.
"Its importance is larger than its size for us," he said. "You're often pushing the technology envelope in government sales, especially in aerospace. For that, it's very important."
NASA is a customer that demands contractors' advance technology, but the agency's budget constraints have, in recent years, made it difficult for NASA to take a lead role in the innovation, he said.
Government agencies are willing to order things that will take years to develop and deliver, he said, something commercial customers usually won't do.
In recent years, Manke said, the company has begun offering more services. Although it has no desire to become a conventional systems integrator, the various pieces of United Technologies do provide services around the products they develop and sell, he said.
"In our community, we normally deal with people who don't think about them delivering professional services, but certainly they do," Bjorklund said. "They're being hired to design new capabilities or modify existing capabilities."
However, don't look for too much change in the company, Manke said.
"We like our core businesses," he said. "Our acquisitions have been building on those core businesses."Profiles of the Top 20 companies in the 2007 Top 100
No. 1: Lockheed Martin's reinvention
No. 2: With SBInet, Boeing IDS takes flight
No. 3: Northrop Grumman rises to new challenges
No. 4: KBR gets down to business
No. 5: IPO catapults SAIC into a new era
No. 6: Raytheon strives for balance
No. 7: General Dynamics in full sprint
No. 8: Fluor's ready in a pinch
No. 9: L-3 leadership stays the course
No. 10 EDS, Hard-learned lesson
No. 11 CSC, Experience that counts
No. 12: Battelle seeks new frontiers
No. 13: Booz Allen, Quality over quantity
No. 14: Bechtel telecom makes a splash
No. 15: For BAE, persistence pays off
No. 16: ITT makes a push into new markets
No. 17: Dell, Talking about evolution
No. 18: Technology and service fuel IBM
No. 19: Verizon caps off a busy year with a big win
No. 20: United Technologies gains altitude
Technology journalist Michael Hardy is a former FCW editor.