BDM Buys Bolster

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BDM Buys Bolster State and Local Business

By Tania Anderson

Staff Writer

BDM International Inc., fresh from its first acquisition of 1997, plans to boost state and local revenues through additional acquisitions keyed to this growing market segment, top company officials said.

The $1 billion systems integrator based in McLean, Va., wants a large slice of the $46 billion state and local information technology pie, which analysts said is growing at an annual rate of 10 percent.

The company acquired Advanced Systems Design Inc. and Software Engineering Inc., sister companies in Fairfax, Va., on Jan. 24 for $4.8 million. The two companies have combined revenues of $9 million and a specialty in designing and developing human services information
systems.

The acquisition will allow BDM to do business in 13 new states, according to Bill Hoover, BDM's executive vice president. The company is considering more acquisitions this year to build its state and local division, he said. The company will pursue contracts in two areas: health and human services and the year 2000 software conversion problem.

Hoover and others expect state and local contracts to sprout in the second half of 1997. He anticipates the company's state and local business to reach double-digit growth but declined to project state and local revenues for 1997. Currently, 18 percent of BDM's revenues come from federal, state and local contracts.

Bill Hoover, BDM's executive vice president, said the company is considering more acquisitions this year to build its state and local division.

"The state and local business is growing at twice the rate of the federal government," said Bill Loomis, an equity analyst with Ferris Baker Watts, Baltimore. "As a leading federal contractor, BDM is looking into other growth markets."

According to Hoover, other systems integrators are recognizing the increasing flow of money from federal to state and local governments, but they are entering a market "that we've been in since 1988."

For instance, BDM won an award last July from the Arkansas Department of Human Services, where BDM is providing a broad range of on-site information systems and services to support agency activities. Nationwide, the company will target contracts in law enforcement
information systems and court information systems.

As states move from the assessment phase of the year 2000 software conversion problem to the implementation phase, BDM and other companies will garner even more business, according to Thomas Davies, vice president of consulting for Federal Sources in McLean, Va.

Many state and local agencies are still planning their budgets for solving the year 2000 problem but contracts should start increasing in the second half of 1997, he said.

BDM already has won a year 2000 contract this year from Ohio's Department of Human Services. The $18.3 million contract, awarded in January, will last four and one-half years. Under the contract, the company will take an inventory of the agency's problem and then assess, plan, renovate, test and install mainframe application software.

BDM has also won year 2000 contracts with Blue Cross/Blue Shield of Michigan, the Utah State Tax Commission, the Virginia Department of Motor Vehicles and Arkansas' Department of Human
Resources.

Systems integrators that traditionally relied on Defense Department contracts for the lion's share of their business are pursuing health and human services awards in state governments, said Bill Loller, project leader for G2 Research Inc., a market research firm in Mountain View, Calif.

According to Ferris Baker Watts' Loomis, American Management Systems, Fairfax, Va.; Andersen Consulting, Chicago; MCI Systemhouse, Ottawa, Ontario; and Electronic Data Systems Corp., Plano, Texas; have recently formed strategies for pursuing the burgeoning state and local
market.

There is going to be keen competition for contracts and an increase in opportunities as states implement information systems to handle new responsibilities handed down by the federal government, Loomis said.


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