High-Tech 8(a) Companies Extend Beyond Washington

High-Tech 8(a) Companies Extend Beyond Washington

By Nick Wakeman, Staff Writer

Washington and the surrounding suburbs might be regarded as the heart of government contracting, but a look at Washington Technology's Top 25 8(a) companies for 2000 shows that the pulse is strong across the country.

Hailing from places like Anchorage, Alaska, and McKinney, Texas, the companies on this year's list are as geographically dispersed as they are technologically diverse.

Heading the list with more than $64 million in 8(a) technology-related contracting dollars is World Wide Technology Inc. of St. Louis.

Revenue growth at that company has been spectacular, soaring from $200 million in 1998 to a projected $750 million in 2000. This growth has made the company a virtual poster child for the 8(a) program, which is designed to give minority-owned companies a boost in the government contracting market.

The 8(a) program, which is administered by the Small Business Administration, seeks to help socially and economically disadvantaged citizens gain access to the economic mainstream. Qualifying companies can participate in the program for nine years and during that time they receive federal government contracting preferences in the form of set-asides and restricted competitions. The goal is to lay the foundation for the companies to survive in an environment of open competition when they graduate from the program.

With less than 10 percent of its revenue now coming from inside the 8(a) program, World Wide executives said they are more than ready for their February 2001 graduation date.

"The future is so bright, I'm wearing shades," joked Chief Executive Officer Dave Steward.

Other companies on the list, like STG Inc. of Fairfax, Va., at No. 3 with $24.8 million in 8(a) revenue, SMI International (formerly Space Mark Inc.) of Colorado Springs, Colo., at No. 11 with $13.7 million and Quality Research Inc. of Huntsville, Ala., at No. 22 with $3.1 million, also face a graduation date from the program within the next 12 months.

During a July hearing, Small Business Administration Administrator Aida Alvarez praised the program that got its start in 1968.

"Over its 31-year history, the 8(a) program has made it possible for many minority entrepreneurs to enter the federal marketplace," she said. "The program is not a government handout or giveaway. It is a means by which qualified businesses have provided goods and services that have met or exceeded market standards and agencies' needs."

Contract dollars to small businesses under the 8(a) program have risen from $3.4 billion in 1990 to $6.2 billion in 1999.

To determine who the top 8(a) companies were during fiscal 1999, Washington Technology turned to the market research firms Federal Sources Inc. of McLean, Va., and Eagle Eye Publishers Inc. of Fairfax, Va.

The list was created by using data from the Federal Procurement Data Center to which agencies are required to report contract expenditures of more than $25,000. Federal Sources and Eagle Eye examined 66 product service codes that represent information technology and telecommunications work.

Agencies report spending only with prime contractors, so the list does not reflect work done as subcontractors. In addition, several agencies are not required to report to the procurement data center, including the intelligence community, congressional agencies, the U.S. Postal Service and judicial branch agencies.

Many of the companies on this year's list have found that concentrating on niche customers or niche capabilities has been a key to strong growth.

At No. 4, RS Information Systems Inc. has seen its overall revenue grow from $15 million in 1998 to $38 million in 1999 by providing advanced IT and engineering services to civilian, defense and intelligence agencies. About 30 percent of the company's revenue comes through 8(a) contracts.

But to fuel further growth, the company intends to concentrate on key customers in the law enforcement and intelligence communities.

A year ago, the company created an intelligence unit that racked up more than $35 million in revenue its first year. Law enforcement agencies also are part of that strategy.

In Alaska, AHTNA Development Corp. used its operations and maintenance work as a jumping-off point to information technology. But the Anchorage-based company didn't move from low tech to high tech in a single leap.

AHTNA focuses on more entry-level IT services such as records management, imaging and help-desk services. Company officials reason that its employees can be trained more easily in these areas.

"We recognize the shortage of personnel in the high-tech areas like programming and networking and we don't want to compete for outside personnel and deal with the high turnover that comes with that type of competition," said Dave Maiero, chief operating officer for AHTNA.

In the recruitment and retention area, AHTNA has an advantage over most 8(a) companies. The company is a regional corporation created by Congress in 1971 under the Alaska Native Claims Settlement Act. Most of AHTNA employees are in essence shareholders in the company.

SMF Systems Corp. of San Ramon, Calif., is another true believer in concentrating on core customers, but the No. 9-ranked company also is a strong supporter of the 8(a) program.

Although nearly three years from its official graduation date, the company is making plans to graduate early, company officials said.

"We are not 100 percent dependent on it," said Thomas Caffrey, executive vice president.

But SMF already has started mentoring newer 8(a) companies. "We give back to the program," he said. "The 8(a) program is what you make of it."

Caffrey and other executives like Angela Mason, president of ITS Services Inc. of Springfield, Va., see the 8(a) program in much the same light as SBA's Alvarez described it to Congress. The program is a training ground and not an end itself.

Mason's company developed the skills and experience to compete in both 8(a) and non-8(a) arenas, she said. ITS hit the No. 6 ranking on this year's list. Less than half of its total revenue of $40 million came from 8(a) contracts, she said.

"We believe our success can be attributed to our focus on understanding federal government contracting and not just the 8(a) program," Mason said.

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