10th annual Top 100
Overview<@VM>1: Lockheed Martin Corp.<@VM>2: Northrop Grumman Corp.<@VM>3: Science Applications International Corp.<@VM>4: Boeing Co. <@VM>5: Computer Sciences Corp.<@VM>6: Raytheon Co.<@VM>7: General Dynamics Corp.<@VM>8: WorldCom Inc.<@VM>9: Electronic Data Systems Corp.<@VM>10: BAE Systems plc<@VM>11: Booz Allen Hamilton Inc.<@VM>12: L-3 Communications Corp.<@VM>13: Dell Computer Corp.<@VM>14: Anteon International Corp.<@VM>15: Titan Corp.<@VM>16: Affiliated Computer Services Inc.<@VM>17: GTSI Corp.<@VM>18: IBM Corp.<@VM>19: CACI International Inc.<@VM>20: Unisys Corp.<@VM>About our numbers
The quickly expanding government market is fueling the growth of companies such as MTC Technologies Inc. of Dayton, Ohio. Michael Solley, president and CEO, devised the strategy that now has MTC growing 30 percent to 40 percent a year.
By Nick Wakeman
Michael Solley didn't want to take an early retirement when Computer Sciences Corp. bought Nichols Research in 1999. Solley, who was executive vice president of Nichols, saw growing opportunities in the Pentagon's plans to modernize aircraft and other weapons systems.
Heavily courted by other companies, Solley found the right fit at MTC Technologies Inc. in Dayton, Ohio. The company was small, about $70 million in annual revenue, but loaded with capabilities.
"We have some good guys here that really understand the platforms and know how to upgrade and modernize them," he said.
But what the company lacked was an overarching strategy to pursue procurements that might take a year or more to win, he said. So when Solley joined MTC as its president in March 2000, he brought with him a long-term plan for expanding the company beyond its traditional customers.
The payoff came a year and a half later when MTC won one of six spots on the $7.4 billion Air Force Flexible Acquisition and Sustainment Tool contract. Suddenly, MTC's growth rate nearly doubled and now ranges from 30 percent to 40 percent a year.
"That was a life-changing event," said Solley, who now is MTC's chief executive officer as well as president.
Since the win, MTC's revenue jumped from $70.3 million in 1999 to $118.5 million in 2002, and it raised $44 million in an initial public offering of stock. MTC makes its debut this year on Washington Technology's Top 100 at the No. 96 spot.
While MTC's success has been dramatic, the company is by no means alone. Many firms on the 10th annual ranking of government information technology contractors are reporting stellar years.
A year and a half into the war on terrorism, two years into the push for more collaboration through e-government and outsourcing, and just weeks after fighting and winning a war in Iraq, the government relies more on its IT contractors today than ever before.
From behemoths such as Lockheed Martin Corp., which captured the No. 1 spot for the ninth year in a row, to smaller companies such as MTC, the government market is rich with opportunities focused on homeland security, defense transformation, e-government and outsourcing.
Market research firm Federal Sources Inc. of McLean, Va., is predicting that federal spending on information technology will rise from $58.7 billion in 2003 to $64.4 billion in 2005, an annual growth rate of nearly 5 percent. FSI and Eagle Eye Inc. conducted the analysis of General Services Administration data to create the Top 100 rankings.
The movement of companies in the rankings illuminates several trends driving the federal market, including the importance IT plays for defense companies. They hold six of the top 10 spots on the list.
The torrid pace of mergers and acquisitions also continues to impact the rankings. For example, L-3 Communications Corp., New York, muscled its way to No. 12, up from No. 28 in 2002, thanks in part to several acquisitions it has made in recent years.
And, of course, Northrop Grumman Corp., Los Angeles, at No. 2 is positioning itself to challenge Lockheed Martin for the top spot, following Northrop's acquisition of TRW Inc., a Top 10 company last year.
The deal-making isn't confined to the top players. In 2002, there were 79 acquisitions, and so far this year there have been 31 deals, according to the investment banking firm Houlihan Lokey Howard & Zukin, Los Angeles.
Companies are positioning themselves for where executives, government officials and analysts see the government spending its money: homeland security, intelligence and defense.
"That's where the stepped up growth is perceived to be," said Jerry Grossman, managing director at Houlihan Lokey's McLean, Va. office. "The growth in defense and homeland security spending has several more years to run."Lessons from war
When President Bush took office in 2001, Defense Secretary Donald Rumsfeld quickly began talking about transforming the Defense Department. What he envisions relies heavily on information technology to foster the ability of the services to work together and share information and command and control structures ? in short, greater agility and lethality.
The military successes in Afghanistan and Iraq, where many of the concepts of network-centric warfare got their first test in battle, will only bolster Rumsfeld's attempts to push through his changes, according to executives and analysts.
"Clearly, modern technology and the new technologies of warfare, much of them information technologies, have proven to be a very powerful and differentiating asset for the United States," said David Langstaff, president and CEO of Veridian Corp., Arlington, Va., and No. 22 on the list.
For government contractors, the push for transformation means growth opportunities will come from building information systems, such as command and control, intelligence and logistics support, rather than systems that drop bombs or shoot missiles.
"The days of buying thousands of everything are probably gone. ? You don't need more platforms, just more operability," said Ken Dahlberg, executive vice president of General Dynamics Corp.'s information systems and technology group. The Falls Church, Va.-based company came in at No. 7 on the Top 100.
Defense planners and the large defense companies are thinking more "holistically about how to tie capabilities together, and that is what gives emphasis to information architecture and thinking about the whole system, rather than just components," Langstaff said.
Major contracts to watch in the coming year include the Army's Warfighter Information Network-Tactical contract, which will integrate communications networks used for planning and carrying out joint missions. Lockheed Martin and General Dynamics are leading competing teams for the $6.6 billion contract.
"Most of us have been seeing our requirements shift toward the network-centric side of the issue, where a single platform is probably less important than the whole concept of the information flow," said Vance Coffman, chairman and CEO of Lockheed Martin.
Executives also are expecting new opportunities to come out of the lessons learned from the conflicts in Afghanistan and Iraq, just as the earlier Gulf War triggered shifts in defense spending and planning. Issues sure to be examined are continued improvements in communications and information sharing, addressing friendly fire problems and enhancing interoperability among the services and U.S. allies.
"The first war in Iraq made it clear that we could be much more efficient and bring our weapons to bear more rapidly," said Ernst Volgenau, president and CEO of SRA International Inc., Fairfax, Va., the No. 32 company on the list. Surveillance, recognizance and intelligence gathering systems had to be improved, and they had to be connected to command and control systems.
The challenge then was not just improving the process, but also convincing the officers and soldiers in the field, he said.
"I doubt there are many nonbelievers now," Volgenau said.The war at home
"The focus on homeland security is clearly an important trend for our nation and affects our market very heavily," said David Karlgaard, CEO, president and chairman of PEC Solutions Inc., Fairfax, Va. The company saw its ranking rise 31 places, from 73 last year to 42 this year.
Major new contracts were awarded in the homeland security arena last year, including the $1 billion prize to build the IT infrastructure for the Transportation Security Administration, won by Unisys Corp., No. 20. TSA also awarded a $490 million contract to a team led by Lockheed Martin to roll out security equipment and systems at the nation's airports.
On the radar screen for many companies is the Homeland Security Department's Visitor & Immigrant Status Indication Technology contract for tracking non-citizens entering and leaving the country. The agency has $380 million budgeted in fiscal 2003 to start the project. The request for proposals is expected in May.
Titan Corp., San Diego, has more than 60 homeland-security-related projects, up from just 10 before the Sept. 11 terrorist attacks, said Chairman and CEO Gene Ray. Titan is No. 15 on the Top 100 list. "It's being in the right markets at the right time," he said.
But for homeland security efforts to work, information sharing is critical, and that has only raised the importance of systems integration and the role of systems integrators, executives and analysts said.
"If you tally up all the money the government has spent on IT and engineering services, you find you have this huge, installed base of technology, but not a lot of it was integrated," said Joseph Kampf, president and CEO of Anteon International Corp., which landed at No. 14 on the list.
"The market is now moving toward integrating as much of the installed base as possible. You need the current government service contractors to do that," Kampf said.The business case for integration
The Bush administration, through the Office of Management and Budget, has been an active proponent of integrating information systems, both for homeland security and to further e-government projects and eliminate redundant systems. Mark Forman, OMB's administrator of the Office of E-Government and IT, has been a vocal standard bearer, pushing the concept of business cases and enterprise architectures, key components of the President's Management Agenda.
"If you want to understand the market, you really have to understand OMB. They are the single biggest force in the market today," said James Kane, president and CEO of Federal Sources.
Increasingly, funding is being tied to an agency's ability to show how it's IT spending meets the agency's mission. As a result, agencies are hiring contractors to help them map their systems and analyze how the spending relates to the mission.
"Business case analysis makes good sense. Anybody who is considering substantial investments in information technology ought to do that type of thing," said SRA's Volgenau.
"Part of most of our jobs today is not only to implement a specific system but to design it so that it fits an agencywide architecture," Karlgaard said.
Helping agencies develop business cases or mapping an agency's architecture likely will never be a large business for contractors when measured in dollars, Volgenau said, "But it is certainly important, and it is growing."Editor's note
For more data on all 100 companies, see the expanded online Top 100
To see the Top 100 as it appeared in the print edition of Washington Technology, view the list in PDF format
.View top companies by industry sectorSenior Editor Nick Wakeman can be reached at email@example.com.
Vance Coffman, president and CEO of Lockheed Martin Corp.
Henrik G. de Gyor
By William Welsh
Lockheed Martin Corp. "is working its financial health issues hard," said Chairman and Chief Executive Officer Vance Coffman.
In the past several years, Lockheed Martin has pursued a debt reduction strategy, funded in part by the sale of units that are not part of its core integration business, and reduced its debt from nearly $12 billion to $7 billion.
The company, ranked No. 1 on Washington Technology's Top 100 list for the ninth straight year, expects to achieve overall growth of between 8 percent and 12 percent in 2003, Coffman said.
"It's a very good feeling," he said.
Lockheed Martin's core capabilities are aeronautics, space systems, systems integration and technology services. The company's place at the top of the list can be attributed to its clear understanding of customer needs, its focus on creative solutions to complex problems, its ability to field world-class platforms and systems and its highly skilled work force, Coffman said.
Lockheed Martin's business mix is 57 percent defense, 23 percent civilian government, 16 percent international sales and 4 percent commercial sales, he said.
Paul Nisbet, principal with JSA Research, Newport, R.I., said the company performed well in 2002, even though company officials "were inflicted with some problems that were beyond their ability to resolve."
Although Lockheed Martin's defense and IT businesses fared extremely well, the company was hurt by a declining demand for satellites and satellite launches, as well as a downturn in their pension earnings. "Other than that, everything else went quite well for them," he said.
In the Iraq war, Lockheed Martin-built systems, such as the F-16, F-117 and C-130J aircraft and the Multiple Launch Rocket System, performed well, according to initial reports the military has given the company, Coffman said. The same holds true for IT support, satellite imagery and air traffic control systems.
"We haven't gotten any negative at all, and we've gotten a lot of positives," he said, referring to the user feedback.
Most of this feedback, however, has been of an anecdotal nature, as opposed to an official evaluation of a system's performance in battle conditions, he said.
Whether Lockheed Martin can achieve double-digit growth this year may depend in large part "on what comes out of the situation in Iraq," Coffman said.
The company is tracking several ongoing trends in defense contracting, including network-centric warfare, joint services training and spiral development where upgrades are made in increments that don't require taking systems off-line.
"Most of us [in the defense business] have been seeing our requirements shifting toward the network-centric side of the issues, where a single platform is probably less important than the whole construct of the information flow," Coffman said.
With this in mind, the company is hoping to win the full production contract for the Army's Warfighter Information Network-Tactical program, or WIN-T, a 15-year, $6.6 billion deal.
In August, both Lockheed Martin and General Dynamics Corp. of Falls Church, Va., won contracts to develop the architecture and start initial production for testing. The Army eventually will pick between the two for full production. WIN-T will provide the Army with a high-speed, high-capacity backbone communications network that will move information among commanders, staff and units on the battlefield.
Meanwhile, Lockheed Martin has plenty of work to keep it busy.
In June 2002, the company and Northrop Grumman Corp. of Los Angeles won a contract to modernize the Coast Guard's assets. The Deepwater contract is worth $11 billion over 20 years, and has a potential value of $17 billion over 30 years.
The company also won a $1.2 billion contract from the Federal Aviation Administration for the En Route Modernization program, a $490 million contract from the Transportation Security Agency for the Airport Strategic Rollout program, and a $970 million contract for the Postal Service's Automated Package Processing System.
Moving forward, Lockheed Martin is positioned to capitalize on opportunities with the new Department of Homeland Security in the near term and in the future, Coffman said.
The company has completed training of 53,000 airport screeners for the nation's 429 commercial airports as part of a $105 million contract it won last year. It is also implementing new security procedures at those airports as part of the Airport Strategic Rollout program.
In addition to its civil aviation security contracts, the company is keeping a sharp eye on business opportunities related to air traffic control, border security and port security.
Altogether, the company had a 50 percent win rate in 2002, Coffman said. "When you're competing against three or four competitors in each of these competitions, that's a pretty good record," he said.
Still, the company faced fierce competition from other large integrators. For example, Boeing Co. of Chicago defeated Lockheed Martin, Raytheon Co. of Lexington, Mass., and BAE Systems plc of Farnborough, England, for the 12-year, $4.9 billion C-130 Avionics Modernization Program contract.
Northrop Grumman defeated Lockheed Martin to win the DD(X) system design and prototype for the Navy's next generation of destroyers, a contract worth $2.9 billion over four years. Although it didn't win the prime contract, Lockheed Martin won a place as a subcontractor on the project.
Coffman shrugged off those losses as a natural part of doing business. "Nobody wins 100 percent of the time," he said. "We always try to look at those [losses] in terms of how we can make ourselves better."
But if Lockheed Martin wants to maintain its place at the top of Washington Technology's Top 100 list, it will have to work hard to keep ahead of Northrop Grumman, which analysts and industry officials said is closing the gap quickly with its acquisition last year of TRW Inc. of Cleveland.
Coffman doesn't seem worried. Lockheed Martin is familiar with both Northrop Grumman and TRW, having partnered with each company on various projects over the years.
"I believe we have streamlined our organization to the point where we are becoming more efficient every day," he said. "We have a process for doing that, [and] frankly, I think Northrop Grumman is just getting started in that process. So we will see how they go."Prime IT contracting revenue:
Bethesda, Md. President & CEO:
$26.6 billion2002 net earnings:
$500 million2001 revenue:
$24 billion2001 net loss:
Steve Carrier, vice president of business development and strategic planning for Northrop Grumman Information Technology
By Tania Anderson, Contributing Writer
At the height of Northrop Grumman Corp.'s strained attempt last year to acquire TRW Inc., it seemed unlikely that a little more than 12 months later, TRW would be fully and happily integrated into Northrop Grumman.
But to hear executives at Northrop Grumman tell it, the two companies were meant for each other. Northrop Grumman announced in early April that TRW's defense-related operations have been officially merged into Northrop Grumman's Mission Systems sector, which is based in Reston, Va., and Space Technology, which is in Redondo Beach, Calif.
Mission Systems, which is made up of the former TRW Systems, integrates systems and services for defense and intelligence-related federal agencies and is a prime integrator for the Intercontinental Ballistic Missile program. That sector is working closely with Northrop Grumman's Herndon, Va.-based Information Technology sector, which provides IT solutions, engineering and business services to government and commercial clients.
Officials at the Mission Systems and Information Technology sectors talk about going after government contracts together, several of the division heads talk on a daily basis, and the former TRW employees have fully adopted the Northrop Grumman name. The company is now studying how the two sectors, along with the five other sectors of Northrop Grumman, can be more closely integrated.
"We're already naturally working and acting as one Northrop Grumman on a very practical, day-by-day, event-by-event basis," said Sally Sullivan, vice president of business development and resources for Northrop Grumman Mission Systems and a former executive of TRW Systems. "I see our sector presidents working collaboratively on major programs."
Aside from daily communication, the two sectors also communicate through an online system that tracks government programs that each is pursuing.
"We have a very sophisticated process to make sure we don't fall all over each other in the marketplace," said Steve Carrier, vice president of business development and strategic planning for the IT sector of Northrop Grumman.
Los Angeles-based Northrop Grumman has acquired 16 companies since 1994, growing from $5 billion in annual revenue to between $25 billion and $26 billion in 2003. The growth has allowed the company to maintain its spot at No. 2 on Washington Technology's Top 100 list of federal prime contractors. The company brought in $3.5 billion in federal prime IT contracts last year out of $17.2 billion in total revenue.
Company officials would not reveal whether Northrop Grumman will continue its acquisition run, but Carrier said he thought "the name of the game is to integrate and execute on the acquisitions we already have."
Top contract wins for the year included a five-year, $228 million deal with the former Immigration and Naturalization Service. Northrop Grumman IT will provide the primary IT infrastructure and support services of the agency, which could be about 40,000 desktops and servers and sustain local area networks supporting more than 1,400 sites.
Another big win was the six-year, U.S. Transportation Command contract option worth $63.8 million. The company will help build the information system, which will improve the ability to track the identity, status and location of any passenger or cargo moving through the Defense Transportation Systems.
TRW Systems, before becoming part of Northrop Grumman Mission Systems, won a seven-year, $511 million contract with the Centers for Disease Control and Prevention to develop and support information systems that aid CDC public health research, surveillance and intervention efforts and serve its centers, institutes and offices nationwide.
But the year also had its share of disappointments, Carrier said. Northrop Grumman IT lost bids on base and range jobs with the Army and Air Force, which would have required the company to run the operations and maintenance of military bases as well as run the weapons ranges.
However, Carrier said the IT unit also experienced the largest number of bookings of new business last year.
"If I talk about it too much, probably my competitors will say I'm whining," he said. "I've won more than my share."
Sullivan added that Mission Systems, which does a significant amount of work for state and local public safety command centers, has been frustrated with shrinking state and local budgets.
"You just feel for these people who are having to rethink first-responder types of systems and support," she said. "They're hampered significantly with not having the budget or the ability to reach out and do that kind of work."
When Carrier and Sullivan talk about each of their sectors' strengths, they describe how each is going after the most complex programs in the federal government.
"There are a lot of big companies in town that do business with the government, and a lot of those are outsourcers," Sullivan said. "What they do is wonderful, but they have a standard, replicable model for the low-hanging fruit. You're not going to find us there."
Carrier said the IT sector is pursuing the Department of Defense Integrated Military Human Resource System contract, which will be the largest government personnel and pay system ever. He said he expects the contract to be awarded this summer.
The sector also will compete for an opportunity in Taiwan to integrate its air, ground and naval systems.
Mission Systems, according to Sullivan, will pursue the Homeland Security Department's entry-exit system contract, as well as more state and local public safety command center work.
"You're going to see a lot of interest with Information Technology and Mission Systems combined in terms of homeland defense opportunities," Sullivan said. "And not only at the federal level but at the state and local level."
One of Northrop Grumman's major challenges this year, according to analysts, is to integrate some of the business segments that have been acquired over the last decade. But the company also faces increased interest by the government and Congress to un-bundle large contracts and provide more contracting opportunities for small, disadvantaged companies.
"If the government decided any of the procurements were getting far too big, then that could represent a threat to a company that's going to be going after most of the mid- and large-sized opportunities," said Jerry Grossman, managing director of Houlihan Lokey Howard Zukin. "But I see more opportunities down the road for them than threats."Prime IT contracting revenue:
Los AngelesPresident & CEO:
$17.2 billion2002 net earnings:
$64 million2001 revenue:
$13 billion2001 net earnings:
Duane Andrews, corporate executive vice president of the SAIC's federal business unit
By Gail Repsher Emery
Science Applications International Corp. is a prime example of a company that's "pretty much everywhere" in the federal information technology marketplace, said Tom Meagher, vice president of equity research at BB&T Capital Markets, Richmond, Va.
The San Diego firm is a major player in the market because of its size and the breadth and depth of its capabilities, Meagher said. Those capabilities include systems integration, information security, wireless systems, software development, data mining and research and development.
"We focus on leading-edge technologies and have a team of people who can tackle hard problems," said Duane Andrews, corporate executive vice president of the company's federal business unit. "Even when we subcontract to some of the bigger companies, you will find us with the complex software development part of the job."
Sixty-nine percent of the company's $5.9 billion in annual revenue comes from federal government sales. Roughly $3 billion comes from sales to defense agencies, including the Army, Navy and Air Force. About $1.48 billion comes from sales to civilian agencies, including NASA, the former Immigration and Naturalization Service and the Department of Energy, Andrews said.
"On anything other than hardware production ? planes, ships, tanks or roads and commodes, or low-end services work ? you will probably find SAIC showing up. We don't miss many things," Andrews said. The company received new contract awards worth $14.4 billion in fiscal 2003.
At the same time, however, SAIC executives are selective about the work they pursue, avoiding projects they consider too risky. To a certain extent, SAIC executives can pick and choose what projects they'll pursue because the shareholders they answer to are their employees, not Wall Street investors.
"We can make decisions based on what we feel is the right thing to do, and not how the market is going to react to it," Andrews said. Indeed, Meagher said results from quarter to quarter aren't emphasized as much in an employee-owned company as they are in a publicly traded company.
Despite a few setbacks during the last year, including a recent loss to SRA International Inc. on a maintenance and support contract for the Army's Reserve Component Automation System, which SAIC built, Andrews said he was far happier with the company's wins than disappointed in its losses.
"We grew our federal business 16.7 percent this year," he said. "When you have that kind of growth, you don't need to hunt around for other stuff."
SAIC's wins include a contract, with partner Boeing Co., to act as lead systems integrator on the Army's Future Combat Systems, a networked system of improved communication links and lighter, more mobile armored vehicles that will be rapidly deployable and capable of high survivability and success in multiple combat situations. The SAIC-Boeing team won the $154 million contract for the concept and technology demonstration phase.
A partnership with Northrop Grumman netted a five-year, $93 million contract from the Naval Surface Warfare Center in Philadelphia for engineering services and installation support with the introduction of "enabling technologies" into Navy ships. The enabling technologies reduce the workload of sailors involved in the operation and maintenance of Navy ships and equipment.
A U.S. Geological Survey Earth Resources Observation Systems Data Center job was also a major win, Andrews said. Under the five-year, $155 million contract, SAIC will provide scientific, engineering and operational technical support services, helping the center develop new technologies and applications to handle and use the data the center receives. The center holds 15 million satellite images and aerial photographs, the world's largest collection of remotely sensed data covering the Earth's land masses.
In addition, SAIC was selected by the National Security Agency to carry out the technology demonstration platform phase of the Trailblazer program, NSA's modernization of its signals intelligence capabilities. The phase is worth about $280 million.
In the coming year, SAIC is looking at opportunities in post-war reconstruction of Iraq, including training and telecommunications projects, Andrews said.
"We, along with a lot of companies, have surged to support the war effort," he said. "In our case, it is a couple of dozen people here and there and some extra procurements. That has more than offset the slowdown in procurements because of the war."
Also this year, the Department of Defense is seeking to upgrade its command and control systems.
"You will find us competing in that world," Andrews said. "Wherever there is a tough mission-critical application, you are going to find SAIC a part of that."
SAIC is pursuing the National Imagery and Mapping Agency's Enterprise Engineer contract, worth an estimated $549.3 million. The contract is for independent engineering support across the National System for Geospatial Intelligence and NIMA's corporate systems and processes. The contract incorporates some aspects of a five-year, $333 million NIMA contract for systems engineering that SAIC holds, which expires in September.
SAIC has about $2 billion in cash and continues to be an aggressive acquirer, closing six deals in the last six months, said John Allen, co-managing partner for the investment bank Windsor Group LLC of Reston, Va.
The acquisitions complement SAIC's capabilities and have expanded its customer base in agencies or offices where it did not have a strong presence, such as the Internal Revenue Service, Andrews said. With the acquisitions of Computer Systems Technology Inc. and VGS Inc., SAIC gained positions on the Millennia Lite governmentwide acquisition contract.
Under the $20 billion Millennia Lite vehicle, about 35 prime contractors provide a broad range of IT services to federal agencies. SAIC had lost some work to competitors who had Millennia Lite contracts, and now plans to go after some of the work it lost, Andrews said.
"When Lite was first issued, the intent wasn't for big companies to have it. We were asked not to bid on it," he said. "Then a bunch of big companies bought Millennia Lite contracts, so we've been looking to buy a Millennia Lite vehicle."
SAIC will be an interesting company to follow over the next year because J.R. Beyster, who founded the company and is stepping down as chief executive officer, Allen said, has long dominated it. Beyster will retire in February 2004, but will remain chairman of the board until July 2004.
SAIC "is an attractive business for someone to take over," he said. Prime IT contracting revenue:
San DiegoPresident & CEO:
$5.9 billion2003 net earnings:
$246 million2002 revenue:
$5.8 billion2002 net earnings:
Phil Condit, Boeing chairman and CEO
By Heather Hayes, Contributing Writer
The Boeing Co.'s efforts to become more customer friendly ? to be a partner with federal agencies in developing solutions ? helped the company increase its federal prime contracting dollars and garner the No. 4 rank on Washington Technology's Top 100 list.
"You can't sit back and wait for the [request for proposal] to come out," said Shephard Hill, vice president for business development at Boeing Integrated Defense Systems (IDS). "You have to be with customers daily, hourly even, and not just in the acquisition areas but with the warfighters, the Joint Command, various NASA centers, the areas of intelligence doctrine. Then we can jointly figure out what are the current needs and the needs of the future in five years, 10 years, 20 years."
Chicago-based Boeing hopes to achieve the lofty goal of one day being the country's No. 1 defense contractor. To that end, it is trying to address the Pentagon's growing needs for joint operations, interoperability and network-centric warfare.
Hill said Boeing's IDS operation, formed just last year to provide customers with a one-face, one-place approach to the best integrated solutions possible, provides just the right internal business structure to support these demands.
Boeing IDS has business units that deal directly with customers, each providing one-stop shopping services for a specific agency or business practice, such as Army Systems or Aerospace Support. But to ensure it doesn't create stovepipe solutions, Boeing develops its technology, makes its investments and develops its solutions based on seven key market areas that straddle the needs of most of its customers. These are integrated battlespace, mobility, missile defense, precision engagement, homeland security, launch and orbital systems, and sustainment.
"When we design a Navy solution, it's tailored to the Navy; but it's also interchangeable and interoperable with what we're proposing to the Air Force, for example, or with what we're proposing to NASA," Hill said, noting that IDS accounted for 47 percent of the Boeing overall revenue last year.
This strategy is clearly working. In 2002, Boeing captured a number of key defense contracts from customers who said they were looking for a partner rather than a traditional prime contractor.
The most high profile among these was the Future Combat System, an Army transformation program worth $4 billion over five years. It is a networked system of improved communication links and lighter, more mobile armored vehicles that will serve as the backbone of the Army's long-term transition plan to reach what it calls the "objective force." Boeing is partners with Science Applications International Corp. on the project and serves as lead systems integrator.
Boeing also was awarded contracts for the Army Joint Tactical Radio System, valued at $2 billion-plus with options, which will serve as the foundation for all future military tactical radios; and for the Air Force's Family of Advanced Beyond Line-of-Sight Terminals program, valued at $273 million over six years. This project is to provide strategic forces with radio systems outfitted with special antennas that use a common design and open system architecture to enable seamless information exchange between ground, air and space platforms.
Taken together, these three recent awards solidify Boeing's position in integrated battlespace programs, in which networked information and communications systems provide a competitive edge to soldiers in the field and commanders in the control room. Boeing officials anticipate that integrated battlespace opportunities will be worth more than $200 billion over the next decade.
"This is one of the most dynamic periods relative to the DoD in many, many years," Hill said. "The world situation has changed, of course, but in parallel the DoD is changing not just in terms of its structures, but in terms of how they're approaching the solutions and equipment they need."
The military now wants mobility, interoperation and situational awareness, he said. "It's no longer a specific platform. They want your best ideas and your best solutions. And we're giving them that."
Hill said the Department of Homeland Security is looking to incorporate a similar strategy and wants contractors that can provide a comprehensive ability to assess threats and turn information into actionable, sharable knowledge.
Boeing's understanding of this helped it make strong headway in this market last year as well. The firm partnered with the U.S. subsidiary of Munich-based Siemens AG last year to win the Transportation Security Agency's $1.37 billion contract to install and maintain explosives detection systems at 438 commercial airports.
What's more, the Department of Transportation named Boeing's Homeland Security and Services, a business unit of the Integrated Defense Systems division, as prime contractor of the year after the company provided small and minority-owned businesses with key subcontracts on the explosives detection project.
Hill said Boeing will continue to aggressively pursue homeland security opportunities in the coming year. It's a huge potential market, he said, though "how much of it will be addressable" is still unclear.
But Boeing's recent transformation through mergers and acquisitions has provided it with the human and technology resources needed for success in areas such as Internet and cybersecurity, chemical and biological threat detection, incident mitigation and the integration of large-scale enterprise systems.
With the formation of IDS, Hill said, Boeing is on its way.
"The goal was always to make sure that we went beyond commercial aircraft to have a very significant federal government business, and we see that continuing to grow over the next number of years," he said. "We feel that we're extremely well-positioned in terms of our strategies, in terms of the skill base that we have and in terms of the technologies that we can bring to bear."Prime IT contracting revenue:
ChicagoChairman and CEO:
$54 billion2002 net earnings:
$492 million2001 revenue:
$58 billion2001 net earnings:
$2.8 billionwww.boeing.com Ticker:
Austin Yerks, senior vice president of marketing for CSC's federal sector
Henrik G. de Gyor
By Joab Jackson
Already one of the largest services providers to the federal government, Computer Sciences Corp. plans to start going after a wider array of contracts, thanks to its recent acquisition of DynCorp, said Austin Yerks, who is senior vice president of marketing for CSC's federal sector.
"Combined, we have a different set of capabilities that neither company had as standalone entities," Yerks said.
The company's March 7 acquisition of DynCorp was worth approximately $950 million. All of DynCorp, which employed around 26,000, will be folded into CSC's federal-sector unit. CSC itself employed about 68,000 before the merger.
El Segundo, Calif.-based CSC expects that the DynCorp expertise will strengthen its efforts in homeland security, federal health care and, most notably, the Defense Department.
The DynCorp purchase was a good deal for CSC, said Peter Garrity, an analyst with American Technology Research Inc., Old Greenwich, Conn.
"CSC didn't pay a lot of money, and in return what they got were significant operations," Garrity said.
Garrity rated CSC a "buy," comparing the company's valuation to that of Electronic Data Systems Corp. of Plano, Texas, "but without the issues." Garrity said he expects growth of the company to accelerate under the larger, combined operations.
DynCorp was a leading player in the field of sustainment, or providing operational and logistical support to base operations and other large-scale government facilities. It also kept a strong practice in equipment maintenance, its original core competency.
DynCorp was one of the Defense Department's largest providers of maintenance for helicopters, jet aircraft and increasingly tanks and armored personnel carriers. The company also was branching out into logistics services to support these vehicles. It generated about $2.4 billion in annual sales, Yerks said.
The acquisition "brings us into the operational world," he said. While CSC has traditionally supplied the systems to support military operations, DynCorp provides the personnel to run operations.
With the DynCorp acquisition, CSC can offer a combined set of services.
As an example, Yerks noted work both CSC and DynCorp are performing at Fort Rucker in Alabama. There are about 3,000 DynCorp employees supporting the Army's helicopter force at Fort Rucker. When that contract comes up for a recompete, CSC can add its supply chain automation system and flight-line technologies to the mix.
Combining DynCorp's functional knowledge of the operations with CSC's cutting-edge systems will allow CSC to "become significantly more efficient and do the same work for significantly less manpower," Yerks said.
The Defense Department was DynCorp's largest customer market, representing approximately 49 percent of the company's revenue in 2001. Some of the company's other key federal customers include the U.S. Postal Service as well as the departments of Energy, Justice and State.
While the DynCorp purchase was taking place, CSC continued bringing in new contracts and executing its backlog of work. In April, the company won a task order worth up to $36 million to support mainframe computers under the Bureau of Immigration and Customs Enforcement, formerly part of the Immigration and Naturalization Service.
In March, the company won a $45 million subcontract through SGT Inc. of Greenbelt, Md., to provide program analysis and control services to NASA's Goddard Space Flight Center in Greenbelt. Also that month, the company won an $43 million extension to support NASA's Hubble Space Telescope.
In January, the company won a $25 million task order from the Centers for Disease Control and Prevention to continue supporting the National Electronic Disease Surveillance System. This system is designed to provide more accurate and timely reporting on outbreaks of infectious disease.
On the military side, CSC won a $96 million, five-year task order in March to support the design and purchase of ships for the Navy's amphibious assault ship replacement program. In February, it was one of eight companies to win a piece of the $3 billion Rapid Response Program Governmentwide Acquisition Contract, which provides a vehicle for government agencies to quickly contract support. CSC can win up to $700 million of work over the next eight years through this contract.
The company is also a major player in the Missile Defense Agency, for which it has booked more than $300 million worth of work in the past 12 months, Yerks said.
In the future, expect the company to be making a bid for NASA's recompete of its Space Mission and Communications and Data Services contract, which calls for support of three programs, one at the Marshall Space Flight Center in Huntsville, Ala., and the other two at Goddard Space Flight Center. CSC will compete as prime for all three programs, which are collectively worth about $3 billion.
Another contract CSC is gunning for is an IT services procurement being assembled by the Air Force to outsource the work at the Air Force Pentagon Communications Agency. Among other duties, this field operation agency assures that the National Military Command Center, the Defense Department's primary command and control center, remains operational during times of crisis. That deal might run about $300 million, Yerks said.
"The idea is to put more uniformed folks at the tooth of the dragon and have contractors like us take on more back-office functions," Yerks said.
The Air Force opportunity is indicative of a larger trend happening with government agencies: outsourcing support operations that do not specifically require government personnel to complete.
Yerks cited other CSC contracts as examples of this trend, such as the Internal Revenue Service's $3 billion effort to update its computer systems, awarded in 1998, and the 2001 $2 billion Groundbreaker contract from the National Security Agency. Groundbreaker is designed to improve the NSA's IT services as well as save the agency money.
"We've been talking about privatization and infrastructure modernization as a major trend, and we still see that. I think you will see over the next three to five years that there will be a very strong growth-oriented marketplace for companies who are positioned in the IT infrastructure and outsourcing world," Yerks said. Prime IT contracting revenue:
El Segundo, Calif.Chairman & CEO:
$11.4 billion2002 net earnings:
$344 million2001 revenue:
$10.5 billion2001 net earnings:
Daniel Burnham, CEO of Raytheon Co.
By Jon William Toigo, Contributing Writer
Raytheon Co., ranked No. 6 on Washington Technology's Top 100 list, has grown into a powerhouse of information technology services.
The company's 2002 revenue from IT work totaled $2.1 billion, with approximately $1.5 billion derived from government work with traditional customers, such as the Defense Department and intelligence agencies, as well as the Environmental Protection Agency, NASA, the National Science Foundation and Homeland Security Department, according to the General Services Administration.
Despite the unexpected change at the CEO position, with Daniel Burnham stepping aside in favor of current President William Swanson this July, the company sees a bright future ahead ? so bright, in fact, that Raytheon is building a new internal organization just to help coordinate all the IT opportunities and engagements it's pursuing with federal customers.
Insiders describe this new organization, Raytheon Information Services (RIS), as a natural evolution for a company whose many business units provide a complex mixture of weapons systems, information systems and related services.
Bryan Even, president of Raytheon Technical Services Co. based in Reston, Va., one of Raytheon's seven government-focused units, reports that his technical services group remains "first and foremost a defense company."
"We serve as a prime contractor on a broad range of government projects, particularly at DoD," Even said. The unit has data centers on seven continents, including Antarctica under a contract with the National Science Foundation, and is working at 250 different locations in 38 countries.
"We serve three different markets: professional services, industrial manufacturing and base and range services. Government engagements cut across all of our capabilities and offerings," Even said.
Raytheon's long tenure continues to give it an advantage with clients such as the Air Force, NASA, Defense Department and some civilian agencies, with or without contract vehicles that are intended "to level the playing field" between established and new contractors, Even said.
Raytheon Technical Services' image is changing from one of an outsourcing solutions provider to a trusted IT services partner that can help with diverse and complex jobs such as procurement consolidation, change management and innovative solutions, he said.
The success of Even's unit has been mirrored by Raytheon's other business units, including Intelligence and Information Systems (IIS) and Network Centric Systems, according to Thomas Anderson, senior executive in charge of the newly formed RIS group. He said that continued success will require mechanisms for matching Raytheon's specialized capabilities in knowledge management, enterprise management, security, infrastructure management, e-business and logistics to the needs of customers.
That was the mission of RIS when it was created Jan.1, "to provide a framework for delivering the products and services of Raytheon's different business units to customer projects," he said.
The value of RIS is immeasurable, Even said. "Some DoD contracts require involvement from six different lines of business within Raytheon. Each line of business works within its own project with its own project leader. This must be coordinated through RIS, so that clear communications exist between the Raytheon teams, and issues can be discussed and resolved quickly."
Anderson said the increasing number of government-wide acquisitions contracts, such as GSA's Millennia or the National Institutes of Health's CIO-SP2, have brought into sharper focus the importance of greater internal coordination for the success of Raytheon. To compete effectively for these contracts, the company needs to be responsive to market drivers and trends, Anderson said.
He said Raytheon is in the role of an outsourced IT department, noting that resource retention is a big issue for the government, "just as it is in many cash-strapped companies today." He said the shortage of IT talent is leading many organizations to hand over strategic planning and architecture services to trusted partners, rather than following the traditional model in which only labor intensive systems development work is outsourced.
Last year, the company won a $600 million contract with the Centers for Medicare and Medicaid Services to support CMS in its future IT needs and to continue support for systems such as the Medicare Exclusion Database and Third Party System. The contract has a one-year base period and four one-year options that will be exercised based on how well the company performs.
In complex tasks such as these, the new RIS group will help match Raytheon's resources to agencies' emerging needs, Anderson and Even said.
"We know the requirements of our customers before they release an RFP for bid. We spend a lot of effort fostering relationships before the engagement. We needed to coordinate that effort, and RIS is the best way to go," Even said.
Anderson said he is hard-pressed to see how a large and diversified IT service provider could be responsive to its clients without an intermediary like Raytheon's RIS. He said that 2003 will present challenges to many government IT vendors and speculates that those that lack an RIS-like function will find it difficult to compete for government business.
Emerging market opportunities, he said, will be enterprise management and infrastructure management "with an emphasis on managed services." An example might be the Federal Aviation Administration's contract to provide integration and consolidation of its communications networks and systems, which are being provided via 11 leased network contracts. Raytheon is a subcontractor to Harris Corp. on this $1.7 billion program and will gross roughly $97 million from the job.
In addition to coordinating its own internal resources, Raytheon also is taking steps to work more closely with all of its supply chain partners. In March, Raytheon conducted its first Enterprise Supplier Conference at the Center for Executive Education at Babson College in Wellesley, Mass. The venue was used to discuss Raytheon's supply chain vision and to reinvigorate relationships with more than 100 executives representing 62 of the company's key suppliers. It represented yet another dimension of the company's efforts to adapt to the economic and performance requirements of the market.Prime IT contracting revenue:
William Swanson Employees:
$16.8 billion2002 net loss:
$587 million2001 revenue:
$16 billion2001 net loss:
Nicholas Chabraja, CEO of General Dynamics
By James Schultz, Contributing Writer
Savvy pursuit of Defense Department awards, success of IT-intensive combat systems in Iraq and canny strategic investment may be propelling General Dynamics Corp. to the next level of growth.
A major supplier of advanced defense systems and a market leader in land and amphibious combat systems, the Falls Church, Va.-based company garnered the No. 7 spot on Washington Technology's list of Top 100 federal IT prime contractors.
At the end of 2002, the company could boast of a contracts backlog of $29 billion, 8 percent more than the $26.8 billion figure reported in 2001. Although profit margins were down by nearly 3 percent in 2002, to $917 million from the 2001 figure of $943 million, overall revenue rose almost 15 percent, from $12.05 billion in 2001 to $13.8 billion in 2002.
"You've got a company that's both in commercial aerospace and in military and defense," said Jerry Grossman, Aerospace Defense Government Group managing director for investment bankers Houlihan Lokey Howard & Zukin in McLean, Va. "There's a strong movement up in defense. There's an expectation of 6 percent to 7 percent growth per year, and I think they'll hold the line on operating expenses. Longer term, there's a multiyear, nearly $30 billion backlog. It's what I would call a stable outlook. It's an awfully strong platform."
That strong platform could eventually propel General Dynamics into position as one of the defense industry's emerging "superprimes," a handful of companies with expertise so deep and broad, they are able to coordinate the activities of other prime contractors.
Superprimes, according to Anita Antenucci, also a managing director with Houlihan Lokey Howard & Zukin's Aerospace Defense Government Group, are taking the responsibility of lead systems integrator, coordinating the "system of systems" across many different platforms. Such managerial prowess is crucial, given the high electronic content of everything from vehicles to machinery and the need for rapid change out of software and hardware upgrades, particularly in defense applications.
"The long and short of it is that General Dynamics is very well-positioned in specific areas of high-priority spending in the Defense Department," Antenucci said. "Whether [the company] will be a superprime, a prime contractor or subcontractor largely depends on how the government decides to spend its money."
The federal government's willingness to fund military and domestic defense is welcomed by General Dynamics. According to Ken Dahlberg, General Dynamics executive vice president in charge of the company's Information Systems and Technology Group, the company continues to work closely with the nation's key agencies on matters of domestic protection.
In particular, Dahlberg cites the 2002 award to the company of a $611 million contract by the Coast Guard to modernize its 30-year-old search and rescue communication system, which should have the ancillary effect of boosting security. The National Distress and Response System Modernization Project, called "Rescue 21," should enhance the Coast Guard's ability to pinpoint mayday calls from boaters and coordinate rescue operations along the 95,000-mile U.S. coastline and interior waterways.
In terms of warfighting, Dahlberg said the trend is to turn troops into "nodes in [an information] network." He points to the Joint Operations Warfighter Information Network-Tactical, or WIN-T program, as well as the Army's Land Warrior system, which General Dynamics has been hired to enhance.
The current version consists of soldier-carried personal electronics, communications, global navigation and other integrated equipment. The Land Warrior upgrade should improve interoperability with the battlefield command and communications systems found on Stryker Brigade Combat Team vehicles and on the Army's Future Combat System.
The systems are also designed to dovetail with the Force XXI Battle Command Brigade and Below system, the command and control system at the heart of the Army's digitization effort. According to company estimates, the potential value to General Dynamics of the Land Warrior program with all options exercised stands at $791 million.
The Army also has chosen General Dynamics as the prime contractor and systems integrator for a $19.9 million program to upgrade its Prophet tactical signals intelligence system. By networking together two or more combat vehicles or soldier-carried electronic components, Prophet can determine the bearing of a radio signal and build an electronic emitter-map display of those signals.
The Prophet Block II and III upgrade should provide brigade commanders with significantly improved electronic surveillance capabilities and a new electronic attack capability, enabling forces to securely and accurately detect, identify, locate and deter a wide range of enemy signal emissions on the battlefield. Commanders will also be able to disrupt enemy operations, protect friendly forces and prevent the transfer of potentially damaging information either inadvertently or through hostile electronic surveillance.
"It's a paradigm shift. Because of technology you can be more lethal, more stealthy and more situationally aware," Dahlberg said. "A warfighter's capabilities are enhanced. The days of buying thousands of everything are probably gone. It's making what you have better. You don't need more platforms, just more operability."
During the Iraqi conflict, the Navy deployed a General Dynamics-developed application, the Area Air Defense Command system, which uses commercial computer technology to allow joint task force commanders to rapidly plan and coordinate air defenses across broad operational areas.
The system combines information from data links into an easily understood graphic representation of force deployments and potential threats. Friendly forces and hostile aircraft, cruise and theater ballistic missiles are identified with headings and impact zones indicated in near real time, providing officers with a complete view of military-theater action.
It's another example of putting technology to intelligent use, Dahlberg said. As planners look to reshape the military's future and the effectiveness of defense on the home front, General Dynamics expects to continue to play a primary technology-development role.
"The company is operating on all cylinders in the defense arena," Dahlberg said. "From a product point of view, we have the soldier locked up for the next 10 years. We win, we perform and we'll be able to get additional business."Prime IT contracting revenue:
Falls Church, Va.Chairman & CEO:
$13.8 billion2002 net earnings:
$917 million2001 revenue:
$12.05 billion2001 net earnings:
Jerry Edgerton, WorldCom senior vice president for government markets
By Patience Wait
WorldCom Inc. could easily serve as the poster child for the corporate scandals of 2002, having declared the biggest Chapter 11 bankruptcy ever filed when accounting fraud was uncovered that could total as much as $11 billion.
Instead, the company has changed its brand name to MCI, its leadership team and even its corporate headquarters, from Clinton, Miss., to Ashburn, Va., to distance itself from the tainted past.
Its public woes appear to have had no impact on its sales to the federal government. In fact, MCI improved its standing in this year's Washington Technology Top 100 list of federal prime contractors, breaking into the top 10 for the first time, with revenue of more than $772.4 million.
Jerry Edgerton, senior vice president for government markets, said MCI didn't suffer in the government space because none of the allegations concerned its dealings with federal agencies. Instead, the events of the past year really made his unit focus on its customers.
"In spite of what was going on in the company, we had to continue to deliver service, to communicate with our customers that things would be OK, and with our employees," said Edgerton. "That commitment from our customers was very influential in helping us get through this process."
Even though government billing is only 5 percent to 10 percent of the company's business, Edgerton said, it is a highly visible part. In fact, the government's willingness to keep doing business with the company despite the high-profile allegations of wrongdoing helped MCI staunch the loss of commercial customers, he said.
"With the [government] making a commitment to WorldCom, now MCI, that was the bellwether relative to commercial customers," Edgerton said. "If our largest customer is willing to stick with us, you should be, too. It also was really important to our employees: If the government is willing to do business with us, then there's a [future] here."
Ron McMurtrie, vice president of global marketing with MCI, called the government's commitment to the company "a de facto vote of confidence."
"We didn't make hay ? out of this, but having the federal government reaffirm their commitment to us ? gave [CIOs] a foundation through which to substantiate their position," McMurtrie said.
Danny Zito, managing director of telecom and cable services research at Legg Mason Wood Walker Inc., Baltimore, was a little less rosy in his assessment of MCI's federal entrenchment.
"My view is the reason why many customers didn't flee immediately is because of the complexity of the networks," Zito said. "It's not something you're going to rip down."
The complexity hurdle may have kept customers in place, but it also dampened competitors' efforts to gain share at MCI's expense, he said.
"The window of opportunity for AT&T and Sprint was there last fall, but I think it closed more quickly than anticipated," Zito said.
MCI also benefited from a relatively quiet year for telecommunications contracts, Edgerton said. "If you're going to have a period of uncertainty in your life, you couldn't have picked a better time," he said. "There were no major procurements."
The company did have one big win, the $450 million Defense Research and Engineering Network contract, though the award was mired in controversy and protests once the news broke of WorldCom's accounting scandal. And the company was selected as one of five providers on the State Department's $750 million Spectrum contract to upgrade the worldwide telecommunications network for its embassies and consulates.
There was at least one major ? and high-profile ? program that MCI lost despite being a decade-long incumbent. The Federal Aviation Administration's Telecom Infrastructure contract, potentially worth $3.5 billion over 15 years, was won by Harris Corp., which put together a team that included one national carrier, Sprint Corp. of Overland Park, Kan., and several regional carriers, such as Qwest Communications International Inc. of Denver and Verizon Communications Inc. of New York.
Edgerton said the FTI award may have been affected by the circulating bad news during the evaluation of bids. "The timing was not good" on FTI, he said.
After the turmoil of the past year, the prospects ahead look brighter for MCI, analysts said.
"I'm in the camp that believes MCI will continue" as a dominant player in the telecommunications industry, Zito said. "There were anecdotes when it was WorldCom that you'd see three or four different sales teams, all with a different pitch, [but] now you're seeing one very flexible, customer-focused sales team."
Warren Suss, president of Suss Consulting Inc. in Jenkintown, Pa., also said that MCI is going to be a formidable competitor in the government market.
"I think they're going to have enormous pricing advantages for transmission services," because MCI shed its debt in the bankruptcy proceedings, Suss said. "I think they have ? managed their way through an extremely difficult period and managed to keep most of their customer base intact."
On the other hand, Suss said MCI will lose ground to systems integrators on upcoming opportunities that encompass more than traditional telecommunications services. MCI has been forced to do a lot of cost cutting as part of getting its financial house in order, and much of the cutting was in areas other than its core network transmission capabilities.
"More and more deals are going to cover areas that are not covered by transmission alone," Suss said. "As [MCI] has focused on its core capabilities, it has cut down on being able to move into these other areas."
Edgerton disputes this interpretation of the company's current status.
"I think that's an inaccurate representation of the marketplace," he said. The entire telecom industry has been weak, and systems integrators have been positioning themselves as "agnostic telecom infrastructure providers," but the integrators have not yet demonstrated they can fill that role, Edgerton said.
"We do have systems integration capability. We do it to solve particular business problems, and we've been very successful," he said.
The opportunities for MCI in the upcoming year include major ventures such as:
- The Treasury Department's Treasury Communications Enterprise contract, a $3 billion, 10-year program that will succeed the Treasury Communications System contract now held by Northrop Grumman Corp. through its acquisition last year of TRW Inc.
- The Customs Secure Data Network contract, which appears to be moving forward despite the reorganization of the Customs Service within the Department of Homeland Security
- The Defense Department's Global Information Grid Bandwidth Expansion project.
"There is a lot of network transition going on," Edgerton said. "If we can wrap this thing up [the bankruptcy proceedings] by September, get everyone comfortable, I think agencies will react" positively.Prime IT contracting revenue:
Ashburn, Va.Chairman, president and CEO:
N/A*2002 net earnings:
N/A*2001 net earnings:
*WorldCom has not yet filed revised statements of earnings with the Securities and Exchange Commission for these years.
Al Edmonds, president of EDS' U.S. Government Solutions unit
By James Schultz, Contributing Writer
Electronic Data Systems Corp. won't likely mourn the end of 2002. Last year, the company saw its net earnings dip more than 15 percent. Two major clients, WorldCom and US Airways, declared bankruptcy. EDS restructured a major contract with the Navy and Marine Corps; and class-action lawsuits were filed by shareholders at year's end, alleging improper stock transactions.
And then in March, the company fired Dick Brown, its chairman and chief executive officer, and replaced him with Michael Jordan, former chairman and CEO of CBS Corp.
"EDS is going through a difficult time," said William Loomis, managing director for investment advisers Legg Mason Inc. in Baltimore. "It's the toughest IT environment we've seen in more than 20 years. They're the No. 2 player in global aerospace, with a strong market share, but growth will be minimal to none for the next year or two."
The situation, Loomis said, is worsened by client bankruptcies. EDS' WorldCom contract represented roughly $610 million of the company's 2002 revenue, with total receivables outstanding of some $80 million as of Dec. 31. The US Airways contract was valued at $190 million of the company's 2002 revenue, with outstanding receivables of $25 million.
The company's largest contract in the troubled airline industry is with American Airlines, with annual revenue just below $400 million. EDS receives approximately $600 million in annual revenue from other U.S. and international airline and related travel businesses.
Even in a turbulent year, EDS increased its total revenue slightly, from $21.1 billion to $21.5 billion. And the company moved up in its ranking on Washington Technology's list of Top 100 federal prime IT contractors, from No. 11 in 2002 to No. 9 this year. EDS officials have high expectations that their new CEO will help invigorate and re-energize the company.
"EDS is a strong, profitable company," said Jordan in a news conference shortly after his appointment.
In all, 80 percent of the company's business is with the private sector, with 20 percent government-related. Approximately $3 billion of 2002 revenue came from contracts with the federal government, including work for the departments of Defense, Education and Homeland Security and the General Services Administration.
Late last month, EDS announced it had received a contract to improve and ruggedize the Pentagon's IT infrastructure under the Command Communications Survivability Program, or CCSP. The upgrade is designed to ensure availability, survivability, redundancy, recoverability and security of Pentagon networks, data storage and voice and messaging systems. The work will be performed over two years by an EDS-led team and should be worth $258 million to the company.
One of the largest EDS efforts, a program to establish and maintain an intranet for the Navy and Marine Corps, ran into difficulty in 2002. The Navy-Marine Corps Intranet program was set up for five years beginning in 2000, with a three-year extension at the option of the Navy. But the company said the project has been delayed by difficulties in integrating, testing and certifying legacy systems and by the Navy and Congress asking for additional testing beyond the commercial testing mandates anticipated when the contract was awarded.
The base period has since been extended from five to seven years, with a minimum aggregate order for certain specified deliverables, primarily "seat services," valued at $6 billion for the contract duration.
In so doing, EDS has released the Navy from any liability for potential claims, including those for equitable adjustments or attributable to delays in issuing orders for seats up to the date of the modification. The company doesn't anticipate recognizing profit on the project in any significant amount in 2003, according to a company press release.
Nevertheless, Al Edmonds, president of EDS' U.S. Government Solutions unit in Herndon, Va., remains upbeat about the company's future. He noted traditional EDS strengths and capabilities, which he believes match government needs.
While information technology as an enterprise "didn't bounce back like we hoped" so far in 2003, Edmonds said he is bullish on long-term prospects.
"Major wins can't be measured just in dollars," Edmonds said. "They have to be judged in the space they occupy.  was a good year in terms of moving the needle on new business. We had positive growth; it just wasn't as strong as we would have liked."
Edmonds said EDS is also looking to enlarge its client base of local governments here and abroad. In March 2002, the company announced an eight-year agreement with the United Kingdom's post office that EDS said is valued in the multimillions. The company will provide electronic benefits transfer, customer-relationship management and application processing services to the office's 17,500 branches.
The initiative is part of a British government plan to issue benefit payments electronically rather than via paper, and will allow customers to access payouts in cash at post offices with the equivalent of a bank card.
Edmonds said there are continued opportunities for EDS and companies like it because of the pending outflow of experienced IT professionals in government.
"Government everywhere is talking about improving service levels," he said. "But in the next three years, there's a large chunk of IT workers who will be retiring. Enterprise outsourcing will be a very good market in the government space."
Despite the lackluster earnings picture and competition from offshore software providers, don't count EDS out of the fight, said Jerry Grossman, Aerospace Defense Government Group managing director for investment bankers Houlihan Lokey Howard & Zukin in McLean, Va. The company continues to produce stable margins, with operating income as a percentage of sales anticipated to remain within the 8 percent to 10 percent range for the foreseeable future.
"At the end of the day, this is a huge international business with a $21 billion base, operating in 60 countries," Grossman said. "This is a company that appears to have the stuff to endure this period and resume growth when the market picks up."Prime IT contracting revenue:
Plano, TexasChairman & CEO:
$21.5 billion2002 net earnings:
$1.12 billion2001 revenue:
$21.1 billion2001 net earnings:
Mark Ronald, president and CEO of BAE Systems North America
By Lisa Terry, Contributing Writer
BAE Systems North America is the only top 10 federal prime contractor that's technically not U.S.-based, because its parent, BAE Systems plc, is a U.K. company. BAE Systems' rise to No. 10 on Washington Technology's Top 100 list ? it was No. 21 last year ? reflects its success in continuing the high-quality work of forerunner Marconi Electronic Systems, which it reinforced through a string of U.S. acquisitions.
With the United States and United Kingdom allied in the war on Iraq, BAE Systems is well-positioned to compete for defense projects. In addition, the company is poised to apply anti-terrorism technology, already entrenched in the United Kingdom, to new U.S. homeland security projects.
"The Department of Defense treats these guys like they are a U.S. company with an all U.S. focus," said Stuart McCutchan, president of Infobase Publishers, Centreville, Va. "They're allowed to bid on defense contracts at an absolute equal level."
Perhaps the most significant of BAE Systems North America's many contracts is the Joint Strike Fighter project, led by Lockheed Martin. In 2002, BAE Systems participated in the system development and demonstration phase, including a July 2002 award to provide avionics support for Lockheed Martin's Autonomic Logistics Integrated Project Team.
The Defense Department is by far BAE Systems' largest U.S. customer, followed by the intelligence agencies, the Federal Aviation Administration and NASA, said 0Bob Fitch, vice president of government relations and marketing for BAE Systems North America.
"Our customer performance rating is around 95 percent," among the highest in the industry, Fitch said. About 85 percent of the U.S. division's business is in government, mostly federal, with the remainder in commercial businesses, such as flight and engine controls.
Other high-profile 2002 wins for BAE Systems North America of Rockville, Md., include:
- A next-generation Joint Tactical Radio System for the Army, Air Force and Marine Corps on the Boeing Co. team.
- Selection by the Defense Advanced Research Projects Agency to lead the advanced concept technology demonstration phase for its Adaptive Joint C4ISR (command, control, communications and computer, intelligence and reconnaissance) Node program. DARPA budgeted $60 million for the program over five years.
- Development of the integrated vehicle management system computer for Boeing's X-45B unmanned combat air vehicle.
- A five-year, $82.3 million contract to provide engineering, technical and logistics support services for the Naval Air Warfare Center's Surface Communications and Information Systems Division, Systems Modernization Branch, St. Inigoes, Md.
BAE Systems also won all of its service and support recompetes in its technology sector in 2002, Fitch said.
A strong factor in BAE Systems' success, he said, has been the new businesses it acquired. During the past year, the company purchased information assurance solutions provider Corbett Technologies Inc., professional technical services provider Mevatec Corp., sensors and guidance systems maker Condor Pacific Industries Inc., and technical engineering firm Advanced Power Technologies Inc.
In addition, 2002 marked the first year BAE Systems could capitalize fully on its $1.67 billion acquisition of Lockheed Martin's Aerospace Electronic Systems Business, including its jewel, the Sanders unit, which was purchased in November 2000.
"One of our strengths is being able to leverage the technologies and companies we acquired over the last few years into a single-purpose enterprise," said Fitch, from engineering to human resources to financial management.
Fitch said BAE Systems invests in its acquired companies and brings them into the fold in terms of leadership style, training programs and other business practices without destroying their culture. BAE Systems' independent research and development spending is in the double digits, and it spent $220 million in facility upgrades in 2002.
"It is our goal to build prime integrating contractor capability," Fitch said.
BAE Systems North America has supported the war in Iraq by mobilizing 75 employees, 30 with direct area of operations support responsibilities such as customer service and support to intelligence departments and the Navy. But most of the war's impact could come in the form of increased global business contracts for BAE Systems plc.
BAE Systems' government clients are facing a number of significant challenges, Fitch said.
"We've all heard the word transformation," he said. "Our customers across the board are being asked to think differently about how they do business and provide products and services." They're also being asked to do more with less, particularly within C4ISR.
"They're depending more on industry to present total solutions," Fitch said. Reductions in the federal work force are also driving demand for outsourcing.
Fitch expects BAE Systems North America to grow revenue by 10 percent in 2003, a healthy growth rate in comparison to the overall corporation, which saw revenue decline in 2002 and had a net loss in each of the past two years.
"North America has proven to be a fertile market for the total corporation," Fitch said.
Some have speculated that, given BAE Systems' success in the United States, the company may seek to establish dual headquarters in the United States and United Kingdom and list on a U.S. stock exchange. The company, however, denies it has such plans.
BAE Systems "has had a lot of trouble in the U.K. on fixed-price development contracts, which has brought them a fair amount of trouble financially as a result," said Infobase's McCutchan. "But their North American business is going gangbusters."
BAE Systems North America has been recasting itself internally in anticipation of making the U.S. Department of Homeland Security a major client.
"We're trying to pull all of our capabilities together against what we think will be the greatest challenges in homeland security," such as explosives detection, chemical and biological weapons and electronic warfare, Fitch said.
BAE Systems is awaiting a decision on a large Federal Emergency Management Agency digital mapping contract.
BAE Systems was formed through the 1999 merger of British Aerospace and Marconi Electronic Systems.
BAE Systems plc
Prime IT contracting revenue: $638,692,000
Based: Farnborough, U.K.
Chairman: Richard Evans
CEO: Mike Turner
2002 revenue: $19.5 billion
2002 net loss: $1.1 billion
2001 revenue: $21 billion
2001 net loss: $213.8 million
Ticker: BA on London Stock Exchange
BAE Systems North America Inc.
Based: Rockville, Md.
President & CEO: Mark Ronald
2002 revenue: $3.9 billion
2002 net earnings: $370 million
2001 revenue: $3.7 billion
2001 net earnings: $360 million
By Jon William Toigo, Contributing Writer
Booz Allen Hamilton Inc., at No. 11 on Washington Technology's Top 100 list with $636.8 million in federal prime contracting revenue, expects to see continued growth from military and public health opportunities, especially related to bioterrorism and biowarfare.
"There has been an increase in the number of contracts for military health and public health, not big dollar amounts but intended to enable greater use of information technology to improve delivery on the government's health mission," said Dennis Doughty, senior vice president for the firm's civilian IT business.
Last October, the company was awarded two contracts by the Military Health System that will support military medicine's compliance with the Health Insurance Portability and Accountability Act of 1996. The two new tasks, totaling $3 million, will be completed by August by Booz Allen and partner Plateau Systems Ltd. in Arlington, Va.
More recently, the firm got the nod for a $3 million contract to support the Health Resources and Services Administration in its efforts to prepare hospitals for acts of bioterrorism. Booz Allen also won a $9.1 million, four-year assignment from the National Institute for Child Health and Human Development to design, develop and implement a comprehensive clinical trials data management system. The system will assist clinicians and principal investigators with data collection and analysis as well as sharing and dissemination activities related to protecting children against disease and disability.
Civilian, defense and national security agencies are mainstays of the company's government business, Doughty said. Revenue in fiscal 2003, which ended March 31, remained level for the McLean, Va.-based company at $2.2 billion, the same as in fiscal 2002.
Following the Sept. 11, 2001, terrorist attacks, Booz Allen wrote a report on preparing for and responding to a bioterrorist attack. The report was based on a December 2001 war game involving senior policymakers across numerous federal, state and local government agencies, senior executives from pharmaceutical and biotechnology companies and health care providers. The war game was cosponsored by the Council for Excellence in Government. In October 2002, the firm sponsored a port security war game that evaluated the readiness of government and heath care organizations to cope with a dirty bomb attack. Participating in this event were 85 leaders from a range of government and industry organizations involved in port security. Co-sponsored by the Conference Board Inc., New York, the war game was not part of a government contract.
Booz Allen also assists national and international health organizations with a wide range of support, providing expertise in broad areas such as information systems development, adverse event reporting systems and project management. Late last year, the company inked a one-year, $4 million contract with the Food and Drug Administration's Office of Regulatory Affairs to support its electronic Laboratory Exchange Network.
Doughty also said outsourcing is one of the trends he sees in the coming year. "Our role is to help customers select appropriate outsourcing strategies from desktop to data management," he said.
The company has won significant multiyear contracts:
- The Energy Department tapped Booz Allen for enterprise architecture, IT investment management and cybersecurity support, a deal worth $50 million over five years.
- The National Science Foundation picked the company to lead its restructuring of human capital management, business process re-engineering and information architecture, work worth $15 million over three years.
The need for true integration services requires an investment by Booz Allen in its people and processes, Doughty said. The company continues to audit its processes for ISO 9001 compliance and has also adopted the Capability Maturity Model of the Software Engineering Institute to guide its software development and delivery practices.
Prime IT contracting revenue: $636,766,000
Based: McLean, Va.
President & CEO: Ralph Shrader
2003 revenue: $2.2 billion (fiscal year ends March 31)
2002 revenue: $2.2 billion
By Joab Jackson
Thanks to an unrelenting flurry of acquisitions, L-3 Communications Corp. has landed firmly in Washington Technology's Top 20 for the first time. Spunoff from Lockheed Martin Corp. in 1997, New York-based L-3 has been gobbling up companies. But according to chairman and chief executive officer Frank Lanza, there is a method to the buying madness.
"People will ask us, 'Will you just buy companies randomly?' No, we have a plan," Lanza said during an April 23 earnings conference call. The defense-focused integrator buys businesses that build products or offer services that fit into its own systems.
"Now, we make a lot more product that goes into the missile. We do the same thing with aircraft," Lanza said.
In March, the company finished purchase of the avionics systems division of Goodrich Corp., Charlotte, N.C., for $188 million. In November, L-3 acquired Norwalk, Conn., communications provider International Microwave Corp. for $40 million. Other recent buys include:
- Shipboard power system provider Westwood Corp. of Tulsa, Okla., for $28 million;
- McLean, Va.-based defense services provider Technology, Management and Analysis Corp. for $50 million;
- Image capture solution provider Wescam Inc. of Burlington, Ontario, for $118 million;
- Rockwall, Texas-based network-centric warfare solution provider ComCept Inc. for an undisclosed amount.
"There is always some sort of disruption when merger and acquisition activity takes place. But L-3's track record for integrating its acquisitions has been very good," said Jerry Weltsch, principal analyst for global consulting and market research firm Frost and Sullivan Inc., San Antonio.
Despite the company's growth, Lanza does not see L-3 competing with tier-one platform integrators such as Lockheed Martin.
"We don't build platforms. Where a Lockheed or Northrop Grumman would prime on an airplane or unmanned aerial vehicle, I want to sell them the whole communications system [for that platform]," Lanza told Washington Technology.
As a subcontractor to Lockheed Martin, L-3 provides and supports the communications equipment used in the Coast Guard's Integrated Deepwater System program, work worth as much as $1.5 billion over the 30-year deal.
In January, the company was awarded $52 million to build the Advanced Extremely High Frequency Communications Security and Transmission Security System, which will provide secure global communications to U.S. military and allied forces.
The company sees continual growth in the defense sector, especially as the war in Iraq winds down, Lanza said. Fuses and transmitters for bombs and missiles need to be replaced. Ships, helicopters and other pieces of equipment are being slated for upgrades.
The company also plans to aggressively pursue homeland security opportunities.
"We found a niche for ourselves that we didn't expect to fall into," Lanza said. "Things such as maritime security, port security, crisis management, border security ? we do those for the military already. So we're saying let's apply that to the civil sectors."
Lanza expects $6 billion in annual procurement coming from Homeland Security, once the agency gets up to speed. "I think in the next couple of years, if we are smart and lucky, we can grow a Homeland Defense-only business ? that could be a billion-dollar business," he said.
Prime IT contracting revenue: $573,630,000
Based: New York
Chairman & CEO: Frank Lanza
2002 revenue: $4 billion
2002 net earnings: $178 million
2001 revenue: $2.3 billion
2001 net earnings: $149 million
By Heather Hayes, Contributing Writer
Dell Computer Corp. in 2002 became the first company to generate General Services Administration schedule sales of more than $1 billion, helping it grab the No. 13 spot on Washington Technology's Top 100 list for the second year in a row with $557.7 million in federal prime contracting dollars.
The company's overall government revenue increased 28 percent, while its enterprise and services businesses grew at an even faster rate, said Tom Buchsbaum, vice president of federal systems for Dell of Round Rock, Texas.
"I would be very hard-pressed to find any areas of disappointment," he said. "It was an outstanding year for us last year."
Although it is best known as a product supplier, Dell lately has been keen on bolstering its reputation as a provider of enterprise and global services.
"We've been called on to do more complex things around the world," Buchsbaum said, noting that Dell's areas of expertise now include infrastructure services, help desk, managed services and network design, assessment, security and redundancy. "We've invested a lot in our ability to deliver services that are far beyond just fixing desktops."
This push got a lift in 2002 when Dell signed a blanket purchase agreement with the Marine Corps to replace 66,000 desktop and notebook computers, even as the organization prepares to move to the Navy-Marine Corps Intranet. Known as the Enterprise Sustainment Initiative, the contract calls for Dell not only to supply the hardware but also to provide worldwide deployment and application and data migration. Dell is already a subcontractor to Plano, Texas-based Electronic Data Systems Corp. on the NMCI project, which remains Dell's largest federal-sector contract.
Dell also spread its services wings last year with a spate of state-funded projects that further homeland security efforts, an area that remains a major focus for the company at both the state and federal levels. For example, Dell was awarded the Texas Health Network last year, a project that connects the 64 state agency facilities responsible for tracking, monitoring and reporting disease outbreaks and potential bioterrorism attacks. Dell will provide hardware, installation, onsite technical services and storage support.
The company last year also helped the Centers for Disease Control and Prevention build a new communications and computing network for its new Marcus Emergency Response Center.
Boasting operating costs of just 10 percent, Dell remains the envy of the industry, Buchsbaum said, and a favorite among those looking for good deals on commodity items. That opinion is backed up by Dell's GSA schedule business, which topped $1.2 billion last year, the first time any company has broken through the billion-dollar barrier.
Dell also is extending its low-cost model to address trends and challenges within the federal marketplace. It is focused on developing more ruggedized, secure and redundant computing and network products that meet the wartime requirements of deploying IT products in difficult environments.
And the growing demand for government data is fueling a strong foray into the storage area. The Dell PowerEdge product line and Dell/EMC storage area network technology are both becoming very popular among government customers, Buchsbaum said.
"We're able to offer very discernible, differentiating value, and when a customer looks at three vendors and makes a best-value determination, Dell wins a very large share of those value decisions," he said. "Given the fiscal environment, customers are doing a lot of scrutiny around their purchases, and that's when the benefits of our direct model really begin to shine."
Prime IT contracting revenue: $557,667,000
Based: Round Rock, Texas
Chairman & CEO: Michael Dell
2003 revenue: $35.4 billion*
2003 net earnings: $2.12 billion
2002 revenue: $31.168 billion
2002 net earnings: $1.78 billion
*Fiscal 2003 ended Feb. 1
By Gail Repsher Emery
'Our first year as a public company has been wonderful," said Joseph Kampf, president and chief executive officer of Anteon International Corp.
Anteon went public March 12, 2002, with an initial stock offering of $18 per share. The stock closed at $20.05 that day, and as recently as April 22, it was trading at $23.38 ? nearly 30 percent higher than its offering price.
In 2002, Anteon also generated $1.6 billion in new contract awards, the highest annual amount in its history. "We ended the last year on a high note with very high organic growth," Kampf said.
Anteon specializes in areas related to national security, including intelligence systems and programs, logistics modernization, missile defense, training and simulation, emergency response and credential card identification systems. Anteon agreed last month to buy Information Spectrum Inc. of Annandale, Va., a $90.7 million deal that expands its business in credential card technologies, military logistics and training systems.
Eighty percent of Anteon's $825.8 million in revenue comes from Defense Department and intelligence agency customers. Eighteen percent comes from federal civilian agency customers, with a high concentration of work in the Department of Homeland Security and mission-critical programs in other agencies.
Tom Meagher, vice president of equity research for BB&T Capital Markets of Richmond, Va., said his firm looks more favorably on firms with a large percentage of their revenue coming from Defense Department and intelligence agencies because "they are going to get their money on time."
While Anteon's work is concentrated in defense and intelligence agencies, its contracts are spread among many agency offices, giving the company a diverse customer base. Anteon's largest contract amounts to just 5.5 percent of its annual revenue, so the loss of a single job would not be a huge blow. "Our risk profile is low," Kampf said.
Anteon won 54 percent of the more than $3.3 billion in business it bid on in 2002. Its wins included a $66 million deal for systems engineering and information technology support on the Coast Guard's national distress system and a range of other homeland-security-related programs, and a $94 million contract for systems engineering and integration services on the Navy's Aegis Missile Defense Project.
For 2003, Anteon is pursuing more than $8 billion in opportunities, including many contracts worth more than $100 million, Kampf said.
"We believe we will continue to grow organically at a high double-digit growth rate," he said. "We constantly attempt to sell more of our capabilities to our existing customers, and branch out into the agencies where we have a foothold."
Anteon did just that with the Army. For several years Anteon had handled all the IT and communications for sites used to train soldiers in urban combat. Last year, Anteon began working to develop a mobile Military Operations on Urban Terrain site. The mobile MOUT is a series of modular containers wired with all necessary IT and communications systems, which can be shipped worldwide.
The first one was sent to Kuwait March 9, and was used to train troops in the 101st Airborne Division before they moved on Baghdad. The second will ship in early May to Afghanistan, Kampf said. The potential market for MOUT is large, and includes hostage rescuers, state and local police forces and emergency response staffs, he said.
"It saves lives, and it is also a brand new business line for Anteon in an area which we had been doing business for a long time," Kampf said.
Prime IT contracting revenue: $555,744,000
Based: Fairfax. Va.
President & CEO: Joseph Kampf
2002 revenue: $825.8 million
2002 net earnings: $26.4 million
2001 revenue: $715 million
2001 net loss: $82,000
By Heather Hayes, Contributing Writer
With the bulk of its business devoted to defense, intelligence and homeland security, Titan Corp. sees itself uniquely positioned to address the government's 21st century challenges.
The company, which held steady at No. 15 on Washington Technology's Top 100 with more than $514 million in prime contracting dollars, this year will pursue a record number of government contracts that are valued at more than $100 million.
"Our size is such that now, in the areas where the customer knows us and where we have capability, we can compete with whomever the competitors may be," said Gene Ray, Titan's chairman and chief executive officer.
That was clear last year when the Titan team won the National Security Agency's Enterprise Architecture and Decision Support program, beating out a heavyweight team that included Northrop Grumman Corp., Lockheed Martin Corp., Booz Allen Hamilton Inc. and Science Applications International Corp.
Titan will provide technical input and analyses for acquisition, investment and strategic planning for NSA. Worth $533 million over 24 months and five option years, the contract is the largest single award in Titan's history, Ray said.
Transformation is on Titan's mind, which last year discontinued Titan Wireless, its main commercial venture, and is now concentrating its resources on defense, intelligence, homeland security and NASA business. The focus seemed to pay off as the company's business increased by $200 million last year through internal growth.
Ray attributes this growth to "being in the right markets at the right time." That is certainly true of the homeland security realm. Before the Sept. 11 terrorist attacks, Titan had 10 active contracts that today would be classified as homeland security. Now the company is working on more than 60 homeland security contracts.
At the same time, Titan has continued to excel in the defense world. In a new venture, for example, Titan began developing a loitering unmanned aerial vehicle for the Navy. Known as the Affordable Weapon, this UAV can be launched from ship or land, fly for up to 24 hours and then be sent to a moving target within a couple of meters.
Titan is building each weapon for just $50,000, a bargain compared to the going rate of $1 million per cruise missile. Fifteen weapons have been tested to date, and Titan has shown that it can cut two years off of test and deployment.
"The reason we're able to build this so cheaply and so quickly is everything is built out of proven commercial products," Ray said, noting that the weapon could be in full-scale production in less than a year.
In other defense dealings, Titan in 2002 won the $190 million Special Forces Command Enterprise Integration Technology contract to perform enterprise network management and engineering services for all communication and network infrastructure, along with a $188 million test and evaluation contract from the Naval Air Warfare Center Aircraft Division and a $103 million services contract from the Air Force's Electronic Systems Center.
"We now have the size and the capabilities to perform these larger contracts," Ray said. "But we're still agile and responsive like a small company. That makes us pretty unique."
Prime IT contracting revenue: $514,175,000
Based: San Diego
Chairman & CEO: Gene Ray
2002 revenue: $1.392 billion
2002 net loss: $271.5 million
2001 revenue: $974 million*
2001 net loss: $98.6 million
* Restated after discontinuation of Titan Wireless.
By William Welsh
Affiliated Computer Services Inc. will continue to rely heavily on its business process outsourcing experience to land large federal contracts in 2003, according to Harvey Braswell, group president of government services.
"BPO is really driving the IT services industry on the commercial as well as the federal side," Braswell said. The Dallas-based company derives about 66 percent of overall revenue from business process outsourcing, in which contractors perform work that is not considered a core function of government, he said.
In March, ACS made two key changes to its federal business. First, the company created a new position to oversee its federal services, and hopes to have it filled by June, said Jeffrey Rich, ACS' chief executive officer. Second, it is changing how it organizes its business from a focus on service offerings to one on client offerings, he said.
Braswell, who currently oversees both federal and state and local health care services, will lead the health care business, said Steve Person, a company spokesman.
ACS is ranked No. 16 on Washington Technology's Top 100 federal prime contractors list with $457 million in government systems integration revenue.
ACS gets 23 percent of its revenue from federal contracts, 46 percent from state contracts and 31 percent from commercial sales, Braswell said. Federal business is growing at a percentage rate in the middle teens, he said.
ACS' largest federal deal last year was a task order awarded under the General Services Administration's Millennia Lite Contract to centralize processing for workers' compensation programs to the Labor Department. After a 14-month, $5 million implementation, the contract will be worth about $100 million over 10 years, Braswell said.
Other key wins were a four-year, $64 million contract to support Defense Information Operations; a seven-year, $63 million contract to provide network services support to the Air Force Reserve Command; and a 10-year, $28 million contract for desktop support services at Sandia National Laboratories.
Of the task orders that the company held under GSA's Schedule 70 and Millennia Lite contracts in 2002, ACS won more than 90 percent of the renewals, Braswell said.
This year, ACS federal services group will compete for key contracts at the departments of Defense, Education and Homeland Security and the Office of Personnel Management, he said. These opportunities include Homeland Security's Automated Entry-Exit System,OPM's Retirement Systems Modernization, and the Defense Department's Tricare National Retail Pharmacy Program.
The company's biggest disappointment last year was not winning the Department of Housing and Urban Development IT Service contract, known as HITS, Braswell said. Lockheed Martin Corp. of Bethesda, Md., won the 10-year, multibillion desktop services outsourcing contract.
The HITS loss was an important lesson for ACS, Braswell said. While the company can compete on a level playing field with other first-tier federal contractors, it can't afford to bid on every single deal of that size, he said. "We need to be careful and selective about the larger deals that we bid on," Braswell said. "You learn more when you lose things sometimes than when you win."
Prime IT contracting revenue: $456,915,000
President & COO: Mark King
CEO: Jeffrey Rich
2002 revenue: $3.1 billion
2002 net earnings: $229 million
2001 revenue: $2.1 billion
2001 net earnings: $134 million
By James Schultz, Contributing Writer
With profits soaring 113 percent in 2002, GTSI Corp. garnered the No. 17 slot on Washington Technology's Top 100 list, firmly holding its position as the top reseller in the government market.
"Our customers see us as a trusted partner. That's more important than ever before," said John Spotila, GTSI president and chief operating officer.
GTSI of Chantilly, Va. is focused on all government markets, touting and selling expertise in high-performance computing, advanced networking, high-availability storage and information assurance. It prides itself on being one of the country's largest resellers of computer products.
In recent years, GTSI has been moving aggressively toward mobile and wireless applications, particularly for emergency first responders, such as police, fire and rescue agencies. The largest chunk of GTSI revenue, 76 percent, derives from contracts with federal agencies.
This past year was a banner one for the firm. Not only did profits increase from $4.5 million in 2001 to $9.5 million in 2002, but during that same period revenue jumped nearly 20 percent, from $783.5 million to $934.7 million.
In April, GTSI won a three-year, $300 million contract from the U.S. Communities Purchasing and Finance Agency to provide computers, software, peripheral accessories and related IT services to state and local governments, schools and nonprofit organizations affiliated with government agencies. Clients can choose from roughly 175,000 IT products and services from more than 300 vendors.
GTSI is also working on NASA's Outsourcing Desktop Initiative with the Jet Propulsion Laboratory in Pasadena, Calif., to provide hardware, software, managed services and customized reporting in support of the space agency's seat management program.
In December, the company was the sole awardee for a five-year blanket purchase agreement under the GSA schedule to provide the Department of State with workstations, servers, networks and other hardware, software and technical support services to domestic bureaus and missions abroad. The BPA could eventually generate annual revenue of $20 million, according to the company.
The State Department's IT strategic plan includes interconnection of the department's offices worldwide, with classified and unclassified e-mail capabilities, remote diagnostics and continued implementation of the security measures laid out in the President's Protecting America's Critical Infrastructure directive.
In April 2002, working with what was then DynCorp (since purchased by Computer Sciences Corp.), GTSI won a $26 million contract to provide desktop, server, network and integration services to the FBI to modernize its IT systems. Originally, the $132 million Trilogy program was to be completed in three years, but was accelerated in the aftermath of the Sept. 11 terrorist attacks. Trilogy was completed in just about a year.
Spotila said the new timetable was logistically challenging and required complex, rapid, product integration.
"We're like a guy with a whole tool kit, rather than someone with a single hammer looking for a bunch of nails," Spotila said. "The word that gets used a lot is solutions. The trend is to solve problems with multivendor solutions, rather than just buying components in a box. Performance matters. You can buy a computer, load in the software, and if it doesn't work, it's of no use to you."
Prime IT contracting revenue: $432,610,000
Based: Chantilly, Va.
Chairman & CEO: Dendy Young
2002 revenue: $934.7 million
2002 net earnings: $9.5 million
2001 revenue: $783.5 million
2001 net earnings: $4.5 million
By Lisa Terry, Contributing Writer
After essentially pulling back from federal business from 1994 to 1997, IBM Corp. is quickly making up for lost time. Revenue from federal government contracts grew 25 percent from 2001 to 2002, putting IBM back in the top 20 of Washington Technology's Top 100 at No. 18 among federal prime contractors.
"We've had 13 consecutive growth quarters and grew at three times the market rate," said Anne Altman, managing director of IBM U.S. Federal, Bethesda, Md.
The federal government is a key growth sector for IBM and is its largest customer. Altman cited the ability to implement enterprise architecture and enterprise transformation as IBM's core competencies.
"The No. 1 strength we bring to federal stems from our own transformation experience," she said.
In the mid-1990s, IBM moved from a decentralized structure with 13 divisions and thousands of applications to a more centralized company, entailing a consolidation in business processes, data systems and hardware lines. IBM leadership has been sharing that transformational experience through both contracted services and informal forums for government senior executives.
About half of IBM's federal customers are civilian agencies. The other half are within the defense and intelligence communities. Major customers include the U.S. Customs Service, the Army and Navy and the departments of Agriculture and Treasury. IBM's reach into government, as well as its consulting capabilities, was broadened with the October acquisition of PricewaterhouseCoopers Consulting.
Altman said she sees her customers' main challenges as improving service, dealing with an aging work force, legacy infrastructure, facilitating interagency communication and establishing new business models. An on-demand approach to serving customer needs is pervasive at IBM.
In 2002, IBM addressed customer challenges through a diverse array of contracts awarded at the end of 2001, such as an e-learning project for Army University and a project for the Office of Personnel Management addressing how to attract, retain and retool personnel, as well as how to collaborate across agencies, improve government business processes and share information and other resources.
Web services, security technology and data management technology have been significant areas of focus. Altman said IBM's services business has grown at four times the market rate, and that its Web services business increased 36 percent year to year. Other big wins include:
- A prime subcontract from Unisys Corp. for the Transportation Security Administration to implement an IT infrastructure. The contract is valued at $1 billion, with $250 million to $450 million to IBM over seven years.
- A managed services subcontract under Computer Sciences Corp. for the Environmental Protection Agency, including a data center, Web hosting, high-performance computing and IT training. The total contract value is $1 billion, with $250 million to $450 million for IBM.
- A $290 million contract from the Energy Department to build two supercomputers for the Lawrence Livermore National Laboratory.
- A $20 million contract to build, with partners, the Capital Wireless Integrated Network (CapWIN) for the Washington, D.C., region, the first interoperable wireless system to span multistate government jurisdictions.
Prime IT contracting revenue: $393,921,000
Based: Armonk, N.Y.
Chairman, president & CEO: Samuel Palmisano
2002 revenue: $81.2 billion
2002 net earnings: $3.6 billion
2001 revenue: $83.1 billion
2001 net earnings: $7.7 billion
By Tania Anderson, Contributing Writer
Jack London always has his eye on the next opportunity. Whether it's a company to acquire or a new market to pursue, London, chief executive officer and president of CACI International Inc., is constantly looking ahead.
These days, London said he's identified untapped areas of homeland security, such as transportation security, Coast Guard operations and border control, as opportunities for CACI. This is in addition to the company's long-time work for defense and intelligence agencies.
"The bad guys are out there and in our backyard, and we can play a role in certain kinds of protections," said London, who's headed up Arlington, Va.-based CACI since 1984. London started with the company in 1972.
It's an important strategy as the federal contractor gets closer to its goal of $1 billion in revenue, which London said the company may reach before its projected date of 2005. He said the company will likely hit between $815 million and $835 million in revenue by the end of its fiscal 2003, which ends June 30.
CACI reached No. 19 on Washington Technology's 2003 Top 100 list with $388.3 million in prime IT contracting dollars. The spot is one lower than last year, but London said the company had one of its best years ever. It hit nearly $682 million in total revenue in fiscal 2002, up 22 percent from the previous year.
Aside from being well-positioned in national security before the Sept. 11 terrorist attacks, CACI also has been an aggressive acquirer, buying 21 companies in the last decade. Just in the last fiscal year, it bought the government solutions division of Condor Technology Solutions Inc., Acton Burnell Inc. and Applied Technology Solutions of Northern Virginia Inc. On April 24, CACI announced it would buy Premier Technology Group Inc. of Fairfax, Va. No financial terms were disclosed on any of these.
London said the buying spree will continue with the search for companies in the $50 million to $100 million range.
"It will be a continuing part of our model," he said. "We have lots of ammunition left."
Some of the company's big contract wins in the last year include a $100 million deal with the Army Forces Command to provide project management services for Army installations and combat training centers.
CACI also won subcontracting work with Computer Sciences Corp. on the Army Communications Electronics Command's Rapid Response program. The company, which expects $50 million over the next eight years from the contract, will play a role in intelligence and information operations programs for the Army and other clients.
CACI also will support new task orders for information assurance projects, as well as integrated logistics activities related to manufacturing and new equipment field testing.
The company also won a prime contract worth $103 million on the Navy Enterprise Maintenance Automated Information System Data Center operations contract.
Bill Loomis, an analyst with Legg Mason Wood Walker Inc., said the company's growth this year will depend on winning more new business, renewing existing contracts and continuing to make successful acquisitions.
"Their internal growth has been around 20 percent, which is pretty impressive," he said. "They've done a great job of growing existing contracts and winning new business in the Defense Department and civilian agencies."
Prime IT contracting revenue: $388,304,000
Based: Arlington, Va.
Chairman and CEO: Jack London
2002 revenue: $681.9 million
2002 net earnings: $30.5 million
2001 revenue: $557.9 million
2001 net earnings: $22.3 million
By Patience Wait
Unisys Corp. may have fallen from No. 10 to No. 20 on Washington Technology's Top 100 list, but the information technology company still had a very good year, company officials said.
The decline in federal prime IT contracting revenue from $524.7 million in 2001 to $384.7 million in 2002 resulted in part from the federal unit's strategy to shed unwanted business lines so that it could focus on its service offerings.
"I said we would exit the commodity resale business," said Greg Baroni, president of Unisys Global Public Sector. "We had an incredible sales force leveraging the use of our [governmentwide acquisition contract] vehicles and having them resell ? other vendors' products through those vehicles."
Instead, Baroni decided the sales force would focus on the agencies he felt would be the centerpiece of Unisys' business in the future. And so today, the company holds one of the highest-profile contracts in the government space: the $1 billion task order to build the IT infrastructure for the Transportation Security Administration.
"Without a doubt, [that win] established us as a player," Baroni said. "I think it surprised a lot of people."
Unisys also used the TSA task order to provide some early services to the newly created Homeland Security Department, such as moving the startup staff of more than 1,000 people into temporary headquarters, complete with computers, applications and communications capabilities.
Overall, Unisys' public-sector business, which includes state and local contracts as well as international government contracts, represents about one third of the company's sales, Baroni said. Federal sales had been about one third of that total, but "the mix is beginning to change significantly," he said, predicting the federal business would grow to close to 50 percent of the sector's revenue.
"We're definitely into strong, double-digit growth in federal, and the market knows this," Baroni said. "I did not expect, and we did not have, double-digit growth last year, just because we were exiting a lot, too. ? However, if you take all the crap we were doing out of the equation, we had substantial growth."
The company is aiming for more business in the homeland security arena.
"It fits with our overall theme," Baroni said. "We are pursuing [the former Immigration and Naturalization Service] work, Customs work. We're pursuing a relationship with [CIO] Steve Cooper and the Department of Homeland Security."
Winning the TSA prize has not been an unalloyed blessing. Unisys has been the target of "some vicious rumors by our competitors," Baroni said, such as an allegation that the company had received a "cure letter" from TSA, requesting that the company improve its performance.
"You've got it from the horse's mouth: There is no such letter," Patrick Schambach, TSA's CIO, told Washington Technology.
Nor has the company floated from triumph to triumph. Unisys had high hopes of winning a $102 million contract to support the Defense Civilian Personnel Management Service, for instance, but lost to Lockheed Martin Corp.
But market analysts give Unisys high marks for its recent change in direction.
"They've developed a high profile, thanks to the TSA contract win. And, of course, federal is the place to be if you're in computer services," said Greg Gieber, vice president of A.G. Edwards & Sons Inc., St. Louis. In a very difficult business climate, Gieber said, Unisys is holding its own. "It's not a large company. They're careful about what positions they take and where they play," he said.
Prime IT contracting revenue: $384,744,000
Based: Blue Bell, Pa.
Chairman & CEO: Larry Weinbach
2002 revenue: $5.6 billion
2002 net earnings: $223 million
2001 revenue: $6 billion
2001 net loss: ($67.1 million)
By Nick Wakeman
The Washington Technology Top 100 is compiled through the work of two market research firms: Federal Sources Inc. of McLean, Va., and Eagle Eye Inc. of Fairfax, Va. They analyze data from the General Services Administration's Federal Procurement Data Center.
The rankings are based on spending by agencies during the fourth quarter of fiscal 2001 through the third quarter of fiscal 2002. GSA did not release procurement data for all four quarters of fiscal 2002 in time to conduct this analysis. The procurement data is analyzed using 117 product service codes.
The codes are selected to give the most accurate snapshot of government spending on information technology, telecommunications and systems integration work. After choosing the codes, Federal Sources, Eagle Eye and Washington Technology sift the data, account for mergers and acquisitions and then rank the companies.
Some things to keep in mind:
- Agencies report dollars obligated to prime contractors that are worth more than $25,000. This represents actual spending on a contract during the time period analyzed and not spending over the entire life of the contract.
- The reports are for prime contracting only and do not include subcontracting dollars.
- GSA schedule transactions of more than $25,000 are included.
- About 65 agencies are required to report contract obligations to the Federal Procurement Data Center. However, the Postal Service, the legislative and judicial branches and most intelligence agencies do not report their spending.