Making the Team: SAIC

"We have created a monster," said George Otchere, laughing.Otchere, Science Applications International Corp.'s director of small business development, is referring to Indus Corp., which was an SAIC subcontractor with five employees just over a decade ago. "Now, they compete with us quite a bit and beat us sometimes," he said.Vienna, Va.-based Indus ? with annual revenue nearing $80 million ? is a small player compared to SAIC and its $2.8 billion in government contracts. Otchere said that Indus used its SAIC introductions at the Environmental Protection Agency, the Justice Department, the Immigration and Naturalization Service and other agencies to build its business since the mid-1990s. The relationship is a valuable example of SAIC's protégé program, which encourages small business development, he said.SAIC also is "the only large company that has an incentive to our business units ? to exceed, not just meet, our goals" for small business involvement in government contracts, Otchere said. SAIC annually allots 50,000 stock options "that we distribute to business units to incentivize them to exceed" contractual obligations for small business partnering, Otchere said. The options pool for the whole company is available to be split among individuals and groups that surpass SAIC's commitments. At today's stock price, the pool represents options valued at about $1 million. Otchere, who has overseen SAIC's small business program for eight years, cites those commitments as emblematic of SAIC's efforts to encourage partnering. He said SAIC spends "in excess of $5 million yearly to support small business" contractors, spread among the company's 25 business units. "In the last two to three years, we're seeing more small business participation, based on the total revenue of contracts," Otchere said. SAIC also has mentoring programs, funded with at least $100,000 per year to train small businesses in how to win government contracts.Some of those funds go to training conferences. SAIC hosted one program in Virginia for representatives from about six historically black colleges and universities and minority institutions plus several federal agencies, including NASA, Army, Navy and Health & Human Services. These sessions offered guidance on proposal development and marketing training. Beyond such targeted initiatives, SAIC has brought small business subcontractors into most of its IT projects. Otchere said the company has worked with more than 500 small firms in recent years on a variety of contracts. Among its recent flagship projects are the UNITeS (Unified NASA Information Technology Services) effort, centered in Huntsville, Ala., which required 30 percent of revenues go to small businesses. That proportion was unusually high compared to a more typical 10 percent ratio. Otchere said that the ratio may continue to climb in future contracts. "In today's environment, we're seeing higher participation requirements for small business," he said. Otchere said SAIC talks to about 20 to 30 companies every week to screen prospective new small business partners. "Some come in for meetings," he said. "We ? screen them to see how they can augment our skills to win contracts." Otchere's team also attends conferences hosted by federal clients to meet prospective partners and uses information in its database, which is supplied by potential partners. Candidates can fill out a profile via the SAIC Web site, and that information is available to all of SAIC's business managers seeking specialized skills or support on contracts. "Any project over $100 million comes through this office," Otchere said. "The smaller the contract, the chances are it will be handled by the line organization without our involvement."SAIC's historic focus on security continues to top its current agenda."Information security is very key, so the small businesses that have good past performance in information security really do have opportunities with us," Otchere said. Beyond that fundamental opportunity, SAIC's major activities is in network administration, software development and business process engineering. A primary credential for selecting small business partners is "the value a company brings to us," Otchere said. "They have to bring value. We don't choose small businesses because they are small. We choose [them] because they bring value and make us more competitive. We're competing against Northrop Grumman, Booz Allen, Lockheed Martin and the rest." Otchere said that SAIC looks at small and medium sized partners as bringing "price competitiveness and innovation." He said SAIC will "probably double in revenue in the next five years," and it looks toward small partners as helping in that growth. "The more competitive they are, the more competitive it makes us," he said. SAIC expects subcontractors to do plenty of preparation before seeking a relationship. "Knowing the customer is important," Otchere said. "If they [small business companies] know the customer, then they know the problems the customer is facing."SAIC relies on subcontracting to companies it has used on previous projects, but encourages new companies to find their way into SAIC, starting at the Web site page devoted to small business partnering (www.saic.com/sbp). At that Web site, prospective partners can fill out a profile. Otchere said company should "tell us what you do best" and include information about past performance."Companies that have worked with us know our culture," Otchere said. "If they are new to our system or don't know who is handling a specific procurement, they can call my office and we can hook them up." Because many of SAIC's defense contracts require security clearances, subcontractors must obtain such credentials. Otchere said SAIC has helped small partners go through the clearance process. Reflecting its expectation that subcontractors do their homework about prospective jobs, SAIC itself claims it is very proactive about procurement objectives. "We know which procurements are coming out," Otchere said. "We form strategies of what the team is going to be. We know we're going to bring in small businesses."He said the small business alliances are developed up to six months before a request for proposal is released."Customers want us to identify up front who are the small business partners," Otchere said. As a result, the subcontractors "know what responsibilities they'll be covering within the teaming agreement. Once the contract is awarded, we do the teaming agreements."As part of the preparation, SAIC prepares a project matrix that includes the names of partner companies, their levels of expertise and commitment."You've got to do that upfront or you're not going to win contracts. Customers want to see your small business-subcontracting plan," he said. "Our philosophy is that for companies to team with us, they have to team with us upfront."SAIC also looks for financial stability in partners, he said."Our subcontractors have to have the ability to maintain their employees," he said. "It's important that they have the infrastructure to support the organization: that they're set up to do government business, which means to comply with rules and regulations. They have to understand the idea of program management and marketing." Geographic presence is vital in some SAIC projects. The bi-coastal company's main offices in suburban Washington and San Diego are augmented by several site-specific locations, with the Huntsville, now seen as among its fastest growing facilities. SAIC said it has more than doubled its compliance with federal statutory mandates on special categories of small business partnering."Ten percent of our contracts are going to small and disadvantaged businesses and women-owned businesses," Otchere said. In 2004, SAIC awarded $105 million in subcontracts to veteran-owned business (about 5.5 percent of its subcontractor commitments). But SAIC fell slightly short of its 3 percent goal for disabled veteran contracts ? reaching only 2.7 percent in fiscal 2004, he said.Otchere dismissed concerns that SAIC takes advantage of its small partners."We don't take companies to win contracts then dump them," he said. But he warns that small businesses "must know what your responsibilities are" and must have a teaming agreement."Ours is a real effort truly to [develop] teammates, truly partners," Otchere said. He said that SAIC eschews the term "supplier diversity," because it does not fully reflect the company's goal to create widespread partnering agreements.The scale of SAIC's ventures are evidence of its small business commitment, Otchere said. Typically, SAIC spends about 15 percent of total revenues on small business subcontracts ? and that translates into nearly a billion dollars this year.That leaves room for some companies, such as Indus, to grow their own business. Gary Arlen is president of Arlen Communications Inc., a Bethesda, Md. research firm. His e-mail address is .