Successful companies transform and grow with rapidly changing market

By Nick Wakeman

When Rear  Adm. Scott Fry retired from the Navy last year, Bahman Atefi knew Fry would be a great hire for Alion Science and Technology  Corp. Fry had 32 years on active duty and 20 years in senior management positions, including commander of the Eisenhower  Battle Group and executive assistant to the Chief of Naval Operations. His last duty station was commander of the Sixth  Fleet.

Just one problem: There were no openings at Alion for someone with Fry’s expertise and experience.

The company  hired him anyway.

“If you hire the right people, the opportunities will come,” said Atefi, chairman and chief executive  officer of Alion, a McLean, Va., science and engineering company ranked No. 63 on Washington Technology’s 2005 Top 100 with  $156.2 million in prime IT contracting revenue.

Fry joined Alion in February 2004 as senior strategist for defense  programs. In that role, Fry helped identify and pursue the company’s acquisition in April of John J. McMullen Associates  Inc., a naval architecture and engineering firm. Fry now runs that $100 million business as group senior vice president and  general manager.

“You go after talent and help people grow,” Atefi said.

Alion’s hiring of Fry is just one  example of how companies up and down the Top 100 list of federal prime contractors are making bold moves to bolster their  positions in the government market. IBM Corp. (No. 14), for example, is investing in RFID technology, banking heavily on a  growing demand among government agencies. EDS Corp. (No. 6) purchased the human resources capabilities of Towers Perrin to  position itself for an expected expansion in human resources outsourcing.

Other contractors are pursuing new lines of  business or reorganizing to focus company resources on areas of anticipated growth, such as homeland security or defense. All  are taking risks, knowing that the strategy that works today may not work tomorrow.

“We tend to reinvent ourselves every  two or three years,” said Renato DiPentima, president and CEO of SRA International Inc. (No. 27).

 

Empower managers

For  STG Inc. of Reston , Va. , the impetus for change arrived when the small business won a spot on the large Commerce Department’s Information Technology Services contract, or Commits, in 2000. With that win, STG’s founder Simon Lee set the company on a  path for growth that required him to let go of some control and trust others to perform.

“It’s been an evolution,”  said Phillip Foote, who has worked at STG since 1999 and was named chief operations officer last year.

Lee has taken  on the role of strategist at STG, while Foote is now responsible for operations and implementing that strategy.

As  part of the plan, STG has been hiring people with experience at larger companies such as Northrop Grumman Corp., Computer  Sciences Corp. and Boeing Co. as well as people with extensive government experience.

“Unless you build the right team, it  doesn’t matter what your strategy is,” Foote said.

The payoff has been that STG hit the $200 million revenue mark in  2004, a dramatic increase over its $48 million sales in 1999, the year before it won Commits. As a result, the company rose  to the No. 61 spot on the Top 100 this year with $159 million in prime IT contracting revenue.

A similar story is told at  NCI Information Systems Inc. of Reston , Va. , another IT services company moving into the middle tier of the federal market.

  Founder and Chairman Charles Narang brought on Michael Solley as CEO a year and a half ago. Solley previously helped run the  federal business at Nichols Research Corp. until CSC acquired it. He then became CEO of MTC Technologies Inc. (No. 59) and  helped that company grow and become  publicly traded in 2002.

NCI debuts on the Top 100 this year at No. 92, with $88.3  million in prime contracting revenue and overall revenue of about $171 million in 2004. The company expects to be at more  than $200 million by the end of 2005, Solley said.

Last year, Narang and Solley revamped their business development  efforts by pushing more responsibility to their general managers as well as creating a centralized business development  office that can target large opportunities.

“You give the GMs the resources they ask for, and you have those resources  report to them directly,” Narang said. “We’ve been trying to build the infrastructure and processes so that when we grow two  to three times our size, we’ll have the resources in place to handle it.”

The key is empowering managers and making  sure you have the right managers in place for the company to grow, Solley said.

“When you go from being a small  business to a medium size and large business, it gets difficult to have just one or two people trying to keep tabs on  everything,” he said.

 

Invest in growth

Over its 27 years, SRA International of Fairfax, Va., has successfully made  the transition from small company to midtier player and now is on the verge of breaking the $1 billion annual revenue mark.  The new challenge is positioning the company to reach the $2 billion level, DiPentima said.

DiPentima, who took over in  January as CEO from SRA’s founder and long-time chairman and CEO Ernst Volgenau, is overseeing many changes to reach the new  goal. Last year, for example, the company restructured operations around three business sectors: civil, defense and command,  control, computers and intelligence or C3I.

But the most critical factor for continued growth is the investment SRA has  made the last two years in business development, proposal and capture management and recruitment and staffing, DiPentima  said.

More business development people increases the number of opportunities the company can identify, while adding capture  managers and proposal managers gives SRA the ability to respond more quickly to the leads that business development  identifies, he said.

“Having won the contracts, we had to make investments in a robust recruitment and staff operation to  make sure we could deliver the people,” DiPentima said.

Those investments are already paying off for SRA, which  before January 2003 had never won a contract with an initial value of more than $100 million.

“In the first six months of  2003, we won four,” he said. “Now, we are winning a nice flow of contracts in that $100 million to $350 million range. Six  years ago, that

wasn’t the range we were dealing in.”

The next step is looking at the larger jobs of $350 million or more.  “When you become a $1 billion company, you have to win a whole lot more work then when you were $100 million,” DiPentima  said.

 

Distinguish yourself

One of the biggest challenges facing contractors of all sizes is how to stand out in the  crowd. After all, nearly all the companies in the market claim to be experienced, innovative, nimble and well versed in the  latest technologies and solutions.

Part of STG’s plan for distinguishing itself has been to embrace performance-based  contracting as a way of doing business. Thanks to holding contracts such as Commits and now CommitsNexGen, as well as the  Veterans Affairs Global Info rmation Technology Support Services, the company now performs 70 percent of its government work  under performance-based contracts or task orders, Foote said.

STG, which offers IT and engineering services, also is in the  running for the Army’s Info rmation Technology Enterprise Solutions 2 Services contract, another performance-based contract.

 STG also must find customers that understand performance-based contracting, Foote said.

“You have to show the  customer that you are not going to put the burden back on them,” Foote said. “It is a partnership; you both take a risk.  Their risk is picking you to do the work. Your risk is tying your pay to your performance.”

Internally, STG’s staff also  has to embrace the performance-based contracting concept, Foote said. The company sets objectives in its strategic plan and  has incentives for meeting those objectives. For example, the company shares award fees with the employees.

“If you are  going to go after performance-based work, you have to run your company that way. You have to live it, too,” he said.

Reward good people

One of the adages in the government market is that company assets walk out the door and go home every day.  Most companies on the Top 100 point to their employees, not to their sophisticated technologies and solutions, as their key  to success.

Finding the next Adm. Fry and then hanging on to him or her is a top priority. Consequently, most companies  offer incentives to reward good performance as well as career advancement and professional development.

Alion, for  example, spends about $2 million funding internal research and development projects that are proposed by employees.

The  employee-owned company, which expects to reach about $450 million in annual revenue this year, has a committee that reviews  the proposals, Atefi said. Grants that range  from $50,000 to $200,000 are awarded twice a year.

Often the results can  be taken to a government customer, which may decide to fund further development, he said.

“The most important thing I  preach every day is creating an environment that the best and brightest would feel good about,” Atefi said. “This is a tool  for doing that.” 

 

Senior Editor Nick Wakeman can be reached at nwakeman@postnewsweektech.com.