The 2009 Federal List

10 companies that are on the move in the federal market

As leaders of technology and business trends, they play a role in how government gets things done

Like it or not, contractors are an integral part of government operations. The pendulum might be swinging against their use, but they will always play an important role in how the government gets things done.

The following 10 companies are at the leading edge of technology and business trends, and their impact will resonate throughout the government market and beyond.

1. Vangent and Booz Allen Hamilton
An initial public offering might seem like a remote possibility in today’s market, but that’s the direction Vangent is headed.

Owned by Veritas Capital, Vangent already acts like a public company — it’s been issuing quarterly revenue and earnings reports. What better way to pique the interests of potential investors and analysts ahead of your IPO than to dangle financial insights?

Another company to watch in this category is Booz Allen Hamilton, which is owned by the Carlyle Group. An IPO is likely the only way the company can satisfy Carlyle’s expectations and hang onto its unique corporate culture.

2. General Dynamics
Any company that’s about to lose its chairman and chief executive officer to retirement must prepare for big changes.

Nicholas Chabraja has led General Dynamics on an amazing journey of growth, which has included building an information technology business from scratch through a series of blockbuster acquisitions. Chabraja turned over the CEO title to Jay Johnson July 1, and by May 2010, Chabraja will step down as chairman, too.

3. Science Applications International Corp.

A similar process is under way at Science Applications International Corp., where Walter Havenstein will become CEO on Sept. 21 as Ken Dahlberg begins his move out of the executive suite. By SAIC’s annual meeting in June 2010, Dahlberg will resign as chairman.

Both companies bear watching to see where the new leaders will take them.

4. Lockheed Martin
Its position at the top of the government IT contracting world puts all eyes on this company. Despite its size — nearly $15 billion in government IT contracts in 2008 — Lockheed Martin continues to find itself near the front of innovative government trends. A recent example is how leaders have positioned the company for the smart-power initiative that the Obama administration is advocating. The idea is to stabilize countries to avoid situations in which military operations seem unavoidable.

When Lockheed Martin acquired PAE in 2007, it expanded its expertise beyond that of a Defense Department supplier by adding mission readiness, global infrastructure support, peacekeeping and disaster response to its repertoire.

5. Cobham
Cobham is the latest British entrant into the U.S. market, and it has made a series of acquisitions to build a business with more than $1.5 billion in U.S. revenue.
With the acquisition of Sparta, Cobham grabbed significant prime-contracting work in the intelligence and missile defense market. The acquisition was part of the company’s strategy to move up the government contracting food chain.

6. Deloitte and Touche
The accounting and consulting firm made two bold moves this year. First, it hired former Rep. Tom Davis (R-Va.) as a director in its federal business unit. Then it acquired BearingPoint in that firm’s fire sale. The $350 million acquisition more than doubled Deloitte’s federal business.
The two major investments sent a clear signal that the company wants to be a major player in the government market.

7. Acquisition Solutions
As pressure grows to address organizational conflicts of interest in the government market, large companies will be forced to get out of the acquisition support business. Thanks to a 2008 investment by private equity group Excellere Partners, Acquisition Solutions is well positioned to acquire business units that larger prime contractors might need to jettison.

Look for increased merger and acquisition activity in this area by Acquisition Solutions and other like-minded companies.

8. Pragmatics
This former 8(a) small business proves that it is possible to be a long-term success after graduating from the set-aside program. Part of the credit goes to founder Long Nguyen’s ability to recruit a management team that has experience building billion-dollar businesses. Of Pragmatics’ 12 senior executives, four are alumni of SRA International, and three come from Titan.

9. TASC

The big question raised by Northrop Grumman’s plan to sell off its TASC unit is who the buyer will be: another large private equity group or an existing company. But with the deal having the potential to reach $2 billion, it’s also worth asking what Northrop Grumman will do with all that cash and whether the TASC sale will prompt other large defense contractors to divest themselves of valuable businesses.

10. EDS and HP
The combined companies are entering the second year of their merger, so the evidence of an integrated operation should move from the marketing materials to the field. And with the follow-on contract to the Navy Marine Corps Intranet looming, the stakes are high for incumbent EDS and its parent company.

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