Stretching the field

Touchstone acquisition strengthens SRA's consulting business unit

SRA International's recent acquisition of Touchstone Consulting Group adds management consulting depth to an integrator that already touts its professional services.

Touchstone, a privately held company founded in 1991, provides management consulting services to customers such as the Homeland Security Department, the Pentagon, the Office of Management and Budget and intelligence agencies.

With Touchstone, SRA will bulk up its consulting services, which represent the front end of the systems development life cycle. Renny DiPentima, SRA's president and chief executive officer, said the integrator offers strategic consulting services. He added that the company was among the largest practitioners of business process re-engineering during the 1990s. The addition of Touchstone "strengthens that part of our life cycle," he said.

Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc., said SRA has established a reputation for offering high-end services mostly in an advisory role.

"Touchstone adds more capacity in that area and also adds more customer base and adds more security clearances," Bjorklund said. Sixty percent of Touchstone's 135 employees have security clearances.

For Touchstone, the acquisition is about scale. The $27 million management consulting firm will become part of a company that generated $756 million in revenue in 2004 and offers a spectrum of services from strategic planning to outsourcing.

"When I looked at [Touchstone's] future 10 years out, I saw SRA," said Chris McGoff, Touchstone's CEO. "They are what we would be."

But the acquisition has one possible sticking point. In late 2004, OMB officials selected Touchstone and its subcontractor team as the sole industry sources for the agency's e-government and federal enterprise architecture program offices. That means Touchstone officials influence programs that SRA could then bid on, creating an apparent conflict of interest.

To mitigate the concern, Touchstone will operate as an independent group within SRA and maintain the Touchstone name, DiPentima said. "We want their customers to be fully confident that they will maintain their independent reputation," he said.

"No SRA people are going [to get involved in OMB business] because we are separate and distinct," said Tony Summerlin, a Touchstone vice president. "There won't be any crossover at all. We've always been hugely careful. We've never crossed over between our own folks, much less doing it with SRA."

Some customers will want to use the combination of Touchstone's consulting and SRA's implementation, DiPentima said. Touchstone's independence, he said, will provide a partition between the consulting and implementation sides.

Executives at the companies said independence and conflict avoidance were major considerations during their acquisition discussions.

McGoff said SRA has experience in creating such partitions. "We are just a logical extension of what they are already doing," he said.

Bjorklund said any company that combines management consulting and technology implementation runs some risk of conflict. He said an integrator may create an organizational firewall to separate business units. Integrators work with their government customers to reach an agreement on specifically how to structure the firewall, he said.

"As long as the government and contractor are making that [firewall structure] clearly known in a public way, there is usually less potential that a contractor outside of the picture could raise an issue," Bjorklund said.

McGoff said the SRA/Touchstone partition will enable Touchstone to maintain its independence as it offers management consulting and strategic advice. "We see nothing that is getting in the way of that at all," he added.

In deciding to make the acquisition, DiPentima said he was particularly attracted to Touchstone's focus on implementing the President's Management Agenda and its "activities around Clinger-Cohen business planning, lines of business and cross-agency initiatives." He said SRA has long been involved in initiatives related to the Clinger-Cohen Act.

Service synergy wasn't the only driver behind the deal, however. DiPentima and McGoff both pointed to cultural compatibility. "Their rules and our rules are the same: Do what's best for customers," McGoff said.

David Perera contributed to this story.

Ready to buy

SRA International's acquisition of Touchstone Consulting is the company's first acquisition in 15 months. Here's a summary of the company's acquisitions since 2002.

April 2005

Touchstone Consulting Group

Expertise: Management consulting.

January 2004

Orion Scientific Systems

Expertise: Counterterrorism.

January 2003

Adroit Systems

Expertise: National security, command, control, communications, computers, intelligence, surveillance and reconnaissance.

January 2002

Marasco Newton Group

Expertise: Information technology, management and environmental policy solutions.

— John Moore

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