Sticking to basics and succeeding

During the late 1990s, many privately held information technology firms were on a growth tear, and their owners were wrestling with not "if" but "when" to go public and cash in on the Internet stock rage.

But Datatrac Information Services Inc. — the top revenue producer among woman-owned IT businesses in the federal government — was in the midst of its own growth spurt, fueled by federal contracts. Company officials rejected the ever-present temptation of quick riches in the stock market in favor of more measured growth and remaining privately held.

The decision has paid off so far: Datatrac continues to grow steadily while many other IT firms succumbed when the recession struck and the Internet stock bubble burst.

"Of course, we had discussed going public, and maybe we could have gone out and made a lot of money, but in the end, who really were you helping and hurting?" asked Kathi Yeager, Datatrac's president and chief operating officer. "We really think of the company as a family and a team, so the people who are here and stuck through the craziness are happy to be here right now."

Besides its commitment to what Yeager jokingly refers to as the company's "corny" principles — such as manageable growth and employee job security — another distinction for the Dallas-based firm is that it is co-owned by women, Yeager and Judy Burleson, Datatrac's chief executive officer. The 1,155-person company is a recent graduate of the federal 8(a) program for socially and economically disadvantaged small-business owners. Yeager credits the 8(a) program, along with a spot on the General Services Administration schedule, with opening many doors for the 15-year-old firm and helping it land at the top of Federal Computer Week's list of woman-owned firms in the federal IT market.

The company joined the 8(a) program in 1995 based on the ethnicity of Burleson, who is American Indian. However, the federal program does accept firms owned by white women if they can document that they have suffered economic discrimination, according to Luz Hopewell, associate administrator for business development at the Small Business Administration, which runs the 8(a) program.

Datatrac booked revenues of about $100 million in fiscal 2001, up from just $8 million in fiscal 1997. (Datatrac's fiscal year mirrors the calendar year. The Federal Computer Week rankings, compiled by Eagle Eye Publishers Inc., cover the government's fiscal year, which ended Sept. 30, 2001.)

Federal contracts account for virtually all of this revenue, according to Yeager. But the company is facing fresh challenges due to its graduation last year from the 8(a) program, typically a difficult transition stage to the open market that results in the downfall of many former 8(a) companies.

Nonetheless, Yeager is bullish on Datatrac's prospects because one of the firm's specialties is automated call center systems, an area primed for growth as agencies try to improve services and efficiency using e-government technologies. The company works with some of the leading players in this space, including customer management vendors Siebel Systems Inc. and Genesys Telecommunications Laboratories Inc., a subsidiary of Alcatel.

Last year, Datatrac won a blanket contract to provide call center services to the entire Labor Department and a smaller contract for a Coast Guard call center.

It also built and operated call centers for the Immigration and Naturalization Service, and though the company lost this contract in January to a non-8(a) firm that submitted a lower bid on the renewal, Datatrac still impressed INS officials.

"They were truly exceptional, one of the best firms I've worked with in all my years in government," said Bob Kennard, the director of INS' national customer service center. He said that among their strengths was the ability to respond quickly — even proactively — to the agency's constantly changing requirements.

Datatrac also reports an increase in its records management business line, recently winning a contract with the Department of Veterans Affairs.

Although Yeager is quick to credit the 8(a) program for Datatrac's strong recent showing, she said that winning contracts — as an 8(a) firm or a former one — comes down to a company's performance and quality, characteristics that are increasingly important as the federal market changes.

"I see government trying to work more in partnership with contractors to find solutions, rather than just saying this work is the government's and this work is the contractor's," she said. "This partnership approach is a lot more demanding."

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Woman-owned businesses in the 8(a) program

Fiscal 2001: 1,770

Fiscal 2000: 1,518

Fiscal 1999: 1,326

Fiscal 1998: 1,155

Competition heats up for 8(a) program

While woman-owned businesses have always been eligible to participate in the federal government's 8(a) program for socially and economically disadvantaged small business owners, it was a loosening of program requirements three years ago that significantly increased the participation of such businesses.

"The requirements for white woman-owned businesses are now less stringent," said Luz Hopewell, associate administrator for business development at the Small Business Administration, which runs the 8(a) program. "The application must be able to document [in writing] that they've been discriminated against. Ethnic minorities are presumed to be disadvantaged."

According to SBA, 1,770 woman-owned businesses belong to the 8(a) program, or 26 percent of the program's total participants. In addition to providing general business development assistance through mentoring and business counseling programs, the 8(a) program provides federal contracting opportunities to participating businesses.

Most of the business opportunities come in the form of set-asides, or federal contracts that are earmarked for 8(a) companies. For contracts that involve services, such as information technology, those under $3 million can be awarded to a single 8(a) company without being put out for bid. For those contracts valued at more than $3 million, agencies must compete the contracts among 8(a) firms.

"There's a misperception that it's a handout program, but the competition has become fierce for 8(a) work, which has improved the overall quality of 8(a) firms considerably," said Jeannette Lee White, chief executive officer of Sytel Inc., a systems integrator and former 8(a) participant in Bethesda, Md. Sytel ranks 10th on Federal Computer Week's 2002 list of woman-owned firms in the federal IT market.

The 8(a) program itself does not have any specific goals for how much agency work must be set aside for the program. However, in a separate but related program, the Small Business Act sets a goal of 23 percent of all federal prime contract awards going to small businesses each year. At least 5 percent of that amount must go to small disadvantaged businesses and 5 percent to woman-owned small businesses.

"The 8(a) program can be used as a mechanism by agencies to reach those goals," Hopewell said. "We ask agencies to use the 8(a) program to meet at least half of their [Small Business Act] goals."

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