Boom Times For Federal Contractors
Saturday, May 7, 2005
In an ornate hall across the street from the White House, newly minted Homeland Security Secretary Michael Chertoff stood before an audience of 400 business executives last week and asked for help.
"We don't have the expertise in this department, even across the government, to get into very specific solutions for some of the challenges we face. You have that expertise," Chertoff said. The private sector, he repeated again and again in his address at the U.S. Chamber of Commerce, must be the government's "partner" in pioneering products and services to keep Americans safe.
When he finished, the executives applauded heartily. But Chertoff wasn't telling them anything they didn't already know. If industry leaders want a reminder that the government is turning to them more than ever for assistance, all they have to do is look at their latest earnings reports.
Double-digit profit gains and record revenue were commonplace last quarter for firms that specialize in serving the government, a trend largely fueled by ramped-up demand for outsourced technology services in areas such as defense, intelligence and homeland security.
"It's a good time to be a government contractor," said Ray J. Oleson, chief executive of Reston-based SI International Inc., an information technology supplier whose first-quarter profit was up 37 percent from a year earlier. "In 10 years, we'll be calling these the good old days."
Not that Oleson, or anyone else in the industry, expects the boom to end in the foreseeable future. If anything, they say, the outlook is bright for even greater profit for firms that make their living doing the government's business.
Among the factors: The pace and level of contracting in Chertoff's department are increasing as the department matures. At the same time, officials government-wide are looking to outsource more work as federal employees retire and as the private sector sells itself as a more efficient replacement.
Finally, the reelection of President Bush has given contractors and government officials a clearer sense of what the nation's priorities will be over the next four years and where both should put their money.
J.P. "Jack" London, chief executive of Arlington-based CACI International Inc., said that last year the presidential election and the uncertainty over who would lead key departments such as Defense made some in the government reluctant to award major, long-term contracts.
"You had a lot of things going on that tend to slow new contract initiatives," said London, whose firm specializes in computer network and information security work for the government.
Not so in the first few months of 2005.
"Decisions are moving through the pipeline," London said last month when his company posted a 37 percent profit gain for the quarter. "It's really a booming situation."