By Griff Witte
Washington Post Staff Writer
Monday, August 7, 2006

None of the giants wanted Ericsson Inc. on its team.

Executives from the Swedish cellphone maker called on four of America's largest government contractors last year, offering to help them win a $2 billion Homeland Security deal to use technology to help secure the nation's borders. They found no takers.

All the giants, in contrast, wanted Computer Sciences Corp. on the teams they were assembling to compete for the government's Secure Border Initiative, or SBInet. The California company, which has more than 10,000 Washington area employees and specializes in government technology, had its choice of working with Lockheed Martin Corp., Boeing Co., Northrop Grumman Corp. and Raytheon Co.

But as the complex negotiations dragged on, with proposals and counterproposals circulating among companies that compete until the day they need each other, Ericsson and Computer Sciences did something unexpected: They turned their backs on Lockheed and the others, and decided to form their own group. Ericsson took the lead, on a hunch that its experience policing the Finland-Russia border with video cameras and wireless communications would prove enticing, while Computer Sciences chose to back an idea whose simplicity could prevail over more exotic proposals.

The two companies had become comfortable with each other, establishing an easy rapport in meetings at Computer Sciences' operational headquarters in Falls Church and at Ericsson's offices in the District. Computer Sciences had even sent some of its Europe-based staff to examine Ericsson's border operation. They were impressed, and in the end, both sides said the decision to team up was a no-brainer.

"We had a choice among four very big defense contractors that we work with all the time and that have all the components to design and build a system," said Ben Gianni, Computer Sciences' vice president for homeland security. "Instead, we chose to work with a company that already has a system in place. You might say it's a dark horse. But we think it's a winner."

"We were courting each other," said Douglas C. Smith, an Ericsson vice president. "Now it's like a marriage."

In the world of government contracting, this is the competition before the competition: the extensive romancing, cajoling, scrutinizing, rejecting, jockeying and posturing that goes into putting together a team to bid on a major contract. As in love, it's a process that creates some unusual pairings.

In the commercial world, Coke and Pepsi would rarely, if ever, join forces. McDonald's and Burger King try to steal market share from each other, not collaborate on recipes.

It was no stretch, though, for defense contractor Raytheon to analyze how much of the Secure Border work it could do itself, then hire companies such as BAE Systems Inc., Bechtel Corp. and International Business Machines Corp. -- competitors on other defense contracts -- to do the rest. Teams have become essential even for the largest and most accomplished defense and technology companies, as government contracts have become more complex and agencies have begun lumping more work together to cut down on procurement costs.

"The first phone calls are quite comical," said Frank Marcinkus, who puts teams together for Massachusetts-based Raytheon. Mindful that would-be partners can soon become competitors, neither side wants to reveal too much, so the conversations start off stilted.

"Then you have to go to the inevitable dinner. The point of that is: I want to look you in the eye. I want to feel your handshake and find out how committed you are to this," he said. "You're going to be calling this person at 2 a.m. on the day of his daughter's graduation and saying, 'I need your help.' You don't just do that with anyone. It becomes very personal."

In the case of the Secure Border Initiative, the size and open-ended nature of the deal have pulled much of the Northern Virginia contracting community into a fight that is being viewed as a bellwether for future Homeland Security work. The agency hasn't asked for a product as much as ideas, encouraging companies to not just bid on a service but also to define what the service should be. A winner is to be chosen this fall.

Five main players have emerged, with dozens of subcontractors filling out the roster. Northrop Grumman's group, for example, includes Falls Church-based weapons-maker General Dynamics Corp. and its recently acquired Anteon International, SRA International Inc., the consulting firm BearingPoint Inc., and satellite services provider Hughes Network Systems LLC.

Negotiations to form such a group begin long before the government releases a request for proposals on a given contract, as companies that think they might have an interest in the work analyze their resources and size up potential competitors.

When the Navy began looking for a team in 2002 that could build combat ships, executives at Bethesda-based Lockheed Martin immediately started calculating their chances.

"It didn't take us more than 30 minutes to figure out that okay, we're going to need partners for that," said Jeff Napoliello, a Lockheed business development manager.

Why? Lockheed doesn't make ships. But it figured that it could organize or join teams that included companies that did. So Lockheed put together a group. Different divisions of the company joined others. Before long, various parts of Lockheed Martin were involved with seven distinct teams, all going after the same work -- with firewalls popping up everywhere inside a company that was, in essence, competing with itself.

"We wanted to make sure we had chips down on a lot of different options," Napoliello said.

That's not typical, but it happens, especially in cases where the government's needs are changing rapidly, leaving companies unsure whether they will have the right solution.

For SBInet, the solution is far from clear. Homeland Security officials want better control of nearly 7,000 miles of border with Mexico and Canada, much of it stubbornly porous. And they want a contractor to organize the technology, infrastructure and personnel needed to make that happen. "We're asking you to come back and tell us how to do our business," Jackson told industry leaders.

That pronouncement raised eyebrows at the Homeland Security Department's inspector general's office, where auditors have warned that SBInet is a risk to the government because it gives contractors so much latitude. But for the companies bidding on the contract, the open-ended instructions have given them unusual flexibility in putting together their teams.

Do they bring on board the firm that will send drones hovering above the Arizona desert, or the one that specializes in high-tech motion sensors? Or both?

It's not always just a question of who does what. It's also who knows who.

"Companies are going to look to fill niches and find capabilities that they don't have. But like everything else in the government contracting community, it always comes back to relationships," said David M. Nadler, a government contracts attorney at Dickstein Shapiro LLP.

Some contractors have unusually good access to decision-makers in the government because they've been working with the government for years.

The Department of Homeland Security "still has an issue of critical mass," said Brian Walker, Northrop Grumman's vice president of strategic planning for homeland security. "Its positions are filled by contractors. And those contractors are prime targets when you're selecting your team."

As the dance goes on, the challenge for a prime contractor is to put together the best team without promising too much. A 15-member team on which every subcontractor has been told it will get a quarter of the work will not be happy. So the prime contractor has to manage expectations.

"We'll say, 'We think you're the best basket-weaver, so any work that comes out in basket weaving, you're it,'" said Wayne Esser, who leads Boeing's SBInet team. "But if nothing comes out in basket-weaving, tough luck."

Prime contractors often compete for subcontractors, which means that they sometimes have to promise more than they would like. Paul Leslie, chief executive of McLean-based Apogen Technologies Inc., said the company's extensive experience working with U.S. Customs and Border Patrol made it highly sought-after as the prime contractors put together their SBInet bids.

In choosing which team to join, Leslie said he first tried to determine which is likely to win. If there are several strong contenders, the next question is which one offers the most business. That means looking at what other subcontractors have already signed up, and making sure they don't have skills that overlap too closely with what his firm provides, Leslie said.

Given all of that, he said his choice was clear. "It was a matter of 'okay, let's see what we can get.' We started down that path and bingo, we cut the deal with Raytheon."

Leslie said the technology Apogen provides lines up well with Raytheon's needs.

For other potential subcontractors, it's less a question of which team they will join than whether they will get on a team at all.

Lockheed, which is the only prime bidder for the Secure Border Initiative that has not disclosed its teammates, held a series of outreach events in border towns such as Laredo, Tex., and Buffalo this spring and was deluged with proposals from small local companies that wanted to join its bid.

"For many small and mid-size companies, teaming is often the only way they can penetrate the government market," Nadler said. "The large companies are effectively gatekeepers."

That disturbs Daniel J. Guttman, a Johns Hopkins University fellow who specializes in government contracting. To him, the government is already dependent on the private sector to get its work done. Huge contracts and extensive teaming, he said, take the problem one step further by making companies dependent on one another and limiting the true competition that could save the government money.

"It allows companies to reduce their competitive risk," he said.

It doesn't sit well, either, with Lloyd Chapman, president of the American Small Business League. He said small companies often end up with considerably less work than what they have been promised. "But they do it because it's either that or nothing," he said. "And at many businesses, they just want to keep their doors open."

For Falls Church-based Digital Design & Imaging Service Inc., the situation is not that dire. But firm president Curt Westergard acknowledged that getting on a winning team for SBInet "would change our whole business."

Until now, the 10-person firm's fleet of camera-equipped balloons has attracted interest primarily from the private sector -- for example, from developers who want to know if the proposed penthouse suite really would have a view of the park. But he thinks there's a role for his balloons in aerial surveillance of the border, too. Now he just has to persuade one of the prime contractors that he's right.

"The payoff would be in aces. But the chance of the payoff is small. We're not on the Fortune 500. We're your average American company," he said. "But we're just going to keep waiting. I'll keep two toes in the pond, and hope that something comes through."