Washington Technology: Top 100 Prime Contractors in the Federal IT Market
Guest: Nick Wakeman, Washington Technology senior editor
Monday, May 6, 2002
Even before the war on terrorism sparked billions of dollars in new spending proposals, the federal IT market was a good place to be. Now it could be the best.
On Monday, May 6, Washington Technology unveiled its ninth annual Top 100 list of prime contractors in the federal IT market. The special report also profiles the leading companies, noting who's moving up and who's dropping down, and examines the major trends shaping this unique, $53 billion marketplace.
Washington Technology Senior Editor Nick Wakeman took questions on the government IT market, the major companies, their business strategies and the outlook for the year ahead. Nick, who has closely followed the federal market as both reporter and editor for five years, spearheaded Washington Technology's coverage for the 2002 Top 100 special report.
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Welcome to today's chat with Nick Wakeman, senior editor with Washington Technology. Nick directed Washington Technology's coverage for its 9th annual ranking of the Top 100 prime contractors in the federal IT market. In addition to list of leading contractors, the coverage includes an in-depth look at the federal market and profiles of the top 20 companies on the list.
We've already gotten a good number of questions. So Nick, why don't you get at them.
I see that Lockheed Martin is the top IT prime contractor on Washington Technology's Top 100 list for the 8th year in a row. Were there any surprises or major changes on the 2002 list?
Nick Wakeman: One of the strengths of the list is that it gives a good snap shot of where the market is headed. The top of the list really shows the strength of the defense/aerospace companies and how important IT is to defense projects and how these companies, especially Northrop Grumman, General Dynamics and Lockheed Martin have made acquisitions to bolster their IT capabilities.
Some other interesting developments, we saw Unisys break into the Top 10 for the first time in several years. Anteon, a company that didn't even really exist five years ago, is in the top 20. IBM is out of the Top 20. AT&T also dropped a few rankings but is still in the Top 20.
There are some newcomers to the list, such as Iridium, which is ranked 66th, Qwest makes its first appearance as well.
I guess the worlds of IT and telecom are truly converging.
I have heard that billions of federal dollars are going to be spent on improving the information assurance structures of the nation's defense and national security IT environments. If so, when do you expect to see a surge in IT professional staffing spending in D.C. and other areas?
Nick Wakeman: The big impact on staffing is the demand for people with security clearances. If you have a clearance, companies are going to want to hire you.
We're also going to see and are already seeing merger and acquisition activities being influenced by this. Companies are actively looking for acquisition targets that have a lot of employees with clearances. If your company has a lot of clearances, you'll be able to demand a higher price.
In the Senate last week, legislation was introduced to create a Department of Homeland Security, which would make the Office of Homeland Security a cabinet-level position. Do you think this is really necessary, or is it just more congressional meddling?
Nick Wakeman: This is going to be a great issue to follow. Turn the clock back a year or so ago and there was a lot of clamoring for a government CIO, appointed by the president and approved by Congress. Many in Congress and industry were advocating it. But they backed off and decided to let President Bush try his way.
The clamoring has died down because Bush's strategy with Mark Forman pushing e-gov initiatives and the management agenda seems to be making some progress. But homeland security has been different. If anything the push for a cabinet level officer has only grown. Part of this might because Homeland Security Director hasn't released the strategy yet -- something many in industry are anxious to see.
I think the reception of the plan, due this summer, and the proposals in the fiscal 2004 budget will tell a lot of where the debate will go. So stay tuned.
With the government's emphasis on homeland security, is there a chance that e-gov projects will just get pushed aside? Congress only provided about $5 million last year for Mark Forman's e-gov initiatives. That's not much to go on, is it?
Nick Wakeman: My first thinking after Sept. 11 was that e-gov was going to get pushed to the side, but that really hasn't happened. A lot of the initiatives feed into homeland security efforts in that they require agencies to share information and build infrastructures to work together.
The funding isn't much though. The approach that OMB's Mark Forman emphasizes is that the government spends $50 billion on IT, so the agencies should be able to find the money to do e-gov.
Loudoun, Va.: Dear Nick,
Just wanted to share my experience. I left the government to work for a BIG defense contractor. Working for a government contractor is not the same as working for the government. You don't have the same benefits and job security. Also, before jumping ship and getting a top secret security clearance, talks to some folks in the industry (they probably can't tell you anything specific) but I being female, from a non-military background found the "black world" environment very stressful. The day-to-day security procedures can be very overwhelming for civilians. Many of my male colleagues that were non-military felt the same way.
Also, make sure you are not a "warm body" on a contract. There were numerous contractors where I was located and they would just hire people to fill positions and charge for them. These people often weren't doing challenging work that matched their skills. They often hire people that aren't qualified (maybe on paper they are) and you'll have a group of seven people where two senior people are doing all the work and "training" everyone else even though they are all paid at the same level.
A lot of us (myself included) got sick of this world and left for private sector (pays more). I would go back to a government agency but never a defense contractor.
Nick Wakeman: Thanks for your comments and the insight.
Do you think federal spending for the war on terrorism had any effect on how the 2002 list shaped up?
Nick Wakeman: Since the list only covers spending from fiscal year 2001, which ended Sept. 30, 2001, the war spending only had a very small affect. But I think in recent years the government has been spending more on defense and intelligence related IT, so the rise of the defense/aerospace companies in the IT space had already started and now will likely ramp up even more quickly.
Virginia: How do FFRDCs like CNA, LMI, IDA, and RAND fit into your figures?
Nick Wakeman: The companies you mention are federally funded research and development centers (FFRDC). Generally, they are nonprofit corporations. We treat them the same as any other company. It all depends on the work they do and the codes that agencies use to report the spending. Rand, in fact, made the list last year, but not this year.
Chantilly, Va.: We hear a lot about homeland security and how there's going to be a big flood of new money, but we're not really seeing much of it at our company. Is this just a lot of hype or is the money going for other things besides IT?
Nick Wakeman: You definitely aren't alone in that comment. When I did a 6-month report on homeland security that was a recurring comment I got from companies.
One thing that is deceiving about the numbers that have been attached to the spending bills Congress has passed is that the bulk of the money is going to hire people and buy supplies for the war in Afghanistan.
Executives have told us that they are seeing IT spending on existing contracts and priorities shifting to security, but not necessarily a lot of new spending initiatives or specific solicitations coming out.
If Northrop Grumman is able to purchase TRW, would Northrop Grumman be the biggest IT contractor in the federal market?
Nick Wakeman: Just doing some quick math of Northrop and TRW's numbers on the Top 100, still leaves Lockheed Martin at the top. But Northrop would be a very strong No. 2.
Of course, Northrop's purchase is hardly a done deal. Another suitor could emerge. But for now, Lockheed Martin holds a pretty strong grip on the number 1 spot.
Nick, how big is the data warehousing effort with the federal government I was under the impression that the federal government was creating massive data warehouses to sift thru data on many levels but haven't heard much about this initiative lately. Any ideas?
Nick Wakeman: I think this is one of those long term initiatives. The opportunity may lie more with technology to tie data bases together. Data fusion - powerful tools to turn data into usable information or discover patterns in the data - is another area that is getting attention.
I think we'll see specific initiatives where an agency or group of agencies want to accomplish a particular goal. For example, the entry-exit visa tracking system will need to tie together disparate data bases.
Just to add to Nick's comments on why contractors aren't seeing homeland security funding. The federal government is planning to send $3.5 billion in aid to local governments for first responders, such as fire and rescue and bioterrorism defense. A good portion of this funding likely will go to communications systems and improving information sharing. But this funding, if approved, will not show up in local government pockets for months ahead. It could be more than a year before contractors see any of this funding.
Can a small company or an independent contractor, on its own, begin the process of acquiring a security clearance in preparation for government IT work?
Nick Wakeman: We've gotten a couple questions related to security clearances and the process of obtaining them. We had an excellent package in our March 15 issue which explains the process in detail. You can read that package online here.
That's all the time we have today. Check out Washington Technology's Top 100 special report at www.washingtontechnology.com. Thanks for your great questions. And Nick, thanks for your time.