In January 1998, CACI International Inc.'s chief financial officer, James Allen, talked about the company's plans for growth. "We're not in the intelligence community right now," Allen told an MSNBC reporter, but he predicted that the sector would eventually be a "great marketplace for us."
One acquisition and 10 months later, the Arlington government contractor put out a press release trumpeting its surge in revenue from its intelligence business. CACI followed up by buying more intelligence companies, hiring intelligence experts as executives and putting them on its board.
Soon CACI became a significant player in the sector, holding among other things a contract to provide interrogators for the military. That contract drew CACI into the Abu Ghraib prison controversy, subjecting the company to intense scrutiny by the government, investors and the media. But CACI says that despite the controversy, it remains committed to the intelligence market, which it expects to grow.
Federal intelligence agencies spend about $32 billion a year on information technology, but to the uninitiated, breaking into the market and establishing a solid presence can seem like the murkiest of endeavors.
"It's such a tight community that it is tough to break in from the outside. It's difficult to get visibility unless you know who to talk to and what their interests are," said Gwyn Whittaker, chief executive of Mosaic Inc., an Oak Hill consulting firm that helps companies develop business with intelligence agencies.
There is no secret code to open the door, Whittaker and others said. Companies like CACI get in by hiring executives, appointing board members and buying smaller companies that already have been inside. CACI's experience, she said, is a classic example of how most companies do it.
In the late 1990s, information technology services and software development were CACI's major offerings to its government clients. In May 1998 the company announced plans to acquire QuesTech Inc., a 700-employee engineering and research firm based in Falls Church. It was a $42 million deal that positioned CACI "for very important information warfare and intelligence markets," chief executive J.P. "Jack" London said in a prepared statement at the time.
"I just wanted to be part of a growing market. I could see there were areas where the intelligence community would have some needs and requirements to augment their staff," London said in a recent interview.
In March 1999, CACI told shareholders it had been awarded intelligence contracts worth $29 million. In November that year, the company said it would acquire XEN Corp., a Fairfax engineering and design firm whose clientele included national intelligence organizations, for an undisclosed price.
"The easiest way for a company to get into this line of work is to buy a company that's already in this line of work," said John E. Pike, director of GlobalSecurity.org, a defense and intelligence think tank in Alexandria. Acquisitions provide immediate access to intelligence customers and a workforce with experience in the sector, he said.
A string of later purchases, including those of N.E.T. Federal Inc. of Vienna (a subsidiary of Network Equipment Technologies Inc.), Acton Burnell Inc. of Alexandria and the government solutions division of Baltimore-based Condor Technology Solutions Inc., added employees with security clearances to CACI's payroll and expanded its offerings.
In March 2003, CACI bought Applied Technology Solutions Inc., a McLean company focused on the intelligence community, and last July it acquired Premier Technology Group Inc., a Fairfax firm that specialized in intelligence analysis services.
The company also began in the late 1990s to fill its executive offices with seasoned insiders. CACI named Gail E. Phipps, a National Security Agency veteran who worked in the intelligence divisions of Computer Sciences Corp. and TRW Inc., as an executive vice president in June 1999. The following month, Anthony J. Tether, a former director of the strategic technology office of the Defense Advanced Research Planning Agency and director of national intelligence for the Office of the Secretary of Defense, was named CACI's senior technology adviser and charged with guiding the company's growth.
By August of that year CACI had recruited L. Kenneth Johnson, a West Point graduate with two decades of defense contracting experience, to be its new president and soon issued a statement declaring that it had the management team in place to execute its ambitious growth strategy.
The company also began to recruit veterans of intelligence world to its boardroom. Richard L. Armitage was elected a director in 1999 but stepped down in 2001 when he was appointed deputy secretary of state. Over the past five years the company's board has included Barbara A. McNamara, former deputy director of the NSA; Arthur L. Money, former assistant secretary of defense for command, control, communications and intelligence; and former Air Force Gen. Larry D. Welch, a fellow at the Institute for Defense Analysis.
Such board members often act as liaisons between industry and government, said Elizabeth Bancroft, acting executive director of the Association of Former Intelligence Officers.
"The assumption is that they can make introductions, that they are arriving with a certain amount of built-in knowledge on projects that are going to be coming in the future," Bancroft said.
CACI's strategy paid off. In December 2000, it won a contract worth as much as $500 million to help modernize the Army intelligence systems. Last September, it won a $154.7 million contract to provide information technology support to the Army Intelligence and Security Command.
And the purchase of Premier Technology gave CACI one of its most high-profile intelligence deals: a large umbrella contract for information technology services. The military asked CACI to use that contract to supply interrogators, which CACI did, employing among others Steven A. Stefanowicz, who was implicated in an Army report on prisoner abuse at the U.S.-run prison near Baghdad. Stefanowicz , who has denied wrongdoing, is under investigation by the government. The General Services Administration also investigated to determine whether CACI should be banned from future government work, but decided that a ban is not warranted.
Despite the scrutiny resulting from intelligence work, London said he has no plans to change the company's strategy. In May it completed a $550 million acquisition of American Management Systems Inc.'s defense and intelligence group.
"I'm still enthusiastic about how well CACI has been able to respond in the intelligence community market and the defense and homeland security arenas," London said. "It seems to me there are a lot of challenges out there and it's a market that we feel we're very attuned to."
Ellen McCarthy writes about the local tech scene every other Thursday. Her e-mail address is email@example.com.