ManTech International Corp. said yesterday that one of its divisions was awarded a potentially lucrative contract to perform security clearance investigations for the federal government. A week earlier, delays in the contract caused the company to lay off 100 employees and announce it would post a loss for its second quarter.
Shares of ManTech rose 8.7 percent, or $1.18, to close at $14.82 yesterday after the Fairfax government contractor said it was one of five companies chosen by the Office of Personnel Management to conduct background investigations on applicants for federal security clearances. The company estimates the four-year contract could be worth $50 million to $100 million annually for ManTech.
Employees who were laid off last week will be given "first consideration" for openings that are created as a result of the award, said Mark Root, the company's spokesman.
In addition to ManTech, prime contracts for the background investigations were awarded to CACI International Inc. of Arlington, OmniPlex World Services Corp. of Chantilly, Systems Application and Technologies Inc. of Landover, and Kroll Inc. of New York. ManTech is the only one of the companies that has said the delay of the contract caused it difficulties.
ManTech had expected the contract to be awarded by June 30, Root said, but because of agency delays it didn't learn of the award until Friday evening.
ManTech has viewed the clearance investigation business as a chance for substantial growth. In February 2003 it was jointly awarded a contract with MSM Security Services Inc., of Greenbelt, worth up to $50 million, from the Defense Department's Defense Security Service. The next month ManTech bought MSM for $4.9 million.
But ManTech's entry into the investigations business has proved problematic. In May the company lowered its second-quarter revenue projections to $197 million to $201 million, from the $204 million to $208 million it had predicted the previous month. Last week it told investors it could not confirm its guidance and would swing to a loss for the quarter.
The new clearance investigation contract was delayed because of changes in oversight of the program. The Defense Security Service was supposed to turn over its security clearance duties to the Office of Personnel Management late last year, but the transfer has yet to occur because of problems with DSS operations. DSS had a backlog of 360,000 clearance requests, according to a February report by the General Accounting Office, now the Government Accountability Office.
News of the new contract may not be enough to assuage investors, some analysts warned.
"I think investors have a somewhat muted response to this because there is some uncertainty as to whether this is a good business that can sustain high margins for the contractors performing the work," said Timothy J. Quillin, an analyst with Stephens Inc. The costs of running the unit under the Defense Security Service contract were higher than previously expected, Quillin added.
Root said the terms of the new contract are more favorable for the company than the previous arrangement. Under the old contract, ManTech was paid for completed investigations only, regardless of the amount of time or labor it took to conduct the work. Under the new contract, the company will get half of its payment in advance and the rest upon completion of each investigation.
The company will discuss the financial impact of the contract in more detail when it releases its second-quarter earnings, by Aug. 9, Root said.