Here, ATK workers unpack a M230 cannon at the AUSA Convention in Washington. At the Arlington-based defense contractor, “We very much have in mind flexibility in our infrastructure and workforce so we can be responsive to changes in those customer priorities,” said Steve Cortese, ATK’s senior vice president of government relations and communications. (Jeffrey MacMillan/JEFFREY MACMILLAN FOR WASHINGTON POST)

A s 2012 draws to a close, many companies in the Washington area are facing a fresh reality: They aren’t quite as big as they used to be.

The region’s economic recovery has ambled along, but its pace has been more of a crawl than a dash. And the federal government is looking to rein in spending, particularly on defense, and that has created inertia for companies that do business with it.

Amid this challenging environment, some local firms have moved to recalibrate by spinning off businesses, paring down their workforces or otherwise cutting costs.

Efforts to get leaner were seen at Post 200 companies across a variety of sectors: AES, an Arlington-based energy firm, announced restructuring plans and narrowed its focus to fewer markets. McLean-based Booz Allen Hamilton cut 500 jobs in January and continued its efforts to shrink its real estate footprint. And in December, information technology company Computer Sciences Corp. sold its credit services business for $1 billion, part of a multi-year plan aimed at eliminating about $2 billion in costs.

“Accounting professionals have been telling their clients how to trim things, how to operate more efficiently,” said James C. Dinegar, president of the Greater Washington Board of Trade.

For many big businesses, this year has been a test of agility. They have assumed a nimble posture to adapt to uncertainties or changes in the business climate, and it remains to be seen whether that strategy will yield long-term results.


Nowhere has the shift toward smaller, more streamlined operations been more apparent than in the government contracting sector.

Perhaps the most dramatic of those moves was McLean-based Science Applications International Corp.’s decision to split into two publicly traded companies.

But it was hardly the only company in this industry that pushed itself to slim down.

At Arlington-based ATK, “We very much have in mind flexibility in our infrastructure and workforce so we can be responsive to changes in those customer priorities,” said Steve Cortese, ATK’s senior vice president of government relations and communications.

The defense company’s total workforce dropped from 18,000 in 2011 to 14,000 in 2012, and Cortese doesn’t see that head count settling to equilibrium any time soon.

“Our workforce is going to have a constantly evolving aspect of it as we seek to be very flexible,” Cortese said.

Cortese said the company’s focus on adaptability was critical to helping it secure new business in 2012, including its big win of a contract to operate the Lake City Army Ammunition Plant, a military factory that produces small-caliber ammunition.

“We sought to be ahead of or in line with the customer’s budget,” Cortese said.

At Falls Church-based Northrop Grumman, the strategic shift toward a smaller structure has been several years in the making.

“We have been adjusting our portfolio toward things that we think have enduring value for the Department of Defense in the future,” said Stanley R. Szemborski, vice president of corporate strategy. “We know there’s going to be an emphasis on the government getting as much bang for their buck as they can.”

In addition to concentrating on lines of business it deems most valuable, Northrop has reduced its head count by about 16 percent since 2008. It has reduced the square footage of its facilities by 12 percent during the same period.

Many contracting companies, including ATK and Northrop Grumman, continued to rake in huge profits this year. But it might take time to get a full picture of the effectiveness of their strategies.

“In one way success can be judged by profitability, but the truer metric may be what emerges on the other side, and what these companies look like in two or three budget cycles,” said Roman Schweizer, an aerospace and defense policy analyst at Guggenheim Securities.

There could be ripple effects from the heightened emphasis on doing business at the lowest price, said Alan Chvotkin, executive vice president of the trade association Professional Services Council.

“The longer-term unknowns are what is the government giving up and what is the industry giving up in terms of innovation,” Chvotkin said.


While uncertainty about federal spending weighed heavily on contracting firms, the sluggishness of the economic recovery was a key drag on other businesses.

At Strayer Education, the Herndon-based for-profit education company, enrollment was down at its Strayer University outposts by about 5 percent this fall compared with the same period in 2011.

“It’s been somewhat of a challenging year for us,” said Robert S. Silberman, Strayer’s chairman and chief executive. “The economy has continued to be under some pressure, and that’s hurt the ability of students who need a college education to afford the financial impact and the time impact” of going to school.

Given these constraints, Strayer has adapted by making its tuition increase more modest than in years past. It also has used targeted scholarships to lure students that have already completed some coursework and could transfer those credits to Strayer.

The company has decreased its workforce from 4,020 in 2011 to 2,120 in 2012. In the Washington area, the firm’s head count has slipped from 830 to 550, a change that Silberman said reflects customer demand.

“What we do constantly is balance our academic staff around the country based on where the student enrollment is,” Silberman said.

Strayer doesn’t see the Washington market as one where it has high growth potential. Silberman said it’s the company’s oldest market, and the goal here is just to keep enrollment stable.

Strayer’s graduate programs have fared better than its undergraduate programs this year, a fact that Silberman said is likely because those who already have a college degree are better positioned to absorb the financial and time drain of furthering their education.

Still, “In a challenging economy, we just don’t add students as quickly,” Silberman said.


Not all companies have sought to streamline this year. Sourcefire, a Columbia-based cybersecurity firm, has added about 150 jobs this year and has openings for 60 more. Its revenue for its most recent fiscal year was $166 million, up from $131 million the previous year.

This growth has in part been made possible by robust demand for protection on the Web.

“One of the interesting aspects of the cyber world is it’s a problem that never really goes away. It doesn’t matter what the economy is doing,” said Martin F. Roesch, the company’s interim chief executive.

Roesch also said the company’s narrow specialization has helped it succeed. Sourcefire concentrates on products that defend against cyber threats, a contrast to some of its competitors that have additional divisions such as cyber compliance.

“I think a lot of it is focus. This is all we do,” Roesch said.

Roesch expects to continue to hire next year and plans to reinvest some of Sourcefire’s revenue in the business so it can keep developing products and growing its market share.

“We don’t want to just address profitability only and leave opportunity on the table,” Roesch said.


While many big firms have so far survived or even thrived amid the uncertainty, not all businesses have fared as well.

“We’ve seen a lot of restaurants close up, we’ve seen a lot of small businesses that could not hang on,” Dinegar said.

The environment was also challenging for local nonprofit groups, many of which saw giving stagnate or decrease this year.

And across industries and job categories, the approach to hiring was a careful one.

“When I ask the clients why, it’s often: ‘We’re still gaining our confidence, we’re seeing what’s happening with the federal sector, with the consumer,’ ” said Paul Villella, chief executive of Reston-based staffing firm HireStrategy.

If 2012 was a year for caution among Washington area businesses, the mood of 2013 remains difficult to predict.

“It’s basically impossible to generate a unified baseline forecast at this time, and that’s because we’re at a fork in the road,” said Anirban Basu, chief executive of Sage Policy Group, an economic consulting firm in Baltimore. “And the fork in the road is the ‘fiscal cliff.’ ”

If lawmakers do not reach a deal to avert the combination of spending cuts and tax hikes set to take effect in January, it could be a blow to the many businesses in the region that contract with the federal government. It could also thrust the nation back into recession, the Congressional Budget Office has said.

Even if a compromise is reached, it is not clear how local businesses would be affected because it is not known which programs would be subject to cuts.

“There are some big decisions that are pending in the federal government,” Dinegar said. “Until those get resolved, the marketplace is on hold.”