Volume 1, Issue 3 August 2003

Welcome to the Federal Growth Report.

Our newsletter addresses issues of importance to leaders in the federal technology sector. These people build companies and increase equity value.

For those not directly involved in this industry, you might pass this to someone who is. Feedback and dialogue are welcome by writing me at paulserotkin@minutemanventures.com. Thanks.


Paul Serotkin
Minuteman Ventures

in this issue

The 'Value Table' - 10 Leading Factors in determining Federal/Defense company value.

CEO Corner - Todd Stottlemyer, CEO, ITS Services, Inc., Springfield, Va. - A long-time federal sector veteran (BDM, BTG), Todd recently became CEO of the company, having partnered with private equity group Arlington Capital Partners in the acquisition of $70 million ITS Services.

The Federal Deal! - InfoBase, the respected industry research firm, launches a new feature, reporting its view of a recently completed M&A deal in the federal sector.

Contract Central - InfoBase launches a second new feature, analyzing key recent awards for the Federal Growth Report.

Recent Transactions - A quick look at Defense/Government Technology M&A transactions in recent months.

Value Alignment - Guest author Gary Dunbar addresses this new technique to ensure that operating performance is aligned with strategy.

About Us



Minuteman President Serotkin Speaks on Defense M&A at Defense/Aerospace Investor Conference this September in San Diego
Click here for more on this SRI session.





The 'Value Table' - 10 Leading Factors in determining Federal/Defense company value.

Whether or not you are ready to consider sale of your company, CEOs need to understand the relative value that prospective buyers place on your operation.

While regulations, capital market conditions and buyer types may change, many of these should hold over time. Keep in mind that different buyers will weight each factor differently. All of them pertain to the government market.

To test this ‘Value Table’ against market realities, we asked PEC Solutions executive John Forbus, General Manager, Defense Solutions, to review the list for validity. John has been involved in several of that company’s acquisitions.

Go ahead, rate your company. The closer your firm scores to 100, the more likely that the business will be positioned for sale.

Contract Alignment with the Mission de Jour
Each era of federal contracting brings with it agency missions or strategies that are in favor. Currently, pursuits such as intelligence, public safety, homeland defense technologies and information/physical security are winners. To the extent your firm performs work in a ‘hot’ market and the work is clearly valued added from a technical perspective to the customer, its score on the Value Table improves.

FACTOR: Weak alignment

Strong Alignment

Cleared Employees
In a time when secret, top secret and advanced clearances for employees are harder to obtain and take longer to gain, those firms with at least 60% of their technical work force having clearances in place score better.

0-20% Employees Cleared

20-60% Cleared

60% or Over Cleared

Recaptured Business
Consistently captured re-competed contracts previously held by your firm signal strong client relations, attention to customer needs and commitment to maintain your best customers. Those companies deriving at least half of their annual revenue from re-compete wins will earn higher marks on the Table. (Caution: As Federal Growth Report author Gary Dunbar pointed out in the April 2003 issue, over-reliance on re-compete contract wins could also signal a reluctance to approach new business.)

0-20% Recompete Revenue

20-50% Recompete

50% or Over Recompete

Prime Contract Awards
Buyers like small and mid-sized firms that own the contract, and, preferably control the majority of spending under it. Where the prime contract is one of a limited number awarded under a particular GWAC vehicle (such as Millennia Lite), buyers could look even more favorably.

0-20% Prime Contract Revenue

20-70% Prime

70% or Over Prime

Small Business Set Aside (SBSA) Awards
SBSA revenue is very valuable for growing your business but is looked at less charitably by buyers, especially given draft federal rules which make holding on to small business more difficult. At the time of sale, the SBSA portion of revenue is best if less than half and going down.

70-100% SBSA Revenue

20-70% SBSA

20% or Under SBSA

Time in Business
While there are certainly exceptions, it takes time to build a successful federal firm, develop and test the mettle of a management team, create a winning culture and reach the second generation of re-competed contracts. We selected 10 years as the minimum number of years in business that buyers would like to see.

1-3 years in business

4-10 years

10 years

Contract Concentration
Having your business concentrated in one or only a few contracts is a double edged sword – contract cancellation or losing the recompete could undermine your entire business base. Buyers like concentration within a given customer set (so there is a sufficient foundation on which to build) but do not value the at-risk revenue represented by one or a few awards.

50%+ revenue from 1 contract


less than 25%

8(a) Revenue
When used optimally, the SBA’s 8(a) program has helped launch many companies and grown them into a thriving business that does not depend on the preference program for its growth. Trying to sell your firm while still holding significant 8(a) work – especially revenue from contracts that cannot be transferred to new ownership upon an acquisition, can materially hold down exit value for the seller.

50-100% rev. from 8(a)

15%-50% from 8(a)

Less than 15% from 8(a)

Competent Management
While post-transaction situations can vary widely, generally buyers want management either to stay as full-time employees or stay through a transition to get the seller acclimated to their environment. If owner-managers are leaving on closing, then the need for strong management below them becomes even more critical. In any event, buyers place greater value on proven executives and managers that grew the seller to its current state, and have the potential to grow it more under new ownership.

Lightly regarded management

Highly regarded management

Sustained Revenue Growth
Sustained revenue growth by at least 15% over three straight years can be a strong indicator of future business success. The smaller the company, the faster the buyer would expect the business to grow. While there are plenty of more mature businesses with solid contract backlogs that do not experience this growth rate (and yet have a lot of market value), sustained, profitable growth counts highly, especially in a federal IT sector growing at 10% plus.

0-7% compounded ann. rev. growth

8-15% growth

15%+ growth



CEO Corner - Todd Stottlemyer, CEO, ITS Services, Inc., Springfield, Va.

FGR: The founder/owners of ITS Services sold a majority stake of their company to a private equity group, rather than sell the entirety of the business. Why would they go that route?

TS: For owners who want significant liquidity but want to retain some equity for potential upside by putting their company in the hands of an experienced management team backed by substantial outside capital, the private equity model makes a lot of sense. If the only real goal of the selling entrepreneurs is to get 100% liquidity and the highest possible dollar value, then this route is probably not for them. The ITS Services founders remain as stockholders of the Company and are available as consultants to the firm.

FGR: Does the retention of the founder operators in the business, whether active or passive, help in transitioning the firm to new ownership?

TS: Absolutely. It sends a positive message to employees to say that the founders are still equity holders in the firm, sharing the vision with the new owners that the business has a lot of future growth potential and real equity upside.

FGR: Why do you think that the ITS transaction will be successful?

TS: First, we have an excellent company with a strong past performance record of execution, poised to attack larger prime contracts. Second, ITS Services is now a strategic acquirer, backed by private equity capital and lenders who are focused on and understand the federal information technology sector. As a result, we are very well positioned to make strategic acquisitions. Third, we believe the new management team, including myself, Phil Odeen, Tom Weston and Paul Leslie, all deeply experienced in the industry, will be able to leverage our industry and customer relationships with the inherent value of ITS Services and build a broadly recognized premier federal information technology company.

FGR: How should small to mid-sized company CEOs be viewing the active M&A market in the federal sector?

TS: Both enthusiastically and realistically. Valuations are at historic highs, which is very positive for entrepreneurs who may have the majority of their wealth locked in their company.

Yet, smaller companies must be realistic and manage their expectations. The prices being paid for larger, public companies, such as the Veridian transaction with General Dynamics at well over one time revenue, are not realistic for smaller firms.

Smaller firms need to have a true beachhead with a given customer or customer sets to attract value. $30-$40 million revenue companies that are doing work for 10 or more different agencies where they are spread very broadly probably do not have deep enough penetration in any of them to interest most buyers.

FGR: What type of firm is ITS Services looking to acquire?

TS: We intend to build on our capabilities and strengths – enterprise architecture (where the company built the only Level 5 GAO evaluated enterprise architecture for an agency – U.S. Customs – being absorbed into the Department of Homeland Security), software and systems development, and network engineering and operations.

Specifically, we are looking for additional EA capabilities, a stronger infosec and information assurance capabilities, and defense firms providing skills in modeling and simulation, C4ISR, logistics, training, and missile defense.

Our criteria for company size range extend from $30 to $125 million, with $50-$80 million being the sweet spot.

FGR: What are the plans for liquidity for the ITS Services investors?

Growth – both internal and external through acquisitions - will give us many long-term options. These options include recapitalizing the firm, going public if the capital markets support the sector at that time, or selling the firm to a strategic acquirer at some point in the future.

^ Back to top

The Federal Deal!

New Feature! FGR is now offering analysis of recent M&A transactions involving small- to mid-sized government services contractors. The analysis is written by Stuart McCutchan, president and CEO of InfoBase Publishers, Inc.© and editor of the Defense Mergers & Acquisitions, a premier source for information on defense/aerospace M&A. Opinions expressed below are those of InfoBase. All rights reserved. For more on InfoBase Publishers' services, contact Bill Burton (410.820.6821, wkburton@infobasepub.com) or click http://infobasepub.com/.

Computer Horizons Corp. Acquires RGII Technologies, Inc.

July 9, 2003 - Computer Horizons Corp. (CHC) (NASDAQ: CHRZ) acquired privately-held RGII Technologies, Inc. Headquartered in Annapolis, Maryland, RGII is a solutions provider of information technology (IT) and program management to federal, state, and local government agencies.

Founded in 1990, RGII claims to offer services and solutions in such areas as enterprise management, network infrastructure, information assurance and security, web development and integration, program management, call management, engineering technology and technical services. In addition, RGII's unique proprietary software solution, known as "Monument," addresses Federal budget formulation processes. Supporting over 80 government customers, RGII has more than 350 employees in regional and customer site offices across the continental U.S., with a large percentage of its employees holding U.S. government security clearances. In addition, three of RGII's facilities carry either Top Secret or Secret clearances.

The firm has contracts with numerous Federal agencies, including the U.S. Dept. of State, the DoD (primarily servicing the Office of the Secretary of Defense for Health Affairs (OSDHA) and the U.S. Navy) and the National Oceanic and Atmospheric Administration (NOAA) in the Dept. of Commerce. RGII derives approximately 50% of its business from the DoD and 50% from civilian agencies. RGII is the prime contractor on more than 50% of its contracts. Computer Horizons president and CEO William J. Murphy stated: "We look forward to applying CHC's resources to help maximize RGII's potential. Acquiring a platform company in the federal government IT services marketplace has been a long-term priority for CHC, and we believe RGII is an outstanding fit for us. While most experts agree that the overall IT Services sector continues to face sluggish growth prospects as corporate technology budgets continue to be squeezed and offshore outsourcing of technology jobs continues, the Federal government IT sector remains a very strong market.

Computer Horizons Corp. is itself the object of a hostile takeover offer from Aquent LLC, a privately-held global professional services firm that has offered $5 per share for the firm's stock in a deal worth $152 million. Aquent issued a statement asking for further information about the RGII deal in order to gauge the impact on its own offer for Computer Horizons.


The RGII deal includes an up-front payment of approximately $21 million and an adjustable note with a face value of $10 million that is payable over three years. The ultimate value of the note will be based on RGII's performance against profitability objectives. The acquisition is expected to be immediately accretive to earnings for CHC.

For calendar 2002, RGII revenues exceeded $33 million, having grown at a compounded annual rate of 64% since 1995. RGII claims to have more than 350 employees. H&K Strategic Business Solutions (McLean, VA) advised RGII Technologies on the transaction.


The Washington Post reports that institutional shareholders and some analysts questioned the value and timing of the deal. They criticized the management of Computer Horizons during a conference call for inadequately explaining why it believes that Aquent's offer was too low, and for attempting to separate the issues of the RGII acquisition and the Aquent bid. One, who spoke on the condition of anonymity, told the Post, "They've done an acquisition that very likely destroyed value, although it's hard to evaluate in the absence of any detail."

Financial analysts clearly don't care for this deal. It's unpopular with us, too, but not for the same reasons. RGII is simply not the company with which to start a government IT business base. While almost all of RGII's clients are federal, and it has experienced steady growth since its founding in 1990 to reach $33 million in CY02 annual revenues, the company benefited for nine years (beginning in January 1994) from participation in the U.S. Small Business Administration's 8(a) program for minority- owned, small, disadvantaged businesses.

Though the company still qualifies as a small business in some NAICS classifications, RGII's January 2003 graduation from the 8(a) program means it no longer can win 8(a) sole-source contracts, nor can it compete in procurements limited to 8(a) firms. Data from the Federal Procurement Data Center (FPDC) shows that about 37% of RGII's prime contract revenue is pure 8(a). When subcontracting revenue and task orders on IDIQ, GWAC, and GSA vehicles are factored in, however, we estimate close to 60% of RGII's current work is in jeopardy.

To its credit, the company made a couple key hires in September 2002 (Tom Eakin from Booz-Allen and ex-CSC exec Matt Murray) to help with the transition to the full & open marketplace. Nevertheless, RGII now must compete for new contracts against large businesses like SAIC, CACI, Anteon, Northrop Grumman IT, Lockheed Martin Technology Services, etc., and established small businesses with solid credentials in certain niches.

Which brings us to another sore point with Computer Horizons' choice for entry into the government IT contracting sphere. The types of projects RGII performs for its federal clients are all over the map. Subsequently, the firm lacks the depth in corporate experience (the government calls it "past performance") needed to be a consistent winner in tough contests.

Some examples of RGII's work include computer and peripheral repair for NOAA, project management for NAVSEA, facility operations and maintenance (O&M) for NAVAIR, call center management for HUD, software development for the State Dept., IV&V for the Military Health Systems, and computer-user help desk operation for DISA. See what we mean?

This type of broad-but-shallow contract base comes from an apparent lack of vision by RGII's business development leaders. In its 13 years of existence, RGII has never established a true niche. What type of company does it want to be in five years? 10 years? If RGII had a forward- looking answer to this simple question, perhaps it would have legitimate core competencies in areas expected to be in high demand through the end of this decade (systems engineering and integration, information assurance, missile defense, etc.). Instead, it’s revenue for revenue's sake at RGII.

As a result, we feel this company will struggle in the full & open and small business set-aside environment, and likely will not see much of the $10 million in future performance incentives dangled in front of it by Computer Horizons. Meanwhile, the acquiring company will be forced to look elsewhere to establish a foothold (or cut its losses altogether) in the federal IT sector.

^ Back to top

Contract Central

A Review of Recently Awarded Federal Contracts

New Feature! FGR is now offering briefs on selected services contracts awarded by the U.S. government during the last two months. The briefs are compiled by InfoBase Publishers, Inc.©, a leading provider of competitive intelligence for the worldwide defense/aerospace industry. All rights reserved. For more on InfoBase Publishers' services, contact Bill Burton (410.820.6821), wkburton@infobasepub.com or click http://infobasepub.com/.

In Major Upset, InDyne Wins WROCI; Job Called One of the Largest Federal IT Services Contracts Ever Awarded to a Small Business

In July 2003, the U.S. Air Force Space Command, 30th Contracting Squadron (AFSPC 30 CONS) (Vandenberg AFB, CA) awarded InDyne, Inc. (McLean, VA) an eight-year, $429.8 million, cost-plus/incentive-fee/award-fee contract (F04684-03-C-0050) for Western Range Operations Communication and Information (WROCI).

Under the contract, the company will provide Western Range operations and maintenance (O&M); support services; training; command, control, communications, information and computer (C4) systems services; testing, modifying and installing communications, electronic and security systems at launch facilities, launch control centers, and test facilities.

InDyne's only subcontractor is Northrop Grumman IT, Technical Services (Herndon, VA). Northrop Grumman IT will be responsible for about one-third of the contract's 740-person workforce. InDyne, which earned $69 million in 2002, mostly from NASA contracts, said it expects to double in size as a result of the win. According to the U.S. Small Business Administration (SBA), WROCI is one of the largest federal information technology (IT) and communications services contracts ever awarded to a small business.

The contract was competitively procured through solicitation F04684-01-R-0008, which was issued on June 21, 2002, and called for a single award under competition limited to small businesses only (NAICS 51331). Proposals were due on September 17, 2002. A total of seven offers were received. One of the losing bids was submitted by MCA Engineers, Inc. (Oxnard, CA), which was teamed with ITT Industries, Systems Div. (Colorado Springs, CO), a 44-year incumbent that was not permitted to bid as prime because of the small business restriction.The procurement is considered a follow-on effort. The incumbent was ITT, which worked most recently under the $307 million Range Operations and Maintenance Support Services Contract (ROMSSC) (F04684-96-C-0038) awarded in August 1996.

The WROCI contract also consolidates work performed previously under at least five other Vandenberg AFB support services contracts, all of which are much smaller in size and scope than ROMSSC. The incumbents on the smaller jobs were MCA Engineers, Dynamic Concepts, Inc. and Akima Corp.

InDyne did not participate, either as a prime or a subcontractor, on any of the consolidated contracts. In fact, the company had no prior experience with 30 SW or at Vandenberg AFB. InDyne's most relevant corporate experience is as a subcontractor on the 10-year, $2.2 billion Joint Base Operations Support Contract (J-BOSC). The J-BOSC prime contractor is Space Gateway Support (SGS) (Herndon, VA), a joint venture led by none other than Northrop Grumman IT, Technical Services.

U.S. Army NETCOM Selects FCBS for Enterprise- wide IT Integration Services

In July 2003, the U.S. Army Contracting Activity, Information Technology, E-Commerce and Commercial Contracting Center (ACA ITEC4) (Ft. Huachuca, NM) awarded FC Business Systems, Inc. (FCBS) (Springfield, VA) a $10.5 million task order on a previously awarded GSA contract (GS-35F-4701H) to provide information technology (IT) services support to elements of the U.S. Army Network Enterprise Technology Command (NETCOM) 9th Army Signal Command.

Under the task order, the company will be responsible for developing, implementing, and enforcing enterprise systems management (ESM) processes and activities required to operate and manage the transformed, consolidated Army infostructure at the enterprise level.

The procurement is considered a follow-on effort. The incumbent was L-3's Analytics Corp. subsidiary, which has a business unit called C4I Operations Support (Sierra Vista, AZ). FCBS said it has supported Fort Huachuca for the past seven years, and NETCOM there for more than four years. The firm's Sierra Vista office has grown steadily from 32 to more than 120 employees.

NUWC Selects AMA to Support Financial Management, Workforce Effectiveness Departments

In July 2003, the U.S. Naval Undersea Warfare Center Div. Newport (NUWC) (Newport, RI) awarded Aquidneck Management Associates, Ltd. (AMA) (Newport, RI) a five-year, $15.7 million, cost-plus-award-fee (term) contract (N66604-03-C-0665) for administrative and technical support for the NUWC's Financial Management Dept., Workforce Effectiveness Dept., and Supply Management Office.

Under the contract, the company will perform on- site support for computer systems, computer programs, and data-processing facilities in the departments. The work includes 15 separate tasks. The task for the Workforce Effectiveness Dept. includes program development and maintenance, and personnel department administrative and operations support. The work is expected to be completed by August 2008. Contract funds will not expire at the end of the current fiscal year.

The contract was competitively procured through solicitation N66604-03-R-0665, which was issued on January 29, 2003, and limited competition to small businesses only (NAICS 541513). A total of seven offers were received.

What Goes Around, Comes Around
AEDC Awards Jacobs-led Joint Venture $2.7B Contract to Run Center

In June, 2003, the U.S. Air Force Arnold Engineering Development Center (AEDC) (Arnold AFB, TN) awarded Aerospace Testing Alliance (ATA) (Tullahoma, TN) a 12-year, $2.69 billion, cost-plus-award-fee contract (F40600-03-C-0001) for the operation, maintenance, information management, and support of AEDC, the most advanced and largest complex of flight simulation test facilities in the world.

ATA is a three-way joint venture led by managing partner Jacobs Sverdrup (Tullahoma, TN). The other two firms in the joint venture are CSC Federal Sector, Defense Group, Aerospace unit (Falls Church, VA), and General Physics Corp. (Columbia, MD).

The contract was competitively procured through solicitation F40600-03-R-0001, which was issued on January 6, 2003, and called for a single award under full & open competition With the decision to consolidate these two contracts, the Air Force has come full circle. For 28 years, beginning in 1950, AEDC had only one contractor, ARO, Inc. (now Jacobs Sverdrup), which got several consecutive sole-source contracts. According to Air Force procurement officials, the company's long tenure created some negative effects on the program, so, for FY78-80 support, AEDC decided to compete the contract under full & open competition. Only one other bid was received, however, which was graded unsatisfactory, and the contract was again awarded to the then- ARO.

In an effort to stimulate competition, the Air Force split the work into three separate contracts for FY81-85. This approach worked. ARO won the propulsion testing portion, Calspan Corp. (now part of Veridian) won the flight dynamics testing contract, and Pan Am World Services won the O&M work.

For FY86-95, the government stayed with the three contracts, but in only one of six competitions during that time did the incumbent lose (SSI Services beat Pan Am in the 1985 O&M recompete). In the FY96-00 competition, AEDC left the O&M contract alone (won by ACS), but bundled the two test contracts into one (won by Sverdrup) to eliminate technical and administrative redundancies and achieve cost savings.

Now, the Air Force has decided to return to the days of a single AEDC contract. Procurement officials say the abandoned multiple- contract approach did produce some benefits, but, in the end, the government believes it will be better off with a single contract. The key, they say, is full & open competition to stave off contractor complacency.

Incumbent EMA and Subcontractor Jahn Corp. Flip-Flop Roles to Win NAWCAD SBSA for V-22 Support

In June 2003, the U.S. Naval Air Warfare Center - Aircraft Div. (NAWCAD) (Patuxent River, MD) awarded Jahn Corp. (Lexington Park, MD) a five-year, $34 million, IDIQ contract (N00421-03-D-0045) to provide professional administrative and management support services for the V-22 Joint Program Office integrated process teams (IPTs) and field activities.

The procurement is considered a follow-on effort. The incumbent was EMA, which performed much of the work previously under a blanket purchase agreement (BPA) (N00421-97-A-1443) awarded in FY97. Jahn Corp. was a subcontractor to EMA. Since EMA has outgrown its small business status, EMA and Jahn chose to reverse roles.

Under the contract, which has an estimated level of effort (LOE) of 63,850 labor-hours per year, the company will perform work that includes support for V-22 Osprey (tilt-rotor) aircraft weapon systems program management/administrative support and resources/operations areas; development/production analyses and technical services in the area of V-22 testing for all V- 22 functional areas and V-22 variant aircraft; and independent analyses, technical studies and management services for the V-22 weapons systems program.

Jahn’s subcontractors are:

  • Eagan, McAllister Associates, Inc. (EMA) (Lexington Park, MD)
  • Veridian Engineering Div., Aeronautics Sector (Lexington Park, MD)
  • Titan Corp., probably the Aviation Engineering Group, Aviation Integration Div. (Mount Laurel, NJ).

Protest Pays Off; AFOTEC Adds MacB to General Operations Support (GOS) Winners

In June 2003, the U.S. Air Force Operational Test and Evaluation Center (AFOTEC) (Kirtland AFB, NM) awarded MacAulay-Brown, Inc. (MacB) (Dayton, OH) a five-year, $16 million, IDIQ contract (FA7046-03-D-0004) to provide operational, test, and evaluation (OT&E) support for AFOTEC headquarters, detachments, and operating locations under AFOTEC's General Operations Support (GOS) program.

The contract award resulted from a MacB protest of AFOTEC's original GOS procurement. In October 2002, AFOTEC awarded two GOS contracts, one each to Cirrus Technology, Inc. (Huntsville, AL), a HubZone company, and ASRC Communications, Ltd. (Anchorage, AL), a small business. Having been left out of the winners' circle, MacB protested the evaluation process, and the government ruled AFOTEC must take corrective action. AFOTEC subsequently re-evaluated the MacB bid, which brought it into the competitve range. At that point, AFOTEC chose to award another GOS contract to MacB, while keeping the other two contractors in place.

Under the multiple-award program, the three companies now will compete for task orders to support the administration, planning, and conducting of OT&E activities. MacB was acquired in December 2001 by privately-held The Sytex Group, Inc. (TSGI) (Doylestown, PA). At the time of its acquisition, MacB was generating slightly more than $35 million in annual revenues with 350 employees.

In 8(a) Set-Aside, AFRL Inks ZelTech to Implement A2IPB at 50 Air Operations Centers

In June 2003, the U.S. Air Force Research Laboratory, Rome Research Site (AFRL RRS) (Rome, NY) awarded Zel Technologies, LLC (ZelTech) (Hampton, VA) a five-year, $24.9 million, IDIQ contract (F30602-03-D-0100) to implement the Automated Assumption with Intelligence Preparation of the Battlespace (A2IPB) program.

Under the contract, the company will develop and enhance the A2IPB baseline to interface and interoperate with target development systems, intelligence surveillance reconnaissance (ISR) management and employment systems, fusion systems, intelligence and command and control (C2) databases, and effects-based operations systems.

A2IPB will be fielded to all USAF air operations centers. Installations planned are nearing 50 in number. Further, A2IPB is being readied for use by the intelligence community in DODIIS environment. The contract was issued on March 18, 2003, and limited competition to 8(a) firms only (NAICS 541710). The contract is considered a follow-on effort. The incumbent was ZelTech, which developed A2IPB software under a contract awarded in 2001.

Caelum Gains White Sands Operations Contract

On June 3, 2003, the U.S. Army Contacting Activity (ACA), White Sands Missile Range awarded Caelum Research Corp. (Rockville, MD) a 15-year, $65.3 million, firm-fixed-price, level-of-effort (LOE) contract (DABK39-03-C-0053) to provide Information Systems Operations and Support Services (ISOSS).

Under the contract, the primary information technology (IT) for WSMR employees, the company will supply a team of about 70 people to operate the computer systems, including input/output control, magnetic tape and optical media libraries, magnetic tape maintenance facilities, system accounting and file management.

For WSMR, the company will perform automated data processing equipment (ADPE) operations, help desk, data processing services, software development, and software maintenance services. For the National Range, Caelum will perform real-time operations, business computer operations, network support, telecommunications center operations, and real-time operations control systems (ROCS). For the U.S. Army Research Laboratory (ARL) the company will perform computer operations and computer system operations. For the U.S. Army TRADOC Analysis Center - WSMR (TARC-WSMR), Caelum will operate the TARC-WSMR computer systems and provide network operations support functions for associated LAN systems and their associated equipment computer operations.

Caelum’s only known subcontractor is Pyramid Services, Inc. (Alamogordo, NM), dba Univeral Systems & Technology, Inc. (UniTEC) (Fairfax, VA). The contract, which begins September 1, 2003, contains a one-year base (worth $4.3 million), two one-year options, and 12 one-year award-terms that, if earned, could increase its cumulative value to $65.3 million and extend the period of performance through August 31, 2018.

The contract was competitively procured through solicitation DABJ47-ISOSS, which was issued on February 27, 2003, and called for a single award under competition among small businesses only (NAICS 541513).

The procurement is considered a follow-on effort. The incumbent was UniTEC, which worked under a five-year, $17.7 million contract (DAAD07-98-C-0107) awarded in FY98. In fact, UniTEC was founded in 1991 for the purpose of competing for the ISOSS contract. UniTEC has maintained the contract since that time, but could not bid as prime on this recompete, as it no longer qualifies as a small business within the procurement's assigned NAICS.

"UniTEC is pleased to have the opportunity to continue providing outstanding services to our White Sands customer," said Laura Bregler, president and CEO of Pyramid Services. "Pyramid Services is excited about its partnership with Caelum Research Corp. and the opportunities to further the great mission of WSMR."


Recent Transactions

Selected Defense/Government Technology M&A Transactions

Closing or Announcement






August 5, 2003

Tetra Tech

Engineering Management Concepts (EMC)


July 30, 2003

FC Business Systems

Amerind, Inc.


July 30, 2003

General Dynamics

Digital Systems Resources, Inc.


July 17, 2003

Innovative Technology Application, Inc.

IT Specialists, Inc.



July 15, 2003

American Management Systems, Inc.





July 9, 2003

Computer Horizons

RGII Technologies

$21m (+$10m earnout)



July 2, 2003


McDonald Bradley, Inc.



June 12, 2003

L-3 Communications

Aeromet, Inc.




June 10, 2003


Frank Solutions


48 employees

June 9, 2003

General Dynamics


$1.5 Bn



May 30, 2003

Innovation Technology Application, Inc.

DKCS, Inc.



May 29, 2003

SCB Computer Technology, Inc. (SCBI)

National Systems & Research Co.



^ Back to top


Value Alignment

Value Alignment - The High Performance Foundation for Effective Strategy Execution

Imagine a government professional services provider where every function, every operation, every executive, manager and employee totally perform in complete alignment with the firm’s strategy for delivering value to customers. Or picture a defense equipment manufacturer that is totally synchronized and behaves, operates, and functions at an optimum level to execute the firm’s business strategy.

Firms like this, or very nearly like it, exist. They are the leaders in their industries. In consumer products they are the well- known brand names that have consistently grown and profited. Given the thousands of firms in the world, these leaders are somewhat rare.

In the federal technology marketplace, leaders exist as well, though leadership comes in its own distinct form. A larger, government contractor ‘brand’ may focus on intelligence and security missions, reinforced operationally by aligned acquisitions, high-end strategic work, senior executives formerly employed at relevant government agencies and growing customer presence at agencies such as NRO, CIA and DISA.

For smaller federal firms, that brand could mean meaningful market share in a given geographic market, such as at a particular Army R&D laboratory, reinforced operationally by leadership that had spent their career at that facility, technologists who further the major missions supported by that facility and national policy presence in advancement of relevant missions.

Execution is the issue

The problem is not that companies who perform at lesser levels do not want to join the leadership ranks – most do. The problem is how to do it. Company leadership teams create strategy and take actions to be sure everyone understands the strategy. Often, at year-end, achievements fail to meet goals. The problem is execution – not the strategy. This is not unusual – in fact, it is commonplace.

“Flawed strategy is seldom the sin of these failed CEO’s. In the majority of cases - estimated 70% - the real problem isn’t the high-concept boners. It’s bad execution.” “Why CEO’s Fail” Fortune, June 21, 1999.

The heart of the problem is that company leadership has only their personal judgment and experience to help them analyze what went wrong. Sometimes they isolate and fix the real problem but often, their corrective efforts are misdirected or ineffective.

Value Alignment (VA) diagnostics changes things. With VA, a CEO in virtually any industry can now rapidly review the entire operations and identify elements that are, or are not, operating in alignment with the firm value delivery strategy. Note that the focus is on actually operating in alignment with strategy and not on merely saying that operations are aligned with strategy. This gives the CEO the power to get all the cars in the train on the same track and heading in the same direction. With all elements of the firm operating in support of the strategy for delivering value to customers, the leadership team can focus on improving performance and actually achieving consistent, long-term revenue growth.


VA Applications
VA is most effective when applied in three consecutive steps: Leadership, Executives, and Management.

Step One: Leadership VA
The CEO (or Strategic Business Unit Leader) and no more than two additional leaders (COO and CFO typically) complete a questionnaire defining strategy category and characteristics. Questionnaire responses are evaluated; the VA consultants provide a summary report.

Step Two: Executives VA
Six to eight executives (or, typically other than the CEO, COO and CFO) meet with the VA consultant and develop an understanding of strategic category. They eachcomplete a questionnaire. The VA consultants evaluate questionnaire responses and report findings, including indicators of elements aligned, or not aligned, with value delivery strategy.

Step Three: Management VA
A group of 18 to 25 managers (or smaller number depending on company size) meet with the VA consultant and develop an understanding of strategic categories. They, too, complete a questionnaire. The questionnaire responses are evaluated and findings are reported, including indicators of elements aligned, or not aligned, with value delivery strategy.

What is VA?
VA is new – very new. Valerie Kijewski, Ph.D. and Norma C. Powell, Ph.D., professors at the University of Massachusetts Lowell College of Management and founders of Business Genetics, developed it. Validation testing was completed in June this year. VA builds on the work of Treacy and Wiersema identifying and defining the three basic categories of strategy for delivering value to customers. Simply put, there are three value delivery strategies: PRODUCT, SOLUTION, and COST. Optimum performance is achieved when a firm delivers unmatched value in one of these three while meeting threshold standards in the other two.

Kijewski and Powell took these three value strategy definitions and identified operational characteristics for each. These operation characteristics, or discriminators, are used to construct data collection and analysis tools. These tools may now be used to rapidly review a firm’s operations and identify elements that are, or are not, operating in alignment with the firm’s strategy.

VA is the starting point for improving performance. It is the diagnosis of the situation, not the prescription for cure. For many business leaders, knowledge of the problems rapidly leads to effective corrective actions. More complex or subtle problems may require deeper investigation to identify the effective corrective action.


What does Value Alignment mean?

Look at your own company’s decisions regarding investments. It is likely that your investment decisions tend to fall into one of the three categories below more often than not.


Investment categories
Investment decisions are based on the contribution to:

1. company cost and efficiency
2. technological advantage
3. customer satisfaction.

If you selected category #1 as the most pervasive basis for investment decisions in your company it indicates that you are following a COST value delivery strategy. The second category indicates a PRODUCT value delivery strategy and the third, a SOLUTION value delivery strategy.


Organizational Categories
Internal structure is organized around:

1. business processes
2. product or technology
3. customers or markets

If you again selected #1 we would observe that your investment decisions and your organizational structure are aligned for value delivery strategy. If you selected the second or the third our conclusion would be that these elements are not aligned and may be in conflict, hurting your firm’s performance, and diminishing your ability to grow revenue.

In conducting a Value Alignment diagnostic exercise, we review over a hundred such questions and look for alignment matches, or mismatches, in a broad spectrum of a firm’s operations.


Implementing VA
In practice, VA is applied in three steps: Leadership, Executive, and Management. These steps start at the top, understanding if the firm’s leaders share the same strategic view. Steps two and three move sequentially to lower levels, deepening the analysis, finding indicators of alignment, or lack of alignment, and spreading the alignment concepts. At the end of the process, all three levels of management are focused on those elements most in need of alignment correction and share a common definition of that needed to bring the organization into full alignment with value strategy. The inset outlines the three steps.

VA works for strategic business units as well as independent firms. In general, the size of the firm or business unit ought to generally fit the Leadership/Executive/Management parameters described in the inset. The process is modified as appropriate for organizations that do not fit this model.


Market leadership
CEOs now have more power and capability to turn strategic visions into reality. VA gives them the tools to improve and align their operations with their value delivery strategy and become a leader in the company’s chosen market segment.

More information
VA is being introduced publicly by Gary A, Dunbar, Inc., a business development consulting firm specializing in helping federal technology providers and firms in other industries create consistent, long-term revenue growth. For additional information, contact Gary Dunbar at gary@garydunbar.com. or see http://www.garydunbar.com/

About Us

Minuteman Ventures does two things. We help small and mid-sized company owners sell their businesses, and we help corporate and private equity buyers acquire strategically aligned companies.

We specialize in companies that sell services and products to federal government agencies and the Department of Defense.



Minuteman Ventures
11 Cypress Drive
Burlington, MA 01803

Forward email

Copyright © 2003 Minuteman Ventures.
We invite you to forward this newsletter to friends, coworkers
and colleagues who have an interest in this topic.
This newsletter is copyrighted, though it may be used with attribution.

Newsletter Developed by Blue Penguin Development