Volume 2, Issue 2 June 2004

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.

Feedback and dialogue are welcome by writing:
paulserotkin@minutemanventures.com or calling 781-750-8065 or 703-894-1270. Thanks.

Regards,

Paul Serotkin
President
Minuteman Ventures LLC

 

 
in this issue
Where have all the Federal IT deals gone? - The number of completed federal deals has slowed. Is it trend or blip?
CEO Corner - Jeffrey Freed, Partner at Arlington Capital Partners, addresses the role of private equity in the federal sector.
Corporate Value in the Homeland Security Market: A Legal Perspective - Attorney Kevin P. Mullen provides useful advice on structuring your strategy.
How Do Sellers Prepare for Due Diligence? The Importance of Starting the Process Early - Peter Dwyer says small company sellers should attack the diligence onslaught early in the M&A process.
The Federal Deal - Infobase reviews the announced acquisition by Harris Corp. of Orkand.
Contract Central - A review of recently awarded federal technology contracts.
Deals of the Month - Check out the latest sector deals.
Minuteman Ventures LLC News  
 
Minuteman Ventures LLC advises company owners on the sale of their businesses, and assists corporate and private equity buyers in strategic acquisitions. Our team includes experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

We specialize in the technology sector of the federal government market. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.
Quick Links
EdgeStone Consulting, Inc.
Minuteman Ventures
Maryland Association of CPA's
Piper Rudnick
Bean, Kinney & Korman, PC
ACG National Capital Chapter

 

 

 


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Where have all the Federal IT deals gone?


by Paul Serotkin

Is it a trend or not? M&A transactions involving federal/defense technology services are down 26% for the first five months through May 2004 compared to the corresponding period in 2003.

Thirty five deals were completed last year v. 26 this year. This despite views from investment banks and others in the industry that the M&A market in the federal tech services sector continues apace and, in their words, sees no sign of letting up.

We ask whether this five month performance heralds a longer-term trend, or is a short-term aberration that will soon reverse itself.

While too early to declare one way or another, why might the M&A market be somewhat slowing?

Most buyers claim to be strategic. Joe Kampf, CEO of Anteon, speaking at the annual event this May sponsored by attorney Phil Jaeger (pjaeger@beankinney.com), said the company has completed 7 deals in 8 years, all of which were done for primarily strategic, not financial, reasons. Is it possible that, due to the glut of M&A transactions done in the last several years in this sector, it is becoming harder to justify truly strategic deals?

The slowing federal IT budget. The 2005 IT budget proposed for the federal government is projected to grow at about 1%, well down from the robust annual gains of the last few years. While the 1% increase comes atop an admittedly large $60 billion base, is it possible that corporate and private equity investors are hedging their bets a bit on investing so aggressively in the federal tech space?

The ROI demands of private equity. Carl D. Thoma, co-founder and partner of Thoma Cressey Equity Partners, Inc., the private equity group, said recently that 50% of the returns derived from PEG portfolio investments will come from operational improvement, a much higher percent than needed historically. Speaking at the Association for Corporate Growth (ACG) annual National Capital Chapter conference in May (see www.acgcapital.org), Thoma said the spread between PEG returns and those realized from capital market investments is thinning, making the justification for investment that much more challenging.

Slow moving funding. The government’s 2005 fiscal budget may not pass by the time members of Congress leave October 1 to campaign. The result could be a series a continuing resolutions, leading to two week dole-outs of funds — and delays in starting new programs. With the election looming, uncertainty in the budget process could be causing buyers to hold off until the issue is settled.

The dealmaker dynamo is resting (we think). Employee owned, $6.7 billion SAIC has announced only one deal this year, and not since their pickup of Aquidneck Management Associates in early February. They led the corporate pack in acquisitions by a long shot in 2003. With SAIC apparently either digesting all its companies or making sure its massive reorganization takes root — or working perhaps on a major deal in the works, the effect has been to slow the overall ‘done deals’ scorecard.

Bracing for BRAC. We are now in the ‘pre-BRAC period,’ when the military is evaluating which bases to close or otherwise realign in 2005. Some buyers are gun-shy in acquiring firms who have too much business at one of these high-risk bases. Once the BRAC list is announced, those hesitant buyers may rush in to complete deals in abeyance.

Corporate over-governance? The advent of Sarbanes-Oxley regulations in the post-Enron era is making it more difficult for sellers to get through due diligence hoops. One long-time CEO dealmaker told us he has seen more federal IT deals that fell apart after the LOI was signed than he ever has.

Is it trend or blip? We will be monitoring the flow of deals and report back as the year unfolds with further observations.

Paul Serotkin is President of Minuteman Ventures LLC, paulserotkin@minutemanventures.com, 781-750-8065 or 703-894-1270.

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CEO Corner

Jeffrey Freed, Partner with private equity firm Arlington Capital Partners, a $450 million fund, entered the defense/federal IT services market last year with the acquisition of ITS Services, Inc., then followed it up quickly with the purchase of SEA, Inc., adding it to the ITS portfolio. The company recently renamed itself Apogen Technologies, Inc. We queried Freed on the market and the role played by private equity. (This article previously ran in the May 2004 issue of Defense Mergers & Acquisitions.)

FGR: What interested Arlington Capital in the federal government sector as an investment?

JF: Many factors. Macro issues such as outsourcing and the steady retirement of the federal workforce point to increasing dollars going to contractors. In general, technology adds to productivity; in the government space this is eminently true. Further, the market is highly fragmented, with many quality companies under $100 million. By bringing these firms under the umbrella of a single management structure led by experienced professionals in the sector, we thought this would be a recipe for success.

FGR: Does Arlington Capital have a target for the percent of its funds allocated to the federal government sector?

JF: Between invested and committed capital, about one-quarter of our $450 million is in the federal sector, that being largely the ITS investment. We are looking at other opportunities that would increase that percent of our total funds to greater than that.

FGR: Some private equity funds have made several platform acquisitions in the federal space. Will Arlington Capital use ITS as its platform in this sector or would you consider other platform buys as well?

JF: ITS is our platform for true IT services in the federal sector. The company provides those services across a range of federal agencies, with a focus on DoD and Homeland Security. Were we to consider a federal contractor in technical services or logistics (or something where IT professionals do not predominate), or in other defense/aerospace sectors broadly, we would invest in a different platform firm. We do not want to dilute the purity of the ITS brand.

FGR: There are an increasing number of entrepreneurs who have sold their firms and are now investing in, or trying to invest in the federal sector. What are their chances of success?

JF: People with prior experience in the federal sector stand a much better chance of succeeding. ‘Commercial’ entrepreneurs do not realize that the federal space is more esoteric than envisioned. It absolutely is not easy to migrate to this sector from a commercial background. The management skills are transferable but the ability to gain and grow customers is not. Those from outside the industry will find their path bumpy.

FGR: Why should founder/CEOs in this sector consider private equity firms as means to liquidity (rather than selling to a larger corporate buyer)?

JF: First, after our initial acquisition of ITS, the company is now a strategic buyer that can offer the best of both the ‘strategic’ and private equity worlds. Private company owners are comfortable with going to another private company, especially one which is more diversified and better positioned to grow than their firm is. By combining forces with the likes of ITS, the enlarged firm is better able to achieve the arbitrage available from scale (i.e., the value of selling or going public at higher multiples than the original purchase price).

A good example of the attractiveness of equity-backed firms like ITS is the recent acquisition of SEA by ITS. SEA is a $100 million firm in its own right. We were very pleased that all the members of the SEA executive team, and the majority of SEA management, took a significant share of ITS stock as consideration, giving them upside on a future event once our value grows.

FGR: How do private equity firms such as ITS stack up as acquirers in this sector compared to some of the larger public firms?

JF: We are very flexible in our deal structure and the way we work with sellers. Large companies tend to be impatient and monolithic in their approach. Their model can subsume smaller firms. If the selling CEO wants to preserve jobs and identity, the likelihood is greater when going with a buyer such as our group that is not beholden to pre-formed models.

FGR: What advice do you have for founder/CEOs as they contemplate liquidity and start down the M&A path?

JF: Understand your firm’s strengths and weaknesses. Be honest. Don’t be romanced by the valuations of large public firms. Be prepared when the M&A process starts. Buyers want companies in good order. Financial systems and controls should be in place. Management should be measured by achievement of performance goals. Figure out what is important to you in the process. For Founder/CEOs wanting speed and process efficiency, choose a small number of focused buyers to approach. For those coveting the last dollar, you may get it but be prepared for the disruption that comes from a drawn-out process. And, of course, retain good advisors who know M&A and the government market.

FGR: What is your opinion about how active the IPO market will be for government services over the next year?

JF: The IPO market could take a pause before and after the election, but the macro factors finding federal services in favor remain no matter which party is in the White House. Both parties recognize that a safe homeland and protection of our citizens in the US and abroad is paramount. We think large primes dependent on huge system platform upgrades may suffer but the IT segment of the market will stay strong in the minds of public investors. The trends of interoperability, upgraded legacy systems and outsourcing will drive public values for these types of firms.

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Corporate Value in the Homeland Security Market: A Legal Perspective

by Kevin P. Mullen

Can the Homeland Security market be a ticket to M&A or capital-raising success? Whether CEO of a company in the federal space or looking to enter it via a Homeland Security solution, attorney Kevin P. Mullen from Piper Rudnick LLP provides useful advice on structuring your strategy.

The realities of September 11th and the conflicts in Iraq, Afghanistan and Israel, have focused the attention of the Bush Administration on Homeland Security, as both a domestic policy and procurement priority. Facilitated by Congressional willingness to enact special legislation and to allocate staggering amounts of appropriated funds to protecting against terrorist attacks, the United States Government has created unprecedented business opportunities for companies developing and selling anti-terrorism products and services. These companies — whether they develop and sell vaccines to combat bioterrorism, sensors to detect biological, chemical, and radiological substances, or physical security services to protect citizens and property — are likely to experience strong growth and increased value in the foreseeable future.

Companies operating in the Homeland Security market, however, face a special business and legal landscape. As a fundamental matter, Uncle Sam is the dominant market customer. Government contractors are subject to a host of legal requirements that do not apply to commercial sales. The Government’s business methods and procurement process present real challenges to companies unfamiliar with this environment. In addition, the sale of anti-terrorism technologies brings unique risks, along with the prospect of substantial revenues. In particular, Homeland Security contractors face potentially overwhelming legal liabilities from third-party lawsuits in the event of a terrorist attack. The litigation aftermath of September 11th confirms the staggering scope of this liability exposure.

Whether considering a M&A transaction targeting a Homeland Security company or showcasing a company as an attractive investment opportunity, you should examine the following legal factors which directly impact corporate value in this unique marketplace:

The Government’s Spending Priorities. The Department of Homeland Security (DHS), in cooperation with other agencies such as the Department of Defense (DOD) and the Department of Health and Human Services (HHS), has identified the country’s funding and procurement priorities for Homeland Security. The extent to which a company’s technology corresponds with major spending initiatives can determine ultimate business success in Government contracting.

The Government’s Procurement Cycle. Unlike the commercial world, the wheels of Government procurement typically grind slowly. As a general rule, Government agencies must make purchase decisions based on full and open competition. Competitive solicitations inevitably extend the timeline for award of a Government contract. As a result, sales to Government customers can be a frustrating process for uninitiated companies. Patience is a necessary virtue, and sufficient corporate resources are required for long-term survival. Moreover, an agency must formally justify any sole-source procurement, as an exception to full and open competition. When examining an M&A target, you should be skeptical of any company claims of exceptional treatment from a prospective Government customer.

The Company’s Current Contracts. While a company’s backlog is always an important factor for valuation, Government contracts raise special issues affecting the expectation of revenue and risk. For example, the Government pays close attention to contract performance, and often demands precise satisfaction of specifications and standards under threat of default termination. Also, Government agencies generally are allowed to terminate a contract at will, pursuant to the standard “Termination for Convenience” clause. The “Changes” clause permits the Government to unilaterally amend contract specifications and delivery terms in return for fair compensation to the contractor. Most importantly, an agency’s ability to fund a contract is subject to the appropriation process controlled by Congress. Examination of current contracts should include a diligent analysis of the risks associated with potential terminations, cost overruns, and funding vulnerabilities, in order to provide a complete picture of the contractor’s likely future revenue.

The Company’s Intellectual Property. Intellectual property (IP) rights are the corporate jewels for high-tech companies, and anti-terrorism technology is no different. Government contracting, however, applies special rules to the allocation of IP rights, including inventions, patents, technical data, and software. Any company selling products or services to the Government should understand this peculiar IP terrain, and protect itself from unwittingly transferring its critical IP to Federal customers. Similarly, any M&A due diligence should include a detailed review of Government contracts to identify IP transfer that might impact corporate value.

The Company’s Compliance Systems. Statutes and regulations impose a variety of compliance obligations on Government contractors. There are ethical obligations, socio-economic requirements (such as Equal Employment Opportunity and Affirmative Action), subcontracting requirements, and cost accounting rules governing the recovery of contract costs, just to name a few. A top-quality compliance program is an excellent corporate investment and an important asset, when evaluating the risk of legal exposure and sanctions for violating Government contracting rules.

The Company’s Mitigation of Liability Risk. Homeland Security contracting is rife with exposure to immense legal liabilities, given the possibility of terrorist acts on American soil. As a practical matter, commercial insurance usually excludes this dangerous contingency, exposing a company to terminal lawsuits. Although the “Government Contractor Defense” provides protection for contractors performing according to Government specifications, such circumstances typically don’t apply to companies that develop and manufacture technologies without Government direction. While certain Government agencies are authorized to indemnify contractors against “unusually hazardous risks,” the Bush Administration has been reluctant to utilize this authority except in extreme circumstances.

To address this liability crisis, Congress enacted the SAFETY Act in November 2002. This new statute provides liability protection for sellers of anti-terrorism technologies, who are otherwise unable to obtain sufficient commercial insurance, by restricting third-party lawsuits and capping damages at the level of the seller’s insurance coverage. Notably, this legal protection extends to the buyer of the anti-terrorism technology, whether a Government agency or commercial customer. DHS administers the SAFETY Act application process, and grants approval to technologies judged to be effective, reliable and safe in protecting against terrorism. SAFETY Act eligibility offers a valuable competitive advantage to companies selling Homeland Security products and services. When analyzing corporate value, don’t underestimate the importance of mitigating liability for anti-terrorism technologies.

Valuation of Homeland Security companies involves legal and business issues with which many executives and their due diligence teams are unfamiliar. In this regard, your business team should include lawyers and consultants who can provide strategic advice backed by real Government contracts expertise and experience. A true appreciation for the Homeland Security market from a legal perspective will place you in a better position to capitalize on business and investment opportunities related to the protection of the United States.

Kevin P. Mullen is a Partner in the Washington, D.C. office of Piper Rudnick LLP, where he is a member of the Government Contracts and Homeland Security practice groups. You may contact Mr. Mullen at 202-861-6414 or kevin.mullen@piperrudnick.com.

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How Do Sellers Prepare for Due Diligence? The Importance of Starting the Process Early

by Peter Dwyer

As the owner or CEO of a medium sized company, you and the Board have just reached the difficult decision to sell the company. You have started interviewing investment banks to assist you in the process, and your team has started preparing the book on the company.

It is now time to start thinking about the due diligence by the buyer, and start getting your information ready. Getting organized early will enable you to present your company in the most advantageous terms, helping maximize the price to the shareholders.

The first step is briefing the key people who are involved in the due diligence process for your company. Explain what the company doing with the potential sale, lay out the timetable, and what the process will be. While you may wish to keep the pending sale a secret from the rest of the company, it is my experience that once the due diligence process starts, the rumors start flying in the company. You need the weigh the pros and cons of making an announcement to the whole company vs. trying to keep it a secret to all but the critical team.

It is important to remember that selling the company may take six months to a year to complete, and you still need to focus on the overall performance and growth of the company. So while some of your key people are involved in gathering information, and dealing with representatives from the buyer during due diligence, you need to ensure that the company is staying on plan and meeting its targets. The current performance against the plan is an indication to the buyer of how much faith they can place in your long term forecast.

The next step is to select someone as the single point of contact for all data exchange from your company to the buyer. As the seller, it is critical for you to know what information was presented to the buyer’s team, and when. A central point of contact that is familiar with the company can review the information for accuracy, and help answer any questions.

If you want the process to proceed smoothly, it is recommended that you set up a conference room (at your site or off-site) to collect all the information a potential buyer will need for the due diligence. Remember that you may go through this process with multiple potential buyers before the deal is closed, so once you have invested the time in gathering and organizing the information, set a process in place to keep the information up to date.

Listed below is some of the information to begin gathering in the information room. Each buyer will have their own due diligence checklist, but here is some of the core information that each will request:

  • All corporate documents including Articles of Incorporation, Bylaws, list of outstanding shareholders, minutes of Board of Directors meetings, and bios of directors and executive management

  • All financial documents for the preceding three years including audited financial statements, breakdown of revenue and profit by customer, and schedule of indirect expenses

  • All federal, state and local tax returns for the last five fiscal years and any correspondence with the IRS and state and local authorities regarding any tax issues

  • All contracts and material agreements with customers, including all correspondence between the company and the customers

  • All DCAA related correspondence included incurred cost submissions for the last three years, audit findings for the last three years, and current Forward Pricing Agreements

  • Detailed five year financial projections by customer, monthly for the first two years, and quarterly for the last three years

  • Detailed list of funded and unfunded backlog by contract

  • Employee related matters including schedule of employee information, employment agreements, incentive compensation agreements, stock option agreements, change of control agreements, loan agreements and collective bargaining agreements

  • All documents related to the company’s benefit plans including medical, life and disability insurance, incentive compensation plan, severance, earned time off, and other fringe benefits

  • All company property and equipment and the current depreciation schedule

  • All company leases

  • All business insurance policies including casualty, general liability, workers’ compensation, business interruption, key person, director’ and officers’, and errors and omissions; a list of all claims for the past five years

  • All outstanding and pending litigation

  • All intellectual property of the company including inventions, patents and trademarks
While this list only provides a high level summary of the information you will need to provide to a potential buyer, it will help you get organized and enable the buyer to begin the due diligence as soon as the Letter of Intent is signed. It will also assist in a smoother, faster and more efficient due diligence.

Peter Dwyer is co-founder of EdgeStone Consulting, specializing in acquisition consulting and due diligence support to firms in the federal marketplace. For additional information, contact Peter Dwyer at pdwyer@edgestone.net, or review more detailed information at www.edgestone.net.

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The Federal Deal
 

FGR offers analysis of a recent M&A transaction involving government technology 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 infobasepub.com.

Harris Corp. to Acquire Orkand

Harris Corp. (NYSE: HRS) signed a definitive agreement to acquire Orkand Corp., a privately held provider of technical services and information technology for U.S. Government agencies.

Orkand is headquartered in Falls Church, Virginia, and has operations in 22 U.S. states. The company provides information technology services under contracts with the U.S. Departments of State, Labor, Interior, Health and Human Services, Energy, and the U.S. Postal Service, among others.

Harris chairman, president, and CEO Howard L. Lance stated: “The acquisition of Orkand Corp. expands our mission-critical services business and adds important new customers to our Government Communications Systems division. They have a strong and well-established prime contractor position with these customers. As part of the Harris Technical Services business, Orkand will provide us with increased scale and new contract bid opportunities, expanding our position as a leading communications systems and services provider to the U.S. Government.”

TERMS

On June 7, 2004 Harris announced that it has signed a definitive agreement to acquire Orkand for approximately $66 million in cash, subject to post-closing adjustments.

The transaction, which is subject to customary regulatory approvals, is expected to close prior to Harris’ 2004 fiscal year end on July 2, 2004. The acquisition is expected to be immediately accretive to earnings in fiscal year 2005 at approximately $0.05 per diluted share.

The company also provided increased earnings guidance for FY05.

Orkand is headquartered in Falls Church, Virginia, and has more than 1,000 employees operating in 22 U.S. states.

Orkand revenue for the 12 months ended in March 2004 was $80 million.

ANALYSIS

Orkand’s is a story of high-expectations, founder-driven growth … and ultimately of being in the wrong place at the wrong time.

Founded in 1970, the company grew smartly. Revenues were $20 million by 1988, and had more than tripled, to $72 million, by 1997. In 1998 they stood at $80 million, 85 percent of which came from civil agencies, and a year later, founder, president, and CEO Donald Orkand said that he expected to boost revenues to $200 million by 2002 through organic growth and stepping up efforts at the Dept. of Defense. There were reasons to think it might happen: the company has being strategically responsive to the changing marketplace: GSA Schedule revenues were up 30 percent, and the targeting of DoD was prescient.

But the company did not hit the $200 million target; in fact, it failed to grow at all. The major change in Orkand since 1998 has been in its headcount: it now needs only 1,100 people, as opposed to the 1,300 it employed in ’98, to achieve the same $80 million in revenues.

What went wrong? We’d begin with Donald Orkand’s aversion to acquisitions. In 1999 he told Washington Technology that “None of our growth has come through acquisitions. As more companies get bought and sold, our stability is becoming a tremendous differentiator.”

But all that buying and selling had a purpose. The government customer was shifting towards larger contracts, and companies were using M&A activity to be able to present themselves to that customer as “one-stop shopping” bazaars. That left the sub-$100 million segment of the marketplace increasingly dominated by 8(a)s. In this environment, the only seats available to a company like Orkand are at the back of the bus.

In one sense, Harris is a logical home for Orkand. Like Orkand, Harris has shown no great enthusiasm for acquisitions (at $80 million a year, Orkand is more than twice the size of the biggest-ever acquisition added to Harris’ government sector, $38 million a year Exigent International, acquired three years ago).

We have no size data for Harris Technical Services Corp. (HTSC) (Alexandria, VA), to which Orkand will be added. But we’d expect that this acquisition is a bid to position the company a little bit better to compete against larger peers. Beyond that, the addition of Orkand, whose customer base is dominated by civil agencies, helps balance HTSC, whose customers are largely DoD. If you’ve made a decision to play in this marketplace, deals like this one are part of the price of admission (as Orkand learned to its sorrow). But we look forward to deals in which Harris adds to its higher-tech, higher-margin communications assets.

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Contract Central

FGR presents briefs on selected technology services contracts awarded by the U.S. government to federal contractors 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 infobasepub.com.

ACA NRCC Picks Four for Services at Maneuver Support Center (MANSCEN)

On May 17, 2004, the U.S. Army Contracting Agency, Northern Regional Contracting Center (ACA NRCC) (Fort Eustis, VA) awarded four parallel, five-year, firm-fixed-price, IDIQ contracts, worth $260 million collectively, to provide mission support services for the U.S. Army Maneuver Support Center (MANSCEN) (Ft. Leonard Wood, MO).

The recipients were:

— Battelle Memorial Institute (Columbus, OH)
— Innovative Emergency Management, Inc. (IEM) (Baton Rouge, LA)
— Advancia Corp. (Oklahoma City, OK)
— EAI Corp. (Abingdon, MD)

Under the multiple-award program, these four companies now will compete for task orders that cover general technical and analytical support; doctrine and training development support; training support; force modernization support; battle lab and general test and evaluation (T&E) support; and simulations and analysis support. The task orders, which are expected to number about 40 per year, support MANSCEN, including U.S. Army Chemical School (USACMLS), U.S. Army Engineer School (USAES), U.S. Army Military Police School (USAMPS), Directorate of Combat Developments (DCD), Maneuver Support Battle Lab (MSBL), Directorate of Training Development (DOTD), TRADOC Program Integration Office-Terrain Data (TPIO-TD), and TRADOC Systems Manager (TSM).

Each contract contains a one-year and four one-year options that, if exercised, could increase its total cumulative value to $90 million and extend the period of performance through May 30, 2009. At this time, a delivery order amount of $100,000 is being awarded on each contract. Contract funds will not expire at the end of the current fiscal year.

Army Engineering & Support Center Selects Seven for Munitions Response

The U.S. Army Corps of Engineers’ Engineering and Support Center (Huntsville, AL) awarded seven parallel, five-year, firm-fixed-price, IDIQ contracts, worth $950 million collectively, for worldwide munitions response and other munitions-related services.

The recipients were:

— Explosive Ordnance Technologies Inc. (Rumson, NJ)
— Shaw Environmental & Infrastructure, Inc. (Baton Rouge, LA)
— TetraTech FW, Inc. (Morris Plains, NJ)
— Parsons Infrastructure and Technology Group, Inc. (Pasadena, CA)
— USA Environmental, Inc. (Tampa, FL)
— Zapata Engineering P.A. (Charlotte, NC)
— Environmental Chemical Corp. (Burlingame, CA)

Under the multiple-award program, these companies now will compete for task orders to manage unexploded ordnance (UXO) projects at formerly used defense sites, active DoD installations, DoD Base Realignment and Closure (BRAC) sites, property adjoining DoD installations, and projects for other U.S. government agencies or foreign governments. About 75% of the work is expected to be performed as part of the U.S. Army’s Captured Enemy Ammunition mission in Iraq and possibly in other areas outside the United States. The Huntsville Center is a COE center of expertise for ordnance and explosives cleanup.

Half of the awards were set aside for small businesses only (NAICS 562910). A total of 63 offers were solicited and 15 were received.

NAVFACCO Picks Joint Venture for Anti-Terrorism and Force Protection Engineering Services

The U.S. Naval Facilities Engineering Command Contracts Office (NAVFACCO) (Port Hueneme, CA) awarded LJT-ATFP, LLC (Montgomery, AL) a five-year, $20 million contract to provide anti-terrorism and force protection engineering services.

LJT-ATFP is a joint venture comprised of LJT & Associates, Inc.; ACTA, Inc.; Karagozian & Case, Inc.; and The Systec Group, Inc.; and includes General Physics Corp. (Elkridge, MD) and Battelle Memorial Institute (Columbus, OH).

Under the contract, the joint venture will provide services to the Naval Facilities Engineering Service Center (NFESC) for the DoD and other departments in the Executive Branch of the government. The range of services to be provided includes:

— Risk analysis vulnerability assessments to quantitatively measure vulnerabilities and risks associated with specific assets targeted by specific threats. The analyses include recommendations of innovative security countermeasures to mitigate those vulnerabilities.

— Force protection engineering studies.

— Entry control point studies to identify conceptual layouts associated with vehicle and pedestrian entry points.

— Worldwide anti-terrorism workshops/training using government developed and controlled curriculum.

— Blast analysis studies.

The contract contains a one-year base (worth $5 million) and four one-year options that, if exercised, could increase its total cumulative value to $20 million and extend the period of performance through March 2009 (estimate).

Navy SPAWAR Sole-sources Alutiiq to Support Airspace Systems Division

The U.S. Naval SPAWAR Systems Center San Diego (SSC-SD) (San Diego, CA) awarded Alutiiq Security & Technology, LLC (Anchorage, AK) a three-year, $22.4 million, cost-plus-fixed-fee, IDIQ contract (N66001-04-D-5024) to support the SSC-SD’s Airspace Systems Div. (Code D33).

Under the contract, the company will provide technical and engineering services essential to the performance of in-service engineering agent (ISEA) and cognizant field activity responsibilities for command, control, communications, computers and intelligence (C4I) systems, guided missile weapons systems, homeland security systems, airspace systems, and combat weapons systems. Alutiiq will support branches within SPAWAR Code D33. That Code provides a range of development, systems engineering, and support for Navy, Marine Corps, Air Force, and civilian agency ship, shore, and airborne airspace management and control systems.

The contract, which began on June 1, 2004, contains a one-year base and two one-year options that, if exercised, could increase its total cumulative value to $22.4 million and extend the period of performance through May 31, 2007. At this time, a $13.2 million increment is being obligated. Contract funds will not expire at the end of the current fiscal year.

The contract was not competitively procured. It was awarded on a sole-source basis under requirements specified in the U.S. Small Business Administration (SBA) 8(a) program, recognizing an Alaskan native corporation.

NAWC-TSD Chooses SATCO for TC-12B Training Program

The U.S. Naval Air Warfare Center - Training Systems Div. (NAWC-TSD) (Orlando, FL) awarded Spiral Aviation Training Co. (SATCO) (Centennial, CO) a $12.3 million, IDIQ contract (N61339-04-D-0037) to provide TC-12B aircraft academic and simulator training in support of the Chief of Naval Aviation Training (CNATRA).

Under the contract, the company will support pilot training for the TC-12B (customized King Air BE-200) twin-turboprop aircraft by providing classroom academic and practical training.To support these training courses, SATCO will provide certified instructors; two TC-12B flight training devices (FTDs) for practical training; FTD operation and maintenance (O&M); and any additional labor required for supervising and administering classroom and simulator training.

The contract was competitively procured through solicitation which called for competition limited to small businesses only (NAICS 611512; $21.5 million). A total of three offers were received.

NAWCAD Chooses Five Firms to Support RDT&E of Aircraft Sensor Systems

The U.S. Naval Air Warfare Center - Aircraft Div. (NAWCAD) (Patuxent River, MD) awarded five parallel, five-year, cost-plus-fixed-fee, IDIQ contracts, worth $444.6 million collectively, for technical and scientific support for research, development, integration, analysis, assessment, and test and evaluation (T&E) in support of sensor systems for the NAVAIR Avionics Dept. (AIR 4.5).

The recipients were:

— Titan Corp., Sea & Air Sector, Systems Engineering & Technology Div. (Mount Laurel, NJ), which was awarded a $103.9 million contract (N00421-04-D-0080).

— RBC, Inc. (Alexandria, VA), which was awarded an $89 million contract (N00421-04-D-0081).

— Sabre Systems, Inc. (Warminster, PA), which was awarded an $82.8 million contract (N00421-04-D-0082).

— Navmar Applied Sciences Corp. (Warminster, PA), which was awarded an $86.8 million contract (N00421-04-D-0083).

— BAE SYSTEMS Applied Technologies, Inc., Electronic Systems Div. (California, MD), which was awarded an $82.1 million contract (N00421-04-D-0084).

Under the multiple-award program, these five companies now will compete for task orders that support AIR 4.5 divisions, including Architecture and Systems Engineering, Information Warfare Systems, Flight Information Systems, Electronic Warfare (EW) Systems, RF Sensors, Electro-Optics (EO) and Special Mission Sensors, Airborne Mission Computers, Surface Communications and Information Systems, and Acoustic Systems.

The contract was competitively procured through solicitation N00421-03-R-0089, which was issued on November 4, 2003, and called for multiple awards under full & open competition. At least two awards were set aside for small business (NAICS 541710, 1,000 employees).

NSWC-IHD Chooses Coalescent Technologies to Support Research and Concept Development

The U.S. Naval Surface Warfare Center, Indian Head Div. (NSWC-IHD) (Indian Head, MD) awarded Coalescent Technologies Corp. (Orlando FL) a $7.9 million, cost-plus-fixed-fee, IDIQ contract (N00174-04-D-0005) for research and concept development support services for joint forces programs.

Under the contract, the company will provide research and concept development support services to Joint Force programs such as strike, expeditionary warfare, air defense/theater ballistic missile defense (TBMD), command and control warfare, logistics including asset visibility/asset management, manpower and infrastructure architecture. Work will be performed in Orlando, FL.

The work is expected to be completed by April 2009. Contract funds will not expire at the end of the current fiscal year.

The solicitation called for competition limited to small businesses only (NAICS 541710; 1,000 employees). A total of 50 offers were solicited and two were received.

NUWC Selects MRC for Torpedo Program Support

McLaughlin Research Corp. (MRC), New London, Conn., is being awarded an $18,640,248 indefinite-delivery/indefinite-quantity contract for life-cycle support services relating to various Naval Undersea Warfare Center torpedo programs.

Contract services will include: analyzing, verifying and maintaining data of a configuration management program; performing configuration audits; developing, analyzing, and revising engineering documentation; supporting the implementation and integration of reliability and quality assurance considerations into the overall program; assessing life cycle cost. Work will be performed in Newport, R.I. (80 percent) and Keyport, Wash. (20 percent), and is expected to be completed by June 2009. Contract funds will not expire at the end of the current fiscal year. The contract was competitively procured and advertised on the Internet, with one offer received. The Naval Undersea Warfare Center, Newport Division, Newport, R.I., is the contracting activity.

QSS Inks MSSI to Support Army ITES EMS3 Contract

QSS Group, Inc. (Lanham, MD) awarded Management Solutions & Systems, Inc., (MSSI) (Capital Heights, MD) a wholly owned subsidiary of IJJ Corporation, a three-year subcontract to support the U.S. Army’s Information Technology Enterprise Solutions (ITES) Functional Area-2 (FA-2) Contract.

The FA-2 of ITES is for “Enterprise Mission Support Services Solutions (EMS3).” It is a multiple award, IDIQ contract vehicle, specifically designed as the primary source of information technology (IT) equipment and services worldwide to meet the Army’s enterprise infrastructure and infostructure goals.

The contract is managed by the U.S. Army Small Computer Program (ASCP), in coordination with the Army Contracting Agency (ACA), Information Technology, E-Commerce and Commercial Contracting Center (ITEC4). Through the use of ITES, users have a flexible means of meeting IT needs quickly, efficiently, and cost effectively. ITES is a Performance Based Service Acquisition (PBSA) and is the preferred method of contracting for services and supplies. PBSA is contracting for results, not just best efforts, and involves structuring all aspects of an acquisition around the purpose of the work to be performed.

“The purpose of ITES-EMS3 is to support the Army enterprise infrastructure goals, with IT services and solutions. IT solutions will be acquired by the issuance of individual task orders that will identify specific, detailed requirements,” said MSSI CEO Clifford Pope.

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Deals of the Month
 

Closing/ Anncmt. Date Buyer Seller Purchase Price Seller Revenue
June 15, 2004 Dimensions International SENTEL Corp.    
June 7, 2004 Essex Corp. Performance Group, Inc.   $4.5m
June 7, 2004 Argon Engineering Associates Sensytech   $55m
June 7, 2004 Harris Corp. Orkand Corp. $66m $80m
June 1, 2004 PEC Solutions, Inc. Integrated Information Technology Corp. $33m $36m
May 18, 2004 Paladin Capital Partners Star Mountain (renamed FPMI Solutions; acquired from Provant)   $40m
May 7, 2004 Analex Beta Analytics, Inc. $33.3m 300 employees
April 30, 2004 Essex Corp. Computer Science Innovations, Inc. (CSI)   $7.5m
April 22, 2004 CALIBRE Environmental Technology Solutions   N/D

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Minuteman Ventures LLC News
 

We recently completed two assignments, one to support due diligence for a public company in the wireless space looking to acquire a government house with RFID expertise. The other was a valuation report for a $40 million Virginia federal contractor seeking a M&A market value as a comparison to their ESOP valuation … Paul Serotkin will speak October 15 on federal M&A before the annual government contracting conference of the Maryland Association of CPAs. For more on the group, see www.macpa.org … Serotkin will also speak at the 6th Annual Defense & Aerospace Investor & Corporate Development Conference in San Diego this Sept. 19-21. See www.srinstitute.com for more.

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About Us
Minuteman Ventures LLC advises company owners on the sale of their businesses, and assists corporate and private equity buyers in strategic acquisitions. Our team includes experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

We specialize in the technology sector of the federal government market. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.

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Minuteman Ventures, LLC
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www.minutemanventures.com

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