Volume 2, Issue 6 February 2005

Welcome to the Federal Growth Report, the newsletter published by Minuteman Ventures LLC, an investment bank that focuses on mergers and acquisitions.

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

Regards,

Paul Serotkin
President
Minuteman Ventures LLC

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in this issue
Federal M&A Buyers Come in Many Flavors - We stratify the legions of federal buyers. Where does your company fit?
Executive Interview, Brad King, CEO, SERCO North America - Brad King tells FGR about the UK firm's plan to grow its US federal business.
RFID Draws Acquisition Interest - Federal contractors use M&A to acquire firms with burgeoning ID technology.
The Federal Deal - Infobase reviews the recently announced acquisition of RCI by SERCO Group plc.
Contract Central - Infobase highlights key recent contracts to federal contractors.
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 and divestitures. Our team consists of experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

We specialize in companies that sell services and product solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.


Federal M&A Buyers Come in Many Flavors


Consolidation within the federal contractor market continues unabated. No surprise there, right?

What has caught our eye is the increasing categories of buyers who are entering or enlarging their position in the federal space via the M&A track.

While each group has its own rationale, global reasons are common to all — the market is growing, funding is quite dependable, and the arbitrage play between smaller firms and larger ones can be substantial (increasing the return).

Our view of the groupings follows:

IPO Growers — After a long hiatus, IPOs in the federal services sector began anew in 2002. Most have stayed independent (with the notable exceptions of DigitalNet and Veridian), while gaining market growth and increasing market capitalization. With cash and public capital — and valuations based on 20%+ growth — they have aggressively used acquisition. Among the buyers in this group are Anteon, PEC, SRA, Mantech, and SI International.

'Pond' Jumpers — The British invasion continues. UK firms, attracted to the large and growing US federal/defense market, have created powerful, domestic positions via acquired US firms. Leading the way is BAE Systems (see our interview in the December FGR issue with BAE's Lucy Reilly Fitch), SERCO (see interview below with SERCO's Brad King) and QinetiQ.

Returning Heros — Not an industry known for serial entrepreneurship, there has been more of this activity of late, both of an active and passive nature. Notable here are the founders of Lau Technology acquiring MCR, Paravant founders buying Austin Info Systems, and senior executives and long- time industry veterans from BTG investing in ITS, eventually creating Apogen. In fact, Windsor Group, the investment bank, created a buyout fund of former and existing federal services CEOs; their intent is to invest in industry firms.

Money Planters — Private equity continues to find attractive properties in the sector. Examples include Arlington Capital (ITS) and Veritas (McNeil and pieces of DynCorp), and Paladin Capital, with its focus on homeland security. Venerable federal investor CM Equity recently sold RCI Holdings, though can be expected to seek out other federal offerings.

Growing Old-Guarders — Several companies have been public in the sector for many years. Industry mainstay CACI now targets $2 billion in revenue, with the help of several acquisitions, while Dynamics Research (DRC) added substantially to its size recently with the purchase of Impact Innovations.

Sector Starters — Companies not known for their federal practice have continued to pour into the space. Acquirers include TechTeam, CIBER, and Computer Horizons.

Pole Vaulters — Privately held mid-size and smaller firms have become real competitors in the M&A race. Some have embraced M&A as a key strategic tool; others look opportunistically to fill a gap. Look no further in the former than Calibre Systems, Sytex, Stanley Associates, NCI Information and ASC, while Technology Service Company (TSC) found growth recently via an acquisition in the Huntsville market. One recent M&A entrant, FC Business Systems, doubled its size with the acquisition of CHM. Smaller public companies, ANALEX and Essex, have smartly used M&A to leap to another rung.

Re-Definers — Some with long-time brands in the federal sector, such as the company formerly known as PlanetGov (now Apptis), helped to re-define its market position while building dramatically in size via acquisition.

With apologies to those deserving acquirers not cited, we expect the list to grow as more parties learn how to strategically and financially acquire in the federal sector.

Paul Serotkin is President of Minuteman Ventures LLC. He can be reached at
703-894-1270 or 781-750-8065, and paulserotkin@minutemanventures.com.


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Executive Interview, Brad King, CEO, SERCO North America

The British M&A invasion in the US continues. BAE, Smiths, Cobham, Ultra and Meggitt have made acquisitions of US defense firms in recent months, smartly spying the large and growing US market. The 'pond-jumpers' have not been as keen to acquire US federal and defense services firms.

Now steps in SERCO Group plc (LSE:SRP.L), the $2.8 billion (US) services firm, helping national and local governments around the world improve services across all aspects of operations.

The company's activities are extraordinarily diverse, and include the management of research laboratories, local education authorities, operation of the Docklands Light Railway in London, operating buses and trains in Australia, operating air traffic control towers in the Middle East and across the USA, and providing defense support services worldwide.

What they had not cracked was the US defense market. With the announcement Dec. 16, 2004 that SERCO intended to acquire $270 million (US) RCI Holdings Corp. from US-based CM Equity, its majority owner, that barrier fell as well.

We discussed the SERCO story recently with Brad King, CEO of SERCO Group Inc., one of the architects of SERCO's North American strategy and the RCI transaction. King, a former Day & Zimmerman and Boeing executive, had joined SERCO in 2001 to help shape its North American pursuits.

FGR: How and when did the SERCO strategy to approach the US federal market take shape?

BK: We have been active in the US since the late 1990s with the acquisition of Barton Aviation and JL Associates. Barton, in particular, put us in position to become the leading provider of managed services in the US for Level 1 Air Traffic Control.

That business — and our entire North America operations (which includes Canada) — has been growing nicely since. In 2004 we'll end at $170 million.

Serco's global strategy, however, is to be the leading service provider in the markets we choose (emphasis added).

It was apparent that we were not going to achieve that objective in the US with only organic growth.

FGR: What were the characteristics about RCI that so appealed to SERCO in making this US acquisition?

BK: RCI brought strong management (that is staying), access to a wide variety of GWAC vehicles not held by SERCO, a record of growth and had DoD as its lead customer.

We had met with George Troendle, RCI's President, well in advance of the start of the formal acquisition process. Serco had expressed great interest in the company — RCI fit very well with our strategy for North America.

FGR: Had SERCO considered any smaller companies?

BK: Our size parameters ranged from $200 to $500 million though we did review several targets below that threshold. For us to have gone to the $100 million level, the technology differentiators would have had to be that much greater.

FGR: Where do you expect to see the synergies between RCI and existing SERCO NA operations?

BK: Our strength is in delivering managed services. For example, in the province of Ontario, Canada, we provide driver examination services directly to the public on behalf of the Ministry of Transportation. Where government wants to bring in the private sector to deliver public services, we excel. RCI fits squarely in this space and adds immeasurably to that brand, now giving us additional technology based capabilities and excellent past performance within DoD.

FGR: How important is the North American market to SERCO?

BK: Prior to the RCI transaction, it constituted 5% of global revenue. With RCI, the figures spikes to 12%. (Ed note — based on 2004 revenue as if RCI had been with SERCO the entire year.)

We believe that the US federal market is the fastest growing of any of SERCO's worldwide markets. It is our goal to increase Serco's share of this market so that North America makes up well beyond 12% of our global revenue.

FGR: RCI has an established brand in human capital management for the federal government, having just won two lots under the DoD's HR Solutions vehicle. How much did that brand factor into RCI's appeal?

BK: The human capital experience is one of the aspects about RCI that particularly appealed to us. Two of the five initiatives under President Bush's Management Agenda are Competitive Sourcing and Human Capital. RCI strongly supports both.

FGR: How active in North American M&A do you expect SERCO to be from herein?

BK: We are always looking to expand the business though we will be very selective, as we were this time. (Ed. note — SERCO assiduously reviewed 60 companies over three years before settling on RCI.)

Once the RCI deal is completed and we begin operating together, we will review our North American offering for gaps. Once gaps have been matched to market opportunity, our M&A requirements will fall out.

I'd expect that size again will be a determinant for the next deal, staying within the $200–500 million range. However, if we found a smaller company that responds to the opportunity, size will probably be less of a factor than in the RCI transaction.

FGR: How do you envision the integration of RCI?

BK: SERCO's regional units are somewhat self sufficient. Given that, our optimal route will be to leverage RCI's very mature infrastructure and integrate the SERCO North America operation into those systems. We expect a lot of cost synergies as result.

(See The Federal Deal below for more on the RCI transaction.)

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RFID Draws Acquisition Interest

The unfolding movement toward use of RFID technology in the defense supply chain has many defense contractors looking to add this technology via M&A.

Even smaller companies who have built a modest practice performing RFID analysis and pilot developments have captured the interest of larger firms dipping their toe into this emerging technology water.

As example, look no further than Wireless Facilities' acquisition last summer of Defense Systems, Inc., an under $10 million firm. (Note: Minuteman Ventures supported Wireless in that endeavor.)

The move to acquire RFID technology - whether by M&A or internal build-up - is driven by the DoD mandate requiring DoD suppliers to use passive RFID tags.

Following is a description by Ameeta Soni on the RFID technology, its uses, and why DoD and the commercial sector are rapidly embracing it.

Bar codes are used today in all walks of life. However, there are limitations to bar codes. They often need human interaction for positioning scanner or coded item and store limited amounts of data. Updates are not possible and line of sight is required to the optical scanner. Radio Frequency IDentification (RFID) technology is the next evolution of bar codes for automatic identification and data capture offering solutions to these shortcomings. It involves wireless information transfer via radio waves.

The technology is old and had not been widely deployed because of cost and performance constraints. However in the past few years, efforts at MIT AutoID Center and now EPCGlobal have led to tie-in with the web, standards and cost reduction efforts. Mandates from DoD and retailers like Wal-Mart for their suppliers to use RFID have served as big drivers in the market. These organizations have large supply chains in common and see RFID benefits in streamlining the supply chain.

RFID benefits over bar code technology include:

  • Unique identification of each tagged item
  • Higher readability over larger reading areas and tag positions
  • Reusable and/or programmable
  • Can store large quantities of unique digital information which cannot be copied easily
  • Less susceptible to damage
  • Most materials do not require line of sight
  • Don't require human interaction
  • Can be interfaced with other micro sensors to collect environmental data/location

The RFID systems are made up of tags, readers, antennae, RFID-enabled printers, software and computers. The RFID tags are of three kinds - active, passive and semi-passive. The active tags use built-in batteries to power tags to work over long ranges and are expensive. The passive tags use power from the reader's transmitted energy and are smaller and less expensive than active tags. Semi-passive tags use thin batteries for additional monitoring and/or greater range and are cheaper than active tags.

The Department of Defense has been using active tags for tracking purposes for several years. Approximately 97 percent of the pallets being shipped to Iraq have active RFID tags providing the necessary visibility. The DoD is now initiating use of less expensive passive tags for the supply chain. Initial benefits of these passive tags will be:

  • Improved in-transit and asset visibility
  • Improve shipping /receiving/transportation timeliness & accuracy

Later benefits will include:

Reduction of

    — Safety stocks and inventory

    — Labor for bar code scanning

    — Shipping & receiving errors

    — Vendor fraud

A recent business case analysis by the DoD for active and passive RFID tags projects a significant ROI in three years based on these factors.

Per the DoD mandate, all DoD suppliers (except bulk commodities) have to tag cases and pallets shipped to the DoD starting Jan 1, 05. The DoD has carried out several field tests and pilots and is planning others to assist with the roll-out. Field tests carried out include Combat Feeding, FISC Norfolk Ocean Terminal, Individual Protective Equipment (IPE), Strategic Depot to Operational Unit and Air Force Military Shipping Label. Two key depots run by the Defense Logistics Agency, which provides many supplies to the U.S. military, are now set-up to receive tagged supplies. Lockheed Martin successfully shipped passive RFID tagged materiel to the DoD in early February '05. The shipping locations and scope will be extended over time. Implementation of passive RFID for all the DLA depots is fully funded.

This DoD RFID mandate provides a significant opportunity for RFID vendors, including the. build-up of RFID capabilities through both organic growth or increasingly through M&A.

Ameeta Soni can be reached at 781-334-2832 or at asoni@aanza-autoid.com.

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The Federal Deal

FGR offers analysis of a recent M&A transaction involving 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).

Serco Group plc to Acquire RCI Holding Corp.

DISCUSSION

Serco Group plc (LSE: SRP.L) agreed to purchase RCI Holding Corp., parent company of Resource Consultants, Inc. (RCI) of Vienna, Va., from CM Equity Partners, the majority owner, and other shareholders.

RCI is a provider of systems engineering, IT services, supply chain management and business process management services to the U.S. Dept. of Defense and other federal agencies. The majority of its contracts are of a lower risk 'cost plus' or 'time and materials' nature.

RCI's services include HR focused business process management, IT services, systems engineering, supply chain management and strategic consulting. RCI's primary market — the Department of Defense — represents the largest portion of federal spending, accounting for more than 75% of total contract amounts.

The acquisition supports Serco's North American strategy in that it will:

  • Expand its position in the world's largest service contracting market: the US Federal Government represents the largest global market for managed services. It is expanding rapidly as the US government seeks to improve services and gain better value for money in the face of an aging Federal government workforce and increasing costs
  • Broaden the customer base: RCI's Federal defense customer base complements Serco's largely civil agency and State customer base.
  • Enhance capabilities: RCI's significant technological and IT services capabilities complement Serco's North American change management and service delivery skills RCI has a strong record of growth. The Boards of both RCI and Serco believe that there are good prospects for continued growth given the US government's intentions to further increase the purchase of contracted services.

Serco's North American business employs 2,000 people and operates at the federal, state and local level. Serco North America had 2003 revenues of $127 million. Key activities include air traffic control for the FAA, fleet management and local government services. Serco CEO Christopher Hyman said: "North America is one of our chosen markets."

RCI, founded in 1979, is a professional services firm supporting the DoD, the US Postal Service, federal civilian agencies, state and local governments, and commercial customers.

RCI provides a wide range of service offerings, including strategic consulting, systems engineering, information technology, human strategies, enterprise outsourcing, and supply chain management. RCI's primary market — the Dept. of Defense — represents the largest portion of federal spending, accounting for more than 75% of its contracts.

CM Equity Partners is a private equity investment firm focused on middle market companies operating primarily in North America. CM Equity Partners has extensive experience in the federal and business services sectors. Since 1994, CM Equity Partners has acquired 29 companies, approximately half of which primarily serve the U.S. federal government. CM Equity Partners is affiliated with Carl Marks & Co, Inc., one of the oldest merchant banking firms in the United States.

TERMS

On Dec. 16, 2004 Serco Group plc announced it had agreed to purchase RCI Holding Corp. Terms of the transaction were not disclosed.

In 2003 RCI's revenues were $270 million and profit before tax was $9.1 million. Underlying revenues in 2003 were $256 million and profit before tax was $11.8 million, after adjusting for contracts which have been disposed of. Turnover and profit before tax grew by an average of 23% and 50% respectively between 1998 and 2003. The net assets of RCI at December 31, 2003 were $15.4 million. The company is projecting revenues of $294 million in 2004.

The company employs more than 3,000 personnel.

Serco will integrate RCI with its existing North America business and the enlarged business will be led by Steve Cuthill, Serco's current group chief operating officer.

To complete the transaction Serco must obtain certain clearances from the Committee on Foreign Investment in the United States (CFIUS) and under Hart– Scott–Rodino regulations. Serco said that it "is confident of being granted approval, which is anticipated within 90 days."

ANALYSIS

This deal represents the 22nd acquisition of a U.S. defense company by a British company thus far this year. This unprecedented frenzy of activity, which builds on the 13 such deals recorded in 2003, is readily explained as the result of an extraordinarily close political relationship and a weak dollar.

What is less easily explained is the underrepresentation of services companies in this activity. BAE Systems has been snapping up C4ISR properties, and Smiths, Cobham, Ultra, and Meggitt have each made multiple acquisitions of hardware companies. But aside from VT Group's acquisitions of Griffin Services and most of the contracts of J.A. Jones Services Group, services companies have been largely absent from U.S. defense consolidation. This despite the fact that services deals represent lower barriers to entry from a security perspective.

We suspect that part of the reason may lie with Britain's Private Finance Initiative (PFI), a radical experiment in obtaining services which is as unique to Britain as automobiles with steering wheels on the right side of the dash. Meeting PFI requirements has both absorbed British companies and to some extent rendered them less competitive in outside marketplaces. The world has not rushed to emulate the PFI model.

But the U.S. has services procurement experiments of its own underway — Government Wide Acquisition Contracts (GWACs), multiple-award IDIQs, Blanket Purchase Agreements (BPAs), and the redoubtable GSA Schedule. These generally seek to catalyze competition while slashing at bureaucracy; they differ from the British approach of reducing costs by putting the onus of ownership and financing on the contractor.

But at a certain level success at following one model provides the disciplines for mastering another. This appears to have been the experience of VT Group, which leapt into the U.S. services marketplace by snatching up a company, Atlanta-based Griffin Services, which had been tearing up the marketplace for A-76 competitions. And now comes Serco, and in RCI it has found a company with experience with all the contracting vehicles — GWACs, IDIQs, etc., which have come into growing use in the services marketplace.

RCI owner CM Equity has been looking for a buyer for RCI for two years, with Legg Mason Wood Walker conducting the search. Talks with Serco were conducted over a two-month period. Serco's interest was in boosting its North American business, it's smallest at only 5% of revenues in 2003 (behind U.K. at 73%, Europe and Middle East at 12%, and Asia Pacific at 10%). While Serco could have jumped into the U.S. marketplace with any of its businesses, Defence was a natural choice, given the explosive growth of the U.S. defense market and Serco's extensive capabilities in the area. Serco has been seeking a U.S. defense deal for three years, and it has not been thinking small: a highlight of its search was reportedly a bid to acquire DynCorp. Brad King, CEO of Serco Inc., the company's North American subsidiary, said in an interview with Washington Technology that "We were very focused on what it was we wanted. It was a tough shopping expedition."

In RCI, Serco gets a hot player in a hot market. The contractor provides support services related to human resources (HR), information technology (IT), supply chain management, etc., primarily for the U.S. Dept. of Defense, which continues to spend heavily on back-office modernization under the Bush Administration. RCIs double-digit growth rate is highlighted by several significant wins during the last 18 months:

  • three contracts under the DoD's $2 billion HRSolutions program.
  • a seat at the table for the Army's $1 billion Desktop Support Services program.
  • an exclusive $122 million contract from the Navy for HazMat Control and Management.
  • one of 46 companies competing for acquisition management-related task orders under NAVAIR's $460 million PM MAC program.
  • one of three firms picked for the Air Force's $90 million C2COMM program.

Serco will have some interesting strategic choices to make in its new marketplace. On one hand, it could comfortably take a hands-off approach to its new U.S. subsidiary: RCI's revenues have been growing at a 23% clip, compounded, since 1998. Cash flow is strong, and profits before taxes were $12 million in 2003 (decent for this marketplace). And this deal will boost North America's contribution to Serco's top line to 12 percent, in the same range as Serco's other international sectors.

But on the other hand, RCI is a $300 million/year company, and there are those who believe that a top line falling anywhere below $1 billion puts a company at a disadvantage in this marketplace (that was the reason given by Ken Bajaj for selling DigitalNet Holdings, a company almost exactly the same size as RCI, earlier this fall).

We're a bit dubious about this argument… it's hard to see where a company with a CAGR of 23 percent is at a competitive disadvantage. But a company like Serco, having established a beachhead in the U.S. defense marketplace, has other reasons to expand it. The North American market is big and booming, far bigger than the U.K. market from which Serco derives 70 percent of its business. A U.K. services company with a strong U.S. defense business will have opportunities stretching around the world, beginning on the home turf of the world's biggest defense buyer and stretching to the hills of Afghanistan and the sands of Iraq. Small wonder that Serco is bringing in Steve Cuthill, the chief operating officer of its global operations, to personally oversee the North American operations.

We expect to see more deals like this one as the British Invasion gathers force and depth, both from Serco and from competitors like Babcock International, INSYS, VT Group, and UMECO.

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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 http://infobasepub.com.

FCEE Chooses Five for Global Engineering, Integration, and Technical Assistance (GEITA)

Brief:

On behalf of the Air Force Center for Environmental Excellence (AFCEE), the U.S. Air Force 311th Human Systems Wing (311 HSW) (Brooks AFB, TX) awarded five parallel, five-year, firm-fixed-price, cost-plus- fixed-fee, IDIQ contracts, worth $850 million collectively, for Global Engineering, Integration, and Technical Assistance 2005 (GEITA05).

The recipients were:

— Booz Allen and Hamilton, Inc. (McLean, VA) (FA8903-05-D-8729).

— Portage Environmental (Idaho Falls, ID) (FA8903-05-D-8730).

— SRA International, Inc., Defense Sector (Fairfax, VA) (FA8903-05-D-8731).

— TEAM Integrated Engineering, Inc. (Evergreen, CO) (FA8903-05-D-8732).

— AGEISS Environmental, Inc. (Evergreen, CO) (FA8903-05-D-8733).

Under the multiple-award program, these companies now will compete for task orders to support AFCEEs mission by providing advisory and assistance services (A&AS) in the categories of management and professional; studies, analysis, and evaluation; and engineering and technical. Work will be performed at Air Force and other installations worldwide.

The contracts were competitively procured through solicitation FA8903-04-R-8142, which was issued in June 29, 2004, and called for multiple awards under full & open competition. Two awards were reserved for small businesses only (NAICS 541620). Proposals were due on August 9, 2004.

AFRC Inks Phoenix Management for Base Operations Support at Westover ARB

The Headquarters, Air Force Reserve Command (HQ AFRC) (Robins AFB, GA) awarded Phoenix Management, Inc. (PMI) (Austin, TX) a 10-year, $73.8 million, firm-fixed-price, time-and-materials contract (FA6606-05-C-0001) for base operations support (BOS) services at Westover ARB, MA.

The contract contains a one-year base (worth $7 million) and nine one-year options that, if exercised, could increase its total cumulative value to $73.8 million and extend the period of performance through February 2015. At this time, $56,000 of the funds have been obligated.

The contract was competitively procured through solicitation FA6643-04-R-0005, which was issued in June 2004, and called for competition limited to small businesses only (NAICS 561210; $30 million).

AFSOC Chooses Three Small Businesses for SETA III Program

The U.S. Air Force Special Operations Command (AFSOC) (Hurlbut Field, Ft. Walton Beach, FL) awarded three parallel, five-year, IDIQ contracts, worth $75 million collectively, to provide systems engineering and technical assistance (SETA) services in support of AFSOC.

The recipients were:

— Blackhawk Management Corp. (Houston, TX) (FA0021-05-D-0001).

— TCS Design & Management Services, Inc. (Warner Robins, GA) (FA0021-05-D-0002).

— WinTec, Inc. – Arrowmaker (Fort Washington, MD) (FA0021-05-D-0003).

Task orders are expected to include technical expertise of plans, programs, and process development; coordination of exercise planning / analysis, tactics, mobility / deployment, crisis action team; standardization and evaluation of programs; space operations; operational training support and mission management; database maintenance, management, and software development; software engineering; SOF equipment testing; future capabilities planning; highly skilled technical assistance for Joint Strategic Planning System (JSPS); Joint Operation Planning and Execution Systems (JOPES); Joint Strategic Capabilities Plan (JSCP); U.S. Air Force War and Mobilization Plan (WMP); Theater War Plans; Deliberate Planning; Crisis Action Planning; and Modeling and Simulation and effectiveness analysis; to name several.

Army RDECOM Reaches for Reema to Provide Admin Support to Army Evaluation Center

The U.S. Army Research, Development and Engineering Command (RDECOM) (Aberdeen Proving Ground, MD) awarded Reema Consulting Services, Inc. (Gaithersburg, MD) a five-year, $8.4 million, time-and- materials contract (W91CRB-05-D-0004) for administrative support services.

Under the contract, the company will support the U.S. Army Evaluation Center (AEC), a sub-command of the Army Test and Evaluation Command (ATEC) (Alexandria, VA). The work will be performed at Aberdeen Proving Ground, MD (60%) and Alexandria, VA (40%).

The contract was competitively procured through solicitation W91CRB-04-R-0018, which was issued on May 10, 2004, and called for competition limited to 8(a) companies only (NAICS 518210). A total of nine offers were received.

Army SMDC Chooses CAS to Support Advanced Measurements Optical Range (AMOR)

The U.S. Army Space and Missile Defense Command (SMDC) (Huntsville, AL) awarded CAS, Inc. (Huntsville, AL) a five-year, $7.3 million, cost-plus-fixed-fee contract (W9113M-05-C-0006, 0001-0003 and 0005) for Advanced Measurements Optical Range (AMOR) support.

Under the contract, the company will provide operation, maintenance, calibration, repair services, perform technical assessments in the areas of technology evaluation, data analysis, system analysis, design, fabricate and test active and passive electro- optical measurement hardware, and gather data for databases using ladars and other equipment relating to the operation of the AMOR on Redstone Arsenal, AL. This facility will be the primary location for measurement activities but measurements may be conducted at other geographic locations on a short- term basis as required.

The contract was competitively procured through solicitation W9113M-04-R-0007, which was issued on June 29, 2004, and called for competition limited to small businesses only (NAICS 541710; 1,000 employees). A total of four offers were solicited, but only one was received.

NASA GSFC Picks Muniz Engineering for ESES Contract

The NASA Goddard Space Flight Center (GSFC) (Greenbelt, MD) awarded Muniz Engineering, Inc. (MEI) (Houston, TX) a five-year, $450 million, cost-plus- award-fee, IDIQ contract to provide Electrical Systems Engineering Services (ESES) in support of GSFC's Applied Engineering and Technology Directorate (AETD).

Under the contract, the company will provide electrical engineering support services for the study, design, development, fabrication, integration, testing, verification, and operations of space flight, airborne, and ground system hardware and software. That includes development and validation of new technologies to enable future space and science missions. The contract, which has a minimum value of $1 million, will be performed principally at GSFC and in the contractor's future facility to be located in Lanham, MD.

MEI subcontractors are:

— QSS Group, Inc. (Lanham, MD).

— Science Applications International Corp. (SAIC) (McLean, VA).

— BAE Systems IEWS – Space Systems and Electronics (SSE) (Merrimack, NH).

— Design Net Engineering, LLC

The contract was competitively procured through solicitation RFP-36450-GCR, which was advertised in March 2004, and called for competition limited to 8(a) companies only (NAICS 541710; 1,000 employees).

The procurement is considered a partial follow-on to the Multi-Disciplinary Engineering and Development Services (MEDS) contract. The incumbent was QSS Group, which performed the work previously under a $275 million contract (NAS5-99124) awarded in December 1998.

NOTE: The other half of the MEDS work was recompeted under the Multi-Disciplinary Engineering and Technology Services (METS) awarded to SGT, Inc. (Greenbelt, MD) in December 2004.

NAVFAC Select Six to Support Strategic Sourcing Program

The Naval Facilities Engineering Command, Southern Division (NAVFAC) (North Charleston, SC) awarded six parallel, five-year, firm-fixed-price, IDIQ contracts, worth $328.9 million collectively, to provide consultation services in support of the Navy's strategic sourcing program.

The recipients were:

— Warden Associates (Springfield, VA), which was awarded an $11.3 million base on a $49.8 million contract (N62467-05-D-0081).

— OMNITEC Solutions, Inc. (Bethesda, MD), which was awarded an $11.3 million base on a $50 million contract (N62467-05-D-0082).

— E.L. Hamm and Associates, Inc. (Virginia Beach, VA), which was awarded an $11.6 million base on a $51.8 million contract (N62467-05-D-0083).

— Unity Consultants (Burke, VA), which was awarded a $12.8 million base on a $57.3 million contract (N62467-05-D-0084).

— BAE Systems Analytical Solutions (Huntsville, AL), which was awarded a $12.9 million base on a $57.9 million contract (N62467-05-D-0085).

— Grant Thornton (Alexandria, VA), which was awarded a $13.7 million base on a $62.1 million contract (N62467-05-D-0086).

Under the multiple-award program, these companies now will compete for task orders to provide support services, which include preliminary planning, performance work statement/statement of work development, quality assurance surveillance and performance assessment plan development, market research, facilitation and training. Services may also include privatization or divestiture analysis support. The work will be performed at various Navy and Marine Corps installations worldwide.

NAWCAD Awards 20 Contracts for Auditing Services in Support of DoD Inspector General

The U.S. Naval Air Warfare Center – Aircraft Div. (NAWCAD) (Patuxent River, MD) awarded 20 parallel three-year, IDIQ contracts, worth $977.5 million collectively, for the procurement of professional auditing services in support of the Office of Inspector General Dept. of Defense (OIG DoD).

The recipients were:

— G&B Solutions (McLean, VA) (N00421-05-D -0018).

— L.F. Harris & Associates, CPA (Orlando, FL) (N00421-05-D-0019).

— Acuity Consulting, Inc. (Alexandria, VA) (N00421-05-D-0020).

— Owusu & Co. (Washington, DC) (N00421-05- D-0021).

— Gardiner, Kamya & Associates (Washington, DC) (N00421-05-D-0022).

— Morgan Franklin (Herndon, VA) (N00421-05- D-0023).

— Deloitte & Touche LLP (Washington, DC) (N00421-05-D-0024).

— PricewaterhouseCoopers (Washington, DC) (N00421-05-D-0025).

— Grant Thornton (Alexandria, VA) (N00421 -05-D-0026).

— Ernst & Young (Washington, DC) (N00421-05- D-0027).

— Kearney & Co., PC (Alexandria, VA) (N00421-05-D-0028).

— KPMG (N00421-05-D-0029).

— Reznick, Fedder & Silverman, CPA (Bethesda, MD) (N00421-05-D-0030).

— Urbach, Kahn & Werlin, LLP (Washington, DC) (N00421-05-D-0031).

— McConnell, Jones, Lanier & Murphy, LLP (Houston, TX) (N00421-05-D-0032).

— Regis & Associates (Washington, DC) (N00421-05-D-0033).

— Brown & Co. (Largo, MD) (N00421-05-D -0034).

— William Adley & Co, LLP (Washington, DC) (N00421-05-D-0035).

— Walker & Co., LLP (Washington, DC) (N00421-05-D-0036).

— Cotton & Co., LLP (Alexandria, VA) (N00421 -05-D-0037).

Under the multiple-award program, these 20 companies now will compete for task orders during the three-year ordering period using a lot reservations system, Lot I -HUBZone/8(a)/ Service Disabled Veteran Owned Small Business (SDVOSB) reservation, Lot II — small business reservation and Lot III unrestricted. Of the 20 contracts awarded, six awardees are covered under Lot I (HUBZone, 8(a) and SDVOSB), five awardees are covered under Lot II (small business) and nine are covered under Lot III (unrestricted).

NAWCAD Taps Zimmerman Associates for Synthetic Aperature Radar (SAR) R&D

The U.S. Naval Air Warfare Center – Aircraft Div. (NAWCAD) (Lakehurst, NJ) awarded Zimmerman Associates, Inc. (Fairfax, VA) a $25 million not-to- exceed, IDIQ contract (N68335-05-D-0008) for a Phase III Small Business Innovative Research (SBIR) initiative for Topic N98-043 entitled Advanced Small Synthetic Aperature Radar (SAR) Techniques for Mine and Unexploded Ordnance Detection/Classification.

The objective of the project is to provide a vehicle- mounted radar imaging system capable of imaging very small, buried targets at stand-off ranges.

NAWCWD Selects Saalex Solutions to Support T&E and Training of AAW Systems

The U.S. Naval Air Warfare Center – Weapons Div. (NAWCWD) (Point Mugu, CA) awarded Saalex Solutions, Inc. (Oxnard, CA) a five-year, $16.7 million, cost-plus-fixed-fee, IDIQ contract (N68936-05-D-0009) to provide systems engineering and technical services in support of naval surface weapons programs, including anti-air warfare (AAW) test & evaluation (T&E) and associated fleet weapons training exercises at NAWCWD Pt. Mugu, CA.

Under the contract, which has an estimated total level of effort (LOE) of 138,700 labor-hours, the company will support systems that include naval surface weapons systems, shipboard launch and control systems, tactical data systems, and requirements analysis for Navy Standard and Aegis-unique full and sub-scale aerial targets, including surrogate threat target systems required to support range operations and test. Work will be performed in Pt. Mugu, CA.

NSWC Crane Taps Tri Star Engineering to Support Radar Antenna Test Equipment

The U.S. Naval Surface Warfare Center, Crane Div. (NSWC) (Crane, IN) awarded Naval Surface Warfare Center Crane, Crane, Ind. awarded Tri Star Engineering, Inc. (Bedford, IN) a five-year, $24.8 million, cost-plus-fixed fee, IDIQ contract (N00164-05- D-8907) to provide engineering support services for antenna test equipment design, fabrication, validation, repair and fabrication of antenna systems and components.

Under the contract, which has an estimated total level of effort (LOE) of 485,125 labor-hours of services for AN/ALQ-131, AN/ALQ-184, AN/ALQ-122, AN/ALQ-172, AN/ALQ-119, AN/ALQ-135, AN/ALQ-128, AN/SLQ-32, AN/ALQ-161, AN/ALR-56, AN/APG-63, AN/APG-70, AN/ SPS-49, LN-66, AN/SPS-64, AN/SPS-67, AM/SPS-73, AN/ SPS-55, ALQ-155, AN/SPS-40, AN/SPS-48E, AN/ TPS-59, AN/TPS-63, MRRS, MK-68, MK-68, MK-74, MK -86, MK-92, AN/SPG-60, AN/SPQ-9, AN/APS-130, PARCS and CHET. Tri-Star will support the procurement of various test systems, components for antenna testing, related engineering, program management services, repair, and fabrication of antenna systems and components, and programs identified above. The work will be performed at Crane, IN (50%) and Bedford, IN (50%).

USAF AAC Picks Three Companies for CIMTIC II Program

The U.S. Air Force Air Armament Center (AAC) (Eglin AFB, FL) awarded three parallel, five-year, cost-plus- fixed-fee, cost-reimbursable, and firm-fixed-price, IDIQ contracts, worth $20 million collectively, for a program called the Command, Control, Communications, Computers, Intelligence and Munitions Test Improvement Contract II (CIMTIC II).

The recipients were:

— Dynetics, Inc. (Huntsville, AL) (FA9200-05-D -0079).

— Georgia Tech Applied Research Corp. (GTARC) (Atlanta, GA) (FA9200-05-D-0080).

— Miltec Corp. (Huntsville, AL) (FA9200-05-D -0081).

Under the multiple-award program, the companies will compete for task orders to support AACs 46th Test Wing in the urgent development and modification of AAC range complex systems, facilities, and test infrastructure required for test and evaluation (T&E) of C4, intelligence, and munitions systems. The program has a five-year ordering period that begins January, 2005, but work can continue to January 2011.

USAF AAC Selects BTAS, Colsa for TAMS 3; Four Incumbents Ousted

The U.S. Air Force Air Armament Center (AAC) (Eglin AFB, FL) awarded two parallel, five-year, IDIQ contracts, worth $190.9 million collectively, for the Technical and Acquisition Management Support (TAMS 3) program.

— Business Technologies & Solutions, Inc. (BTAS) (Beavercreek, OH) (FA9200-05-C-0002)

— COLSA Corp. (Huntsville, AL) (FA9200-05-C -0003)

Under the multiple-award program, which has an estimated level of effort (LOE) of 300 labor-years per year, these companies now will compete for task orders to provide range of diverse non-engineering, technical, and acquisition management support required in the acquisition, development, production, and support of various equipment and weapon systems within AAC and various other tenant organizations. This effort supports Foreign Military Sales (FMS) to Australia, Bahrain, Belgium, Canaga, Chile, Denmark, Finland, Germany, Greece, Israel, Italy, Japan, Korea, Netherlands, Norway, Oman, Poland, Portugal, Saudia Arabia, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, United Arab Emirates, and United Kingdom

USAF AFSPC Chooses LinQuest Corp. for Milstar Engineering and Communications Services (MECSS)

The U.S. Air Force Space Command, 50th Contracting Squadron (AFSPC 50 CONS) (Schriever AFB, CO) awarded LinQuest Corp. (Los Angeles, CA) a five-year, $10 million, IDIQ contract (FA2550-05-D-8000) for Milstar Engineering and Communications Services (MECSS).

Under the contract, the company will support the 4th Space Operations Squadron (4 SOPS) at Schriever AFB and the Space and Missile Center, Detachment 11 (SMC Det 11) MILSATCOM Systems Sustainment Office (MSSO) Mission Planning Element (MPE) at Peterson AFB by providing technical communications services to both strategic and tactical users of the Milstar satellite constellation in support of the governments secure, global communications mission (Army, Navy, Air Force). LinQuest also will support the 4 SOPs Cryptographic Re-key mission. The company will support training 24-hour crews in basic communications troubleshooting techniques and explain complicated communications processes necessary for system usage. The company will perform analysis, trouble-shooting, and problem resolution on Milstar software tools supporting resource management and communications planning. The work will be performed at Schriever AFB, CO.

The procurement is considered a follow-on effort. The incumbent was LinCom Corp., which performed the work previously under a five-year, $12.2 million contract (F04701-98-C-0046) awarded in January 1999. LinCom was acquired by Titan Corp. in 2000. In July 2001, LinCom was renamed Titan Communications & Software Solutions Div. (CSSD). Then, in November 2003, Titan divested most of the contracts being performed by CSSD to a newly formed company called LinQuest Corp. in an effort to avoid potential organizational conflict of interest (OCI) issues due to a possible merger with Lockheed Martin, the Milstar prime contractor.

USAF ESC Selects Five Firms for Mission Planning Enterprise Contract (MPEC)

Brief:

The U.S. Air Force Electronics Systems Center (ESC) (Hanscom AFB, MA) awarded five parallel, 15-year, IDIQ contracts, worth $2 billion collectively, for the Mission Planning Enterprise Contract (MPEC).

The recipients were:

— BAE Systems Mission Solutions – Intelligence Systems (San Diego, CA), teamed with BAE Systems IEWS – Information Dominance Systems (Nashua, NH) (FA8720-04-D-0002).

— TYBRIN Corp. (Ft. Walton Beach, FL) (FA8720-04-D-0003).

— Northrop Grumman Mission Systems – Defense Mission Systems (DMS) (McLean, VA) (FA8720-04-D-0004). Work will performed in San Pedro, CA.

— Boeing Military Programs – Wichita Div. (Wichita, KS) (FA8720-04-D-0005).

— Lockheed Martin IS&S – Joint C3 Systems (Colorado Springs, CO) (FA8720-04-D-0006).

Under the multiple-award program, these companies now will compete for task orders to perform all mission planning software development, test and evaluation (T&E), maintenance, integration, training and fielding. These efforts may include:

— Joint Mission Planning System (JMPS) common capabilities development, evolution, and maintenance.

— JMPS aircraft and weapon unique planning components (UPCs) development, evolution, and maintenance.

— Evolution and maintenance of the JMPS framework.

— Migration of aircraft and weapon platforms from legacy mission planning systems to JMPS.

— Maintenance of legacy system software — core systems, installable software modules, and/or platform components.

— Development and evolution of future mission planning systems.

— Performance of mission planning and related C4I trade studies and/or prototyping.

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Deals of the Month

Closing/
announcement date
Buyer Seller Purchase Price Seller Revenue
February 1, 2005 ICF Consulting Synergy, Inc. N/D $25m
January 28, 2005 Edmonds Enterprise Services, Inc. Logistics Applications, Inc. N/D $10–$12m
January 27, 2005 Wireless Facilities, Inc. TLA Associates $34m $27m
January 19, 2005 MTC Technologies, Inc. OnBoard Software $34m $15m
January 12, 2005 SI International Shenendoah Electronic Intelligence (SEI) $75m $74m
January 10, 2005 Science Dynamics Corp. Systems Management Engineering N/D N/D
January 7, 2005 Engineered Support Systems, Inc. Prospective Computer Analysts, Inc $37.6m $17m
January 7, 2005 SYS Technologies, Inc. Antin Engineering $2.6m+SYS stock $7m
January 7, 2005 Essex Corp. Windemere Group LLC N/D $64m
January 3, 2005 FCBS Computer & Hi-Tech Management, Inc. (CHM) N/D N/D
January 3, 2005 TechTeam Global Sytel, Inc. $18.5m $28m (est.)
January 3, 2005 MTC Technologies Manufacturing Technology, Inc. $75m $50m
December 17, 2004 Wyle Laboratories General Dynamics Aeronautics Services N/D $220m
December 17, 2004 Serco RCI Holding Corp. $215m $270m
December 16, 2004 SYS Technologies Xsilogy, Inc. N/D N/D
December 13, 2004 Lockheed Martin STASYS Ltd. N/D N/D
December 13, 2004 Apptis KMR, LLC N/D N/D
December 13, 2004 Veritas Capital DynCorp bus unit of CSC $885m N/D

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Minuteman Ventures LLC News

Joining the Minuteman Ventures team is Ms. Ameeta Soni, Founder and CEO of Aanza AutoID Group, a technology services company helping companies to effectively transition from bar codes to Radio Frequency Identification (RFID). Previously, she founded Aanza, a provider of product lifecycle management software and consulting services. Earlier, in her roles as Vice President of Product Marketing and Vice President of Marketing at ChannelWave Software, a venture-backed company providing Partner Relationship Management software, she helped grow annual revenues from $400,000 to $10 million and attract $30 million in venture capital. Ameeta is chair of the MIT Enterprise Forum of Cambridge, and a charter member of TiE-Boston. Ameeta resides north of Boston. See her article on RFID and its applicability to the federal market elsewhere in the FGR. To read more about her, click here. … Congratulations to Washington Technology, the preeminent publication for federal technology integrators, on its annual M&A issue (Feb. 7, 2005). Minuteman Ventures was one of the investment bank opinion leaders interviewed to select the top 10 deals of 2004. The well-deserved winner — BAE Systems' buy of DigitalNet. See www.washingtontechnology.comMinuteman Ventures President Paul Serotkin will moderate two panels of executives at upcoming industry events … On Feb. 22 in McLean, Va., he will moderate a panel titled "Inside the Mid-Tier Corporate Buyer: How — and Why — They Approach the Business of M&A." Panelists are: Michael Solley, President, NCI Information Systems, Inc., Bill Rosenberg, Vice President, Business Development, Diebold, Incorporated, and Doug Rodgers, CEO, Focus Enterprises. The National Capital Chapter of the ACG sponsors the event. For more, download this flyer from www.acgcapital.org March 8 is the second day of a two-day event sponsored by the Strategic Research Institute, the annual "Aerospace and Defense Investor and Corporate Development Conference." Serotkin will moderate a panel on "Three M&A Perspectives from the Services Sector." Panelists include: Ronald R. Spoehel, Director, EVP and CFO, Mantech International, William E. DePuy, President and CEO, CALIBRE Systems, and Satya Akula, President, AC Technologies (now part of PEC Solutions). 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 and divestitures. Our team consists of experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

We specialize in companies that sell services and product solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.

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