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Volume 3, Issue 6 February 2006

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.

On March 15, Minuteman Ventures LLC is pleased to be hosting its first event in Huntsville titled "Business Growth Strategies for Small and Mid-Size Aerospace, Defense and Technology Companies."

Whether you work in the Huntsville area or plan to be there that day, we welcome company executives to come hear industry experts speak on business development, mergers and acquisitions program and legal and accounting ideas on adapting companies to the evolving world of business operations in government contracting. For an agenda and to register, click here.

Regards,

Paul Serotkin
President
Minuteman Ventures LLC



   

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in this issue
 
When Large Federal Contactors Acquire Small Companies - We look at the market stats while asking acquirer Perot Systems how and why they do it.
Where will the Next Generation of Federal Sector CEOs Come From? - Veteran Executive Search Specialist Bob Brudno advocates preparation for the corner office.
Company Growth May Impact ID/IQ Task Order Awards - Wickwire Gavin's Elizabeth Gill reviews a new court ruling that may impact M&A for smaller companies.
The Federal Deal - General Dynamics announces blockbuster deal to acquire Anteon.
Contract Central - Highlighted are key recent contracts to federal contractors
Daily Deals - Check out the latest sector M&A deals
Minuteman Ventures LLC News

The Minuteman Federal Deal Meter
  Purchase price  
  Under $50m $50–100m Over $100m Total Deals
YTD 2005 9 4 0 13
YTD 2006 9 4 0 13

The Minuteman Federal Deal Meter covers M&A transactions of services firms principally serving federal agencies. Transactions covered are those announced from January 1 through February 13 of 2005 and 2006.

For the list of M&A transactions closed in the sector since January 1, 2005, email Chuck Chappell, Director of Washington Operations, at charleschappell@minutemanventures.com.


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, products, and solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.


When Large Federal Contactors Acquire Small Companies

The View on Smaller Firm Acquisition from Perot Systems

While major transactions grab headlines, many larger, public federal services continue to consolidate the federal services sector by acquiring much smaller industry firms.

We reviewed the 77 2005 M&A sector transactions in 2005 for those where a) the acquirer was public and b) the companies those acquirers bought had $50 million in revenue or less. Some 22 transactions in 2005 qualified using the criteria.

Once we removed the outliers (including transactions involving Lockheed Martin, Northrop Grumman and General Dynamics on the basis of their size alone), buyers in this group were 21.5 times on average larger in revenue than the companies they bought. Stated differently, seller revenue constituted only 4.6% of the buyer's revenue at the time of the transaction. We call this the Buyer-Seller Revenue Ratio (BSRR).

This phenomenon — large and very large firms acquiring small and very small ones — is a consistent hallmark of the federal services M&A world.

The BSRR can be extraordinarily high in many cases, well beyond the BSRR average.

Why do large firms, especially public ones with high visibility, reach down to acquire small firms that have minimal impact on the buyer's revenue base?

First is simple demographics. That is where the action resides, with well over 20,000 federal contractors with annual revenue under $20 million.

Second, small is in the eye of the buyer. A $500 million firm can truly benefit from a $5-10 million firm if that entity brings with it a newly won five-year contract with a ceiling of $60 million.

Third, sellers with a strong strategic edge can add value immediately to a much larger company if the buyer has no easy access to the seller's agency relationship or other key asset. Minuteman Ventures recently represented for sale a company with fewer than 15 Top Secret-SCI cleared personnel supporting application development in one of the three-letter intelligence agencies. Suitors came from a wide range of buyers, including one with over $10 billion in revenue! Why? The 'Small' had an asset — high level cleared employees in an often contractually impenetrable agency — that the "Big' could not otherwise obtain.

We put that question of size and M&A to Jim Ballard, President, Government Services Group, for Perot Systems (NYSE:PER).

Perot Systems in July 2005 acquired 65-person PrSM Corp. (pronounced "prism") for $7.2 million. Perot Systems is at a run rate to exceed $2 billion in revenue in 2006.

Characterized as a leader in consulting, business process, application, and infrastructure services, Perot Systems is constantly looking for companies with technical depth, no matter the size. PrSM brought that, said Ballard.

As smaller transactions can take a similar amount of time and capital to complete as larger deals, the small company must be 'very, very strategic,' he said. "For us to acquire a small company, it must be a rifle shot, not a shotgun."

Ballard's group looked at 20 companies last year with revenue under $25 million. Few passed muster, a result often brought on by the need for a specific strategic fit associated with such a small firm when compared to Perot Systems.

Smaller firms get no special break from the Perot Systems CFO, explained Ballard. The pricing, synergy and strategy must still equate to a return to Perot shareholders that exceeds Perot's internal cost of capital.

Indeed, Perot Systems strives for M&A transactions that are accretive, meaning the small company's earnings must add value immediately to Perot Systems', no matter that such earnings are immaterial when consolidated with the New York Stock Exchange firm.

Perot Systems and operational personnel from PrSM knew each other from joint assignments at Department of Energy sites at Los Alamos and Oak Ridge. (PrSM is headquartered in Knoxville, Tenn.) PrSM Corp. is a safety, environmental and engineering services firm mainly performing work for U.S. Department of Energy contractors.

The acquisition allowed Perot Systems to provide a broader footprint of safety and quality engineering services to the U.S. Department of Energy and to expand offerings into other markets such as the U.S. Department of Defense and NASA.

PrSM's expertise in advising on the safety and occupational health issues related to nuclear power gave Perot Systems the technical strength it sought, said Ballard, while providing an opportunity for PrSM to bid on larger contracts. The PrSM unit, now fully branded as Perot Systems, has already won its two largest contracts.

In the end, it is fair to say that Jim Ballard and Perot Systems overcame any impediments due to the acquired firm's size in transacting and integrating this acquisition.

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Where will the Next Generation of Federal Sector CEOs Come From?

Robert Brudno is Managing Director of Savoy Partners

The Old Guard CEOs are moving on in many sectors of the IT, professional services and government contracting industries and potential successors are often not easily found inside their companies. There are many reasons why this has occurred, but few choices exist for boards of directors that must increasingly focus on this urgent problem.

Too many companies leave their best performers in their areas of strength, rather than rotating them through other functions and business units to give them the broad experience necessary to become candidates for CEO. GE does it right. It moves marketing people into finance and light bulb people into turbines in a well-planned executive development program that always seems to produce successors for GE (and for other companies). The government contracting industry stovepipes its top performers and wonders why they lack successors for aging CEOs.

Demographics tell part of the story. The next generation of industry leader should be in their mid-forties to early fifties right now. When that group was graduating from college, the Cold War had ended and telecom, Silicon Valley and other businesses seemed more attractive than the government market. Today, defense, homeland security and information security are hot businesses, but the lack of bench depth is remarkable. When asked recently to initiate a search for a COO as a potential heir apparent to a sixty-something CEO, I was able to put together a list of prospects in one day, and the list was not very long.

Part of the problem is the understandable reluctance of CEOs who are at the top of their game today to give up the throne. People are living and working longer. CEOs don't view 65 as a natural career end any more. Unfortunately, when they gain a reputation for being never willing to "let go," the best internal successors move on and outside prospects are deterred by the uncertainty of the change of command.

Some believe that all of the M&A activity in the industry should have a positive impact, as companies can acquire executive talent along with more revenues. Unfortunately, the best talent is often the first to quit when companies act like conquerors and stifle the entrepreneurship that was rewarded by the acquired company. Second, as the largest companies in the industry, like GD and Lockheed Martin, continue to be the biggest consolidators, few executives from the smaller, acquired companies are able to immediately scale up.

Hiring from the military or government is a traditional source of executive talent for the industry, but few retirees have the business experience to immediately assume the reins of a large, private sector company.

So, what can companies do to build their bench strength and prepare for CEO succession? Here are some of the choices:

  1. Immediately establish an executive development program that includes early identification of the top performers. Too often companies lose their next generation of leaders before they even emerge as senior, general managers. The most ambitious have been lured away, want to try their hand at running smaller companies, or otherwise react to the ossification that they see above them.
  2. If companies must go outside, they should proceed with care. Boards have made many mistakes hiring successors who do not fit the culture. Many presume that the largest executive search firms can find the right person without realizing that these firms often have so many client "off limits" constraints that the pool of talent is smaller than it would be if a top "boutique" search firm were used. Many times, hiring the big name recruiter is intended more to defend a failure than improve the chances of success.
  3. Beware the siren call of hiring a real "outsider" who will bring a "fresh" perspective. The CEO or COO position is not a good place for on-the-job training in government contracting. Finding someone who actually knows the business is harder, but is much more likely to lead to success.
  4. Move senior executives around, even if the customers might object. Create an inside pool of candidates with broad experience so that the choices are internal when the time comes to move one up.
  5. Hang on to those produced by #1 and #4.

While the federal budget dollars will be moved around in the years to come, most of the players in this industry will have ample opportunity to diversify and expand. Capital seems to be plentiful. Human capital at the top is not.

Robert Brudno is Managing Director of Savoy Partners, a Washington, D.C.-based retained executive search consulting firm. Over the past 25 years, Mr. Brudno has completed many senior level searches for top executives in the aerospace, defense, professional services, and high tech industries. Recently, he recruited the new CEO of SAIC, a new President for CACI, and performed other senior, succession searches. He can be reached at 202-887-0666.

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Company Growth May Impact ID/IQ Task Order Awards

by Liz Gill, Wickwire Gavin PC

A recent court ruling may have a distinct impact on the ability of entities previously certified as small-businesses to compete for certain contracts.

This is an important consideration if your company has acquired a small business and anticipated relying on its small-business status to compete for and acquire future government contracts.

The general, longstanding rule is that a size certification is valid for the life of the contract, including option periods, even if the company grows in size. But the rule established in this recent case allows an agency to ask you to recertify on each task order issued under an ID/IQ multiple award contract.

A federal court held in a post-award protest that a decision by the SBA Office of Hearing and Appeals ("OHA") requiring a size re-certification as of the offer date specified in the task order RFP was neither irrational nor illegal. The contractor, in LB&B Associates, Inc. v. United States, No. 05-1066L, 2005 U.S. Claims LEXIS 368 (Dec. 8, 2005), alleged that the OHA decision was inconsistent with SBA regulations and binding precedent that its existing size certification qualified it as a small business for the life of the contract.

LB&B was one of many awardees selected under an Air Force multi-award ID/IQ contract. At the time it submitted its offer on the underlying ID/IQ contract, LB&B properly certified that it was a small business. When the RFP was issued for the task order at issue, however, LB&B no longer met the size certification requirement for the corresponding NAICS code.

Prior to award of the task order, the Air Force filed a protest with the SBA's Area Office to determine if LB&B still qualified as a small business for purposes of the task order. The Area Office ruled that LB&B could rely on its earlier size certification submitted for the underlying ID/IQ. On appeal, the OHA found LB&B no longer eligible to receive the task order since it was no longer a small business. The OHA determined that: (1) the task order RFP was a solicitation for a new contract; (2) the task order RFP required re-certification; and (3) certain SBA regulations require an offeror to self-certify it is a small business under the standard specified in the solicitation.

LB&B filed a protest with the Court of Federal Claims seeking preliminary and permanent injunctive relief. LB&B argued that the SBA regulations provide that a concern that qualifies as a small business at the time it receives its contract is considered a small business for the life of the contract. Therefore, its previous certification for the ID/IQ contract was applicable.

The Court agreed, but also noted that the SBA has recognized, in connection with other types of multi-award contracts such as Federal Supply Schedule and Multiple Award Schedule contracts, that contracting officers have the discretion to require re-certification of small business status at the time of the new contract. Because the underlying ID/IQ did not guarantee work but only the opportunity to compete for future contracts, the court upheld the OHA's decisions that the ID/IQ contract provided only a framework for future contracting and the present task order RFP represented a new procurement that could involve a new certification. Thus, the Contracting Officer could request a size re-certification for the separate task order.

This case notes the importance of the timing of certifications under different types of government contracts.

For traditional contracts, the size determination is made at the time of the offer and any change in the size of a company over the course of the contract is irrelevant. 13 C.F.R. 121.404(g). Under this SBA regulation, if the company grows to be other than small, the agency can still exercise contract option periods and count the award as an award to a small business.

For multi-award ID/IQ contracts, however, this decision highlights the discretion of a contracting officer to require small businesses to re-certify where the new contract involves or requires small business set-asides.

Thus, if the small business that has been acquired by your company now exceeds its previously applicable size requirement, it may not be eligible for new task order awards issued under the multiple award ID/IQ contract.

Elizabeth M. Gill is associated with the firm of Wickwire Gavin, P.C. Her legal practice focuses on counseling of federal and state contractors, government contract litigation, construction litigation, and surety law. She may be contacted by email at lgill@wickwire.com.

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The Federal Deal

FGR offers analysis of M&A transactions 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 ).

General Dynamics to Acquire Anteon

On Dec. 14, 2005 General Dynamics Corp. (NYSE: GD) announced its biggest acquisition of the decade: Anteon Corp. (NYSE: ANT), a systems integration company that provides mission, operational and IT enterprise support to the U.S. government. Anteon is being acquired for an enterprise value of $2.2 billion. General Dynamics has only once paid more for a company: Gulfstream Aerospace, for which it paid $4.8 billion in 1999.

This deal represents a break from General Dynamics' recent pattern of acquiring smaller information technology hardware, software, and integration companies — but not from its exclusive focus on adding to its Information Systems & Technology (IS&T) group.

IS&T — the House that M&A Built — was already fifty percent larger than any of General Dynamics' others sectors at the close of 2004, turning in revenues of $6.8 billion. During 2005 that lead will only lengthen, driven by the acquisitions of FC Business Systems, Itronix, Tadpole Computer, and MAYA Viz. Next year that process will accelerate sharply, even if the sector closes no deal other than Anteon. The numbers are stunning: from mid-2004 through the first quarter of 2006, the company will have added more than 13,000 people to the payroll of General Dynamics IS&T.

This deal will approximately double the size of the smallest of IS&T's three businesses, General Dynamics Network Systems. Anteon will add $1.5 billion in sales (the expected 2005 figure) to the $1.75 billion which GD earned in the "Network infrastructure & IT services" category in 2004. We're not surprised that GD is choosing to add to this category, which has been growing at a torrid rate of 33 percent since 2002, all of it internally generated. We are surprised that it has taken this long for the company to throw fuel on the fire. But with two deals announced in two days (Anteon and FC Business Systems), the era of strategic neglect is plainly at an end.

What GD is Getting

Anteon could be likened in many respects to CACI International. Both companies operate largely within the program management support sector of the professional services marketplace. Both have used M&A to add customers and capabilities, and have thereby edged judiciously up the food chain. And both, most importantly, have top notch business development operations which have allowed them to generate most of their growth internally.

The numbers tell the story: since Anteon was created in the 1996 acquisition of Ogden Corp.'s Professional Services business, revenues have grown from $110 million to $1.5 billion. Revenues from its nine acquisitions have accounted for only a third of that growth. Headcount has risen to 9,500 people. And backlog — that indicator of past success and predictor of future prosperity — stands at $6.6 billion. All in all, a staggeringly impressive performance (and a staggeringly impressive return for owner Caxton-Iseman Capital, whose $32.5 million investment has returned more than $700 million, counting the six percent stake it continues to hold in Anteon).

Beyond its core business in IT services and program management support, Anteon has added domain knowledge in the areas of open architecture, information assurance, modeling and simulation. These capabilities will marry well with General Dynamics' existing capabilities. We're especially intrigued by the modeling and simulation business, which includes a robust sideline in training soldiers for urban warfare. Beyond the obvious relevance to the current situation in Iraq, this business has a unique synergy with GD: the company has through its own M&A strategy (in particular the buys of MAYA Viz and Itronix) been pushing closer to the edge of the battlefield itself. In his comments during the Q&A portion of the conference call, IS&T chief Jerry DeMuro talked of "pushing information to the edge" for the warfighter.

Why GD Wants It

First, the obvious: at roughly $3.5 billion a year, General Dynamics Network Systems will have risen to Tier one status in the federal services marketplace, able to contend as equals with Lockheed Martin, Northrop Grumman, Computer Sciences, and SAIC. The point bears repeating: in a marketplace where the customer keeps rolling up his requirements into bigger, more complex packages, the size of the bidder does indeed matter. And in the case of General Dynamics Network Systems, when the requirements get really wooly, it will be able to call on some high end capabilities resident in its Advanced Information Systems and C4 Systems businesses.

During the conference call with analysts, GD chairman and CEO Nick Chabraja noted that this deal and the Veridian deal have similar EBITDA multiples (14.6 in the case of Veridian, 13.1 in the case of Anteon). But he said that where Veridian was a deal driven by the opportunity to realize cost savings, this deal is being driven by perceived opportunities in marketing.

The company is particularly excited by the fit with Anteon from an operational perspective. Putting the matter at the highest level, Anteon brings expertise in mission IT services, bridging the gap between General Dynamics' enterprise IT services and C4ISR services.

Acknowledging that Anteon adds most directly to General Dynamics Network Systems, Chabraja makes the case that this deal will help dissolve the boundaries between Network Systems and IS&T's two other pillars: Advanced Information Systems (AIS) and C4 Systems. This is the characterization of the deal we find the most interesting, because it ties the deal strategically to the dealmaking which has been building other parts of this sector. We return again to the MAYA Viz and Itronix deals, and the Pentagon's emphasis on putting better IT tools directly into the hands of warfighters.

GD also has a special interest in Anteon's largest program, the tortuously-named Applications and Support for Widely-diverse End User Requirements ("ANSWER"). Since receiving its ANSWER hunting license from GSA in 1998, Anteon has become the program's most prolific contractor, winning 477 task orders (as of the end of 2004) and realizing revenues of close to $200 million per year. The company is confident it has its ducks in a row for the follow-on Alliant procurement, to be awarded next year. And General Dynamics can be confident that Anteon, with its heavy reliance on multiple award-type contracts and the GSA schedule, is operating directly in the mainstream of one of the most powerful trends in the government technology services marketplace.

One final insight into this deal: we wonder whether Mr. Chabraja's downplaying of cost savings can necessarily be taken at face value. We base this on an exchange between Chabraja and CIBC analyst Miles Walton, in which the latter observed that NS has much higher sales per employee than Anteon ($270K/employee vs. $180K/employee at Anteon). Chabraja dismissed such comparisons as a "silly exercise", noting that NS differs from Anteon in that it passes a high percentage of its sales through to subcontractors, which has the effect of inflating its employee productivity numbers.

Which has us thinking: if some of those NS revenues could be kept at home — if they were performed by the Anteon business instead of being passed through to subcontractors — well, then the Anteon business would have just added a new source of prime-contract-level, fully-margined revenues. And General Dynamics would have figured out a way to realize a greater return on the contracts which it had already won. And there's nothing silly about that.

The Game Remains Afoot

Most industry observers would agree with the idea that the best days of the defense marketplace expansion are past. Major programs are on the chopping block. An expensive war and an even more expensive hurricane season have sapped government resources. Some companies have been acting as though the deluge was already upon them, pulling in their M&A programs and paying cash out to shareholders just as fast as they can rake it in.

But they do continue to rake it in. Margins in the government technology services marketplace have never been better, and the top line is still arcing upwards, albeit more gradually. That trend has two of the industry's biggest players — Lockheed Martin and General Dynamics — engaged in a full-fledged acquisitions race, joined at the periphery by players like BAE Systems and (watch out) SAIC.

GD is betting that even if spending tops out and margins pull back (and we do think they will have to), Anteon's vaunted business development department will be able to market the company out of trouble. In his conference call with analysts, Chabraja said that Anteon and General Dynamics "have identified currents of growth that are significantly faster than the overall budget." Add a little of what Chabraja called the "secret sauce" behind the deal (which may include Anteon's burgeoning backlog as a principal ingredient), and you have the strategic case for growth in a down market. If a rising tide floats all boats, the ebb tide is still characterized by swift eddies in which a maneuverable boat can still work up a good head of steam.

We wouldn't bet against General Dynamics, which over the past decade has had just as much opportunity to prove it can expand in a down market as it has in a growing market.

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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.


Army PEO STRI Chooses UNITECH to Provide MILES Training Devices

The U.S. Army Program Executive Office, Simulation, Training & Instrumentation (PEO STRI) (Orlando, FL) awarded Universal Systems & Technology, Inc. (UNITECH) (Centreville, VA) a four-year, $18.8 million task order on a previously awarded contract to design and produce the latest Multiple Integrated Laser Engagement Simulation (MILES) technology devices.

Under the task order, the company will develop MILES devices to aid training and exercise support training for soldiers by producing their newly developed Shoulder Launcher Munitions (SLM) Weapons Effects Simulators (WES). The Army deployed the MILES system as a tactical simulation training method for preparing soldiers for combat in the early 1970s.

UNITECH will provide the Army with more than 3,500 each AT-4 launcher simulators and 455 visual modification (VISMODS) kits for the basic device, which simulates multiple existing opposing forces shoulder-launched munitions. Used to support MILES training, the launchers will have a modular, flexible design, allowing the training system to be upgraded quickly and economically to accommodate additional system requirements. The VISMODS will simulate weapons other than the AT-4.

The task order was competitively procured through the PEO STRI Omnibus Contract (STOC). Competition was limited to small businesses holding STOC contracts only.

UNITECH issued a statement that said its work in this field created 75 jobs in 2005 and will create 75 more jobs this year


Army SMDC Chooses ASD to Provide IT Support for CIMS

The U.S. Army Space and Missile Defense Command (SMDC) (Huntsville, AL) awarded Advanced Systems Development, Inc. (Arlington, VA) a 10-year, $405 million, IDIQ contract (W9113M-06-D-0001) to support the U.S. Army's Command Information Management System (CIMS).

Under the contract, the company will provide information technology (IT) solutions for CIMS, which is the overall command enterprise and architecture that encompasses the primary IT functions that support the U.S. Missile Defense Agency (MDA) and the Army Forces Strategic Command. It also plays a role in space operations and ballistic missile research and development (R&D).

ASD's subcontractors include:

— SAIC Transformation, Training & Logistics Group – Systems & Technology Solutions Business Unit (Huntsville, AL).

— Camber Corp. (Huntsville, AL).

— InfoPro Inc. (Huntsville, AL).

The contract was competitively procured through solicitation W9113M-05-R-0010, which was issued on July 8, 2005, and called for competition limited to small businesses only (NAICS 541512). Proposals were due on August 15, 2005.

The procurement is considered a follow-on effort. The incumbent was Quality Research, Inc., now part of SAIC, which performed the work previously under a $73.4 million contract (DASG60-98-C-0017) awarded in August 1998.


Army TRADOC Picks Six to Supply Distributed Learning Education and Training Products

On behalf of the U.S. Army Training and Doctrine Command (TRADOC), the Army Contracting Agency, Northern Region Contracting Center (ACA NRCC) (Fort Eustis, VA) awarded six parallel, five-year, firm-fixed-price, IDIQ contracts, worth $1.1 billion collectively, for the U.S. Army's Distributed Learning Education and Training Products (DLETP) program.

The recipients were:

— Universal Systems & Technology, Inc. (UNITECH) (Centreville, VA), which was awarded a $320 million contract.

— C2 Technologies, Inc. (Vienna, VA), which was awarded a $346 million contract.

— Intelligent Decision Systems, Inc. (IDSI) (Centreville, VA), which was awarded a $342 million contract.

— Logistic Services International, Inc. (LSI) (Jacksonville, FL), which was awarded a $338 million contract.

— Karta Technologies, Inc. (San Antonio, TX), teamed with 17 subcontractors including "Tier One" partners CACI, Inc. – Federal (Arlington, VA); SRA International, Inc., Defense Sector (Fairfax, VA); and IBM Global Government Industry (Bethesda, MD). Karta was awarded a $247 million contract.

— Planning & Learning Technologies, Inc. (Pal-Tech) (Arlington, VA), teamed with General Physics Federal Systems, Inc. (Fairfax, VA); Hampton Univ. (Hampton, VA); Information Systems Support, Inc. (ISS) (Gaithersburg, MD); L-3 Link Simulation & Training (Arlington, VA); Microsoft Federal Systems (Washington, DC); New Horizons; Pearson VUE; Research Triangle Institute (Research Triangle Park, NC); SphereCom Enterprises; Symantec Corp. (Cupertino, CA); and Virginia Polytechnic Institute and State Univ. (Blacksburg, VA). Pal-Tech was awarded a $219 million contract.

Under the multiple-award program, these companies now will compete for task orders to supply products that use the latest digital technology for developing Interactive Multimedia Instruction (IMI) web-based courseware to play in a standalone mode over the Internet, via CD-ROM, and DVD. The DLETP program is part of the Army's continuous effort to maintain high-quality training for all of its troops.

The contracts were competitively procured through solicitation W911S0-04-R-0010, which was issued on December 4, 2004, and called for competition limited to small businesses only (NAICS 339999; 500 employees). Proposals were due on February 15, 2005.

The procurement is considered a follow-on to the five-year, $1.15 billion Army Distributed Learning XXI (DLXXI) program awarded to four companies in November 1999.

(ROTC) organizations, the Army National Guard, and other defense and commercial clients.


Navy SPAWAR HQ Taps Eyak Technology for Network Management Software and Related Hardware

The U.S. Space and Naval Warfare Systems Command, Headquarters (SPAWAR HQ) (San Diego, CA) awarded Eyak Technology, LLC (Anchorage, AK) a $15.2 million firm-fixed-price contract (N00039-06-C-0014) for network management software, related hardware and software, installation, and software license maintenance.

Under the contract, the company will provide a network management system for the PMW-790 tactical switching program which uses commercial off-the-shelf products, compatible with existing legacy equipment, that ensure achievement of a future need to be compatible with the Global Information Grid Network operations system.

This contract includes options which if exercised would bring the cumulative value of this contract to $21.9 million.

Work will be performed at SPAWAR locations in Dulles, VA (70%); Norfolk, VA (10%); Charleston, SC (10%); and San Diego, CA (10%), and is expected to be completed by September 2006 (September 2010 with options). Contract funds will not expire at the end of the current fiscal year.

This contract was not competitively procured because it is a sole source acquisition through the Small Business Administration 8(a) program.


NAWCAD Chooses WinTec Arrowmaker to Support 'Little Black Box' Programs

U.S. Naval Air Warfare Center – Aircraft Div. (NAWCAD) (St. Inigoes, MD) awarded WinTec Arrowmaker, Inc. (Fort Washington, MD) a five-year, $26 million, cost-plus-fixed-fee, IDIQ contract (N00421-06-D-0008) for technical and engineering services in support of NAWCAD's Special Communication Requirements Div. (SCRD).

Under the contract, which has an estimated level of effort (LOE) of 72,960 labor-hours per year, the company will provide concept evolution, design, development, integration, test and evaluation, maintenance, logistics, and lifecycle support of Navy, Army, Air Force, Joint Services, Marine Corps, and other agency communication-electronic platforms, equipment, systems, subsystems, and unmanned vehicle systems. WinTec Arrowmaker will perform cradle-to-grave support (from providing turnkey systems fully integrated with all equipment to the development of specific systems to meet or enhance performance requirements). Work will be performed in Tampa, FL (81.58%) and St. Inigoes, MD (18.42%).

The contract contains a one-year base (worth $5.1 million) and four one-year options that, if exercised, could increase its total cumulative value to near $26 million (estimate) and extend the period of performance to February 2011. Contract funds in the amount of $524,123 will expire at the end of the current fiscal year.

The contract was competitively procured through solicitation N00421-05-R-0073, which was issued on June 29, 2005, and called for competition among small businesses only (NAICS 541330; $23 million). Proposals were due on August 1, 2005. Only one offer was received.


NAWCAD Taps Scientific Research Corp. for R&D

The U.S. Naval Air Warfare Center-Aircraft Div. (NAWCAD) (Lakehurst, NJ) awarded Scientific Research Corp. (SRC) (Atlanta, GA) a not-to-exceed $25 million Phase III Small Business Innovative Research (SBIR) program contract (N68335-06-D-0006) for Topic N01-013 entitled "Mid-Air Collision Avoidance System (MCAS) Using Mode 5", and SBIR Topic N01-188 entitled "Smart Flat Panel Multifunction Color Display (MFCD) with Positive Pilot Feedback."

Under the contract, the company will provide services and materials for engineering tasks, including exploratory study of application, further research and development (R&D), analysis for system integration, prototype development and fabrication, customizing prototype to specific platform needs, test and evaluation (T&E), product support services, production buys and training as necessary.

Work will be performed in Atlanta, GA, and is expected to be completed in January 2011. Contract funds will not expire at the end of the current fiscal year.

The contract was competitively procured using a SBIR program solicitation under Topic N01-013 (a total of three offers were received), and Topic N01-188 (a total of five offers were received).


NUWC Taps SEA CORP to Continue Developing SSTD Launch Canister

The U.S. Naval Undersea Warfare Center Div. Newport (NUWC) (Newport, RI) awarded Systems Engineering Associates Corp. (SEA CORP) (Middletown, RI) a $9.4 million cost-plus-fixed-fee contract (N66604-06-D-0100) for engineering and technical services in support of continued development and production of a Surface Ship Torpedo Defense (SSTD) launch canister.

Work will be performed in Middletown, RI, and is expected to be completed by December 2010. Contract funds in the amount of $335,000 will expire by the end of the current fiscal year.

The contract was not competitively procured. It is a Small Business Innovative Research (SBIR) Phase III procurement that further transitions the company's earlier demonstrated technology to a production baseline addressing several mission areas with emphasis on their unique requirements and interfaces.


USAF ESC Taps ECSI for More Security Systems

The U.S. Air Force Electronics Systems Center (ESC) (Hanscom AFB, MA) awarded ECSI International, Inc. (Clifton, NJ) a $550,000 task order on a previously awarded contract (F19628 -03-D-0011) under the Tactical Automated Sensor Systems (TASS) program for forward base rapid deployment applications.

This order is in addition to the previous orders which now brings the total to over $7,350,000. The task order was competitively procured through ESC's Integrated Base Defense Security Systems (IBDSS).

Arthur Barchenko President and CEO stated, "After posting a record $6 million in sales for Fiscal '05, we continue to close substantial orders for equipment and sales to be delivered in Fiscal '06. This additional task order reaffirms the fact that ECSI is an integral part of the Department of Defense (DoD) security technology program and is recognized as an effective quality provider for both the military and Department of Homeland Security (DHS)."

Barchenko further stated, "The Force Protection Program office of the U.S. Air Force Electronic Systems Center accepted proposals for multiple award contracts in support of the Integrated Base Defense Security System program (IBDSS) in June of 2003. Under the current agreement, ECSI is installing its premiere product lines designed to prevent unauthorized entry or access to large, medium and small military facilities. Since the first major award for the Tinker Air Force Base, we have received over $13 million in procurements for both the IBDSS and TASS programs."

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Daily Deals

Closing/
announcement date
Buyer Seller Purchase Price Seller Revenue
February 13, 2006 Alion Science and Technology BMH Associates N/D N/D
February 8, 2006 Homeland Security Capital Corp. Nexus Technologies Group N/D $5.4m
February 8, 2006 SI International Zen Technology $60m $38m
January 30, 2006 SiloSmashers Martis Group N/D N/D
January 26, 2006 L-3 Communications TCS Design and Management Services N/D $45m (2006)
January 26, 2006 Aviel Systems OPTIMUS Corporation N/D N/D
January 24, 2006 Raytheon Co. Houston Associates N/D $28m
January 18, 2006 Kforce Pinkerton Computer Consultants $60m $90m
January 17, 2006 ITS Corp. LEADS Corp. N/D $15m
January 2006 Schafer Corporation 3D Research N/D 375 employees
January 6, 2006 Stanley Associates Morgan Research N/D $70m
January 6, 2006 Celtron International Satellite Security Systems N/D $35m
January 3, 2006 Harris Computer Systems e-Management Solutions (CASS, Inc. unit) $7m $6m
2006
December 23, 2005 CACI International Information Systems Support N/D $200m
December 16, 2005 Lockheed Martin Aspen Systems Corp. N/D $164.4m
December 14, 2005 Offshore Systems International CHI Systems $9m $12m

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Minuteman Ventures LLC News

Joe Fitzgerald, Minuteman's Director of Huntsville operations, this past month received the "Distinguished Service Medal" from the Governor of Alabama, the highest medal awarded by the Governor to a citizen of the state. Congratulations Joe!… Minuteman Ventures President Paul Serotkin sits on a panel March 3 at an event titled 'Navigating New Terrain' sponsored by global investment bank UBS. Held at the Ritz-Carlton Pentagon City in Arlington, Va., this is the 3rd Annual Government/Defense IT Conference held by UBS, with the focus on federal IT services. Serotkin joins the "Consolidation/M&A Outlook" panel… Mark your calendar for March 7 and 8. The Strategic Research Institute is hosting its annual Defense, Aerospace and IT Investor and Corporate Development Conference. Leading defense/aerospace and federal IT investors and corporate development executives will once again meet in Reston to take stock of the constantly evolving industry. The event is at the Hyatt Regency Reston, Va. Click here for more.… The National Defense Industrial Association will host its Third Annual National Small Business Conference May 8–10 in Newport, R.I. Titled 'Meeting DoD/DHS Mission Needs in the 21st Century,' the event brings together company executives and DoD/ government leaders to address current issues and trends… See the Jan. 6 issue of Washington Technology, which quotes Minuteman's Chuck Chappell on the draw of private equity funds to the federal sector. Click here for the article.

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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, products, and solutions to federal government clients. We pride ourselves in being the investment bank for entrepreneurial companies in the federal sector.

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