Thursday, October 29, 2009

Government Contracts Driven By New National Security Spending

Government contracts constitute a mammoth economic sector – more than a half-trillion dollars in federal contracts in 2008 alone, and most of this goes to large corporations that specialize in national security operations. Not included in that massive figure was the contracting done by state Homeland Security offices and by the private sector itself for their own cybersecurity and “critical infrastructure protection.” The fastest growing sector in federal contracts is information and communication services with the Department of Defense, Department of Homeland Security, and the intelligence community (sixteen government agencies including DOD intelligence agencies and DHS intelligence apparatus). Private contractors with intelligence and information-technology divisions are salivating over the boom in related government contracts.
Top Ten Government Contractors, 2008 _______________________________________________
Lockheed Martin Corporation $34,785,141,737 Boeing Company $23,784,593,887 Northrop Grumman $18,177,546,625 BAE Systems $16,137,793,437 General Dynamics $15,992,669,588 Raytheon Company $14,663,608,137 United Technologies Corporation $8,927,106,729 L-3 Communications Holdings $7,597,574,871 KBR, Inc. $5,995,025,351 SAIC $5,945,115,101 _______________________________________________ Source: Top Ten Homeland Security Department Contractors, 2008 _________________________________________________
Boeing Company $591,048,628 International Business Machines $486,219,723 Accenture Ltd $392,700,978 General Dynamics Corporation $391,294,040 Integrated Coast Guard Systems LLC $386,344,211 Unisys Corporation $367,722,670 SAIC $362,403,533 L-3 Communications Holdings, Inc. $329,431,785 Lockheed Martin Corporation $294,412,822 Booz Allen Hamilton Inc. $242,899,612 _________________________________________________ Source: Global Homeland Security 2009-2019 is a new report by VisionGain, an information provider to the defense industry and U.S. government. The company says that homeland security is “one of the defense industry’s newest and most promising sectors” and projects that global governmental spending on homeland security services and goods should top $141 billion in 2009. Included under the homeland security branch of national security are such boom areas as cybersecurity, infrastructure protection, border security, intelligence, disaster preparedness and response, datamining, biosecurity, and national health networks to respond to transborder threats. One industry report projects that twenty federal contracts will be valued at $180 billion in 2010 – 50 percent higher than the top federal contracting opportunities in 2009, and most of the new contracting will be from civilian agencies, notably DHS. Washington Technology, a information company that serves the high-tech industry, tracts IT government contracts and reports that traditional military contractors are also the government’s largest information and cybersecurity providers. Nine of the top ten are major military contractors, most of which now have dedicated intelligence and homeland security divisions. Top IT and Systems Integration Federal Contractors, 2009
___________________________________________________ 1 Lockheed Martin Corp. $14,983,515,367 2 Boeing Co. $10,838,231,984 3 Northrop Grumman Corp. $ 9,947,316,207 4 General Dynamics Corp. $ 6,066,178,545 5 Raytheon Co. $ 5,942,575,316 6 KBR Inc. $ 5,467,721,429 7 SAIC $ 4,811,194,880 8 L-3 Communications Inc. $ 4,236,653,555 9 Computer Sciences Corp. $ 3,435,767,906 10 Booz Allen Hamilton Inc. $ 2,779,421,015 ___________________________________________ Source: Washington Technology, Eagle Eye Publishers Inc., and Houlihan Lokey Lockheed Martin leads the pack as it has for 15 straight years straight. Like last year, Boeing and Northrup Grumman rank No. 2. and No. 3, respectively. Although IT contracts are expanding rapidly, there are few new entrants to the list of top IT providers to the government. In Washington Technology’s list of the top 100 IT providers, there were just 12 new entrants while traditional military giants dominaed the list. In addition to those in the top ten, other military contractors that are now majors in IT include BAE Systems, United Technologies, CACI, Aerospace Corp., BearingPoint, General Atomics, Alliant Technologies, and Alion Systems – all of which have more than a half-billion dollars in federal information-technology related contracts. One of the largest sources of federal contracting at DHS has been the EAGLE (Enterprise Acquisition Gateway for Leading Edge Solutions) IT program, which awarded $8.2 billion in contracts in the past three years. Among the leading contractors are CACI, Booz Allen Hamilton, Lockheed Martin, SAIC, Northrup Grumman, General Dynamics, and BAE Systems – all major military contractors. Most of the EAGLE IT bonanza are in the form “indefinite-delivery, indefinite quantity contracts” that provide generous operating room for IT firms to determine their own enterprise solutions to DHS’ vast IT and cybersecurity needs. DHS claims that it has greatly improved its oversight and management capacity since its early years, but time and again DHS has attested to its heightened diligence with private contracting only to shock evaluators at its level of incompetence and failure to learn from past contracting failures. Given that the EAGLE contracts are a work in progress, it’s too early to assess their success at meeting DHS’ ever-expanding IT ambitions. You can find information about this massive DHS contracting program on the department’s “Open for Business” web pages. Initially, the multibillion dollar IT services program was handled by a DHS unit called the Enterprise Solutions Office. But in the face of congressional criticism that DHS was churning out private contracts without oversight or project management, the enterprise solutions office is now called the Acquisition Program Management Branch. The major military corporations have quickly formed new operations branches to focus on the national security opportunities outside of their traditional core contracts with the Pentagon and armed services. This year, for example, Northrup Grumman created a new Information Systems division to seek defense, homeland security, and intelligence IT contracts. Recognizing the interest in the Obama administration in cybersecurity and information war, corporations such as Booz Allen Hamilton and HP have created new cybersecurity divisions or subsidiaries.
Similarly, the new administration focus at DHS and elsewhere on transnational disease have led military companies such as General Dynamics to acquire health company subsidiaries to ensure a place in the expanding homeland-security health care market. As Washington Technology (May 7, 2009) noted in its recent overview of the IT boom in federal contracting, “Mergers and acquisitions are also playing a role for companies that want to stay current with their customers.” Next: Persistent Problems with DHS Private Contracting

No comments: