After recently reporting financial results its CEO called “disappointing,” SAIC Inc. quickly bounced back by winning several large defense-related contracts that focus on the company’s technology expertise.
In the largest award, SAIC said it received a prime contract by the U.S. Department of Veterans Affairs to provide information technology (IT) services to support the agency’s massive “T4” program. It stands for Transformation Twenty-One Total Technology.
SAIC said the complete program has a cumulative value of up to $12 billion. However, it included a total of 15 prime contracts. VA officials had awarded the previous 14 contracts to other vendors.
Officials said the T4 program is designed to upgrade the VA’s IT infrastructure to provide higher quality health care and benefits services to veterans, their families and survivors. Under the program, the 15 vendors will compete for task orders over the five-year life of the contract, SAIC said.
That contract followed a $281 million win for SAIC with the Missile Defense Agency, which is the Pentagon’s unit for research, development and acquisitions. With this five-year, multiple-award program, SAIC will focus its efforts at the agency’s Huntsville, Ala. operations.
In Huntsville, SAIC will support the Ballistic Missile Defense System by providing senior advisory and analytic services, the company said. The tech-heavy BMDS is designed to counter ballistic missiles of all ranges, speeds, size and performance and requires enormous network-centric computer capabilities.
Based in McLean, Va., the company also won a $35 million contract in early September to provide IT support for the Pentagon’s Special Operations Command. SAIC will focus its Special Ops work in the Philippines and Hawaii, where it will provide mission-critical IT services for command, control and communications.
For SAIC, the flurry of awards comes after the company suffered two major setbacks. In August, the company learned it had lost out on its bid to provide technology development for the Pentagon’s new Ground Combat Vehicle.
With a combined value of about $878 million, those contracts went to BAE Systems and General Dynamics-led teams. SAIC later filed an official protest with the federal Government Accountability Office.
SAIC’s move meant a delay for the program designed to replace the aging Bradley Fighting Vehicle. First fielded in 1981, the Bradley has become a symbol of what a recent page-one story in the Wall Street Journal referred to as the nation’s “geriatric” weapons arsenal.
As regards the new combat vehicle, however, it should be noted that when the Army first announced the procurement procedures in November 2010 the agency said it anticipated awarding up to three contracts.
Thus, the Army’s decision to grant the vehicle bid only to the BAE Systems and General Dynamics teams seemed to depart from that announcement. To be sure, SAIC used a foreign platform for the basis of its proposal.
That’s because the company teamed up not only with Boeing but with two German firms, Krauss-Maffei Wegmann and Rheinmetall Defence. The German companies had developed the Puma infantry fighting vehicle for the German army.
SAIC said Army officials may not have understood the team’s “non-American origins.”
For its part, the Army says it needs a new combat vehicle that can better resist the impact of improvised and other roadside bombs that have accounted for about 60 percent of casualties in Afghanistan and Iraq.
The Army also wants a vehicle that can field a nine-man squad. A decision regarding the protest is expected by Dec. 5, GAO officials said. Meanwhile, the Army has issued a stop-work order to the BAE Systems team, which also includes Northrop Grumman, and the General Dynamics team, which also includes Lockheed Martin and Raytheon.
In the second major setback for SAIC, the storied technology firm reported lower sales and earnings in the midst of what industry officials say is a tough environment for the defense industry.
Not only has the Pentagon begun a sweeping bid to reduce costs that have stretched out contract awards, the recent congressional deal on the nation’s debt limit could lead to profound spending cuts needed to balance the U.S. budget.
Against this backdrop, SAIC said its second-quarter sales declined 6 percent from the similar period a year ago. Profits in the period fell from last year’s $190 million to $178 million, a decline of 6.3 percent.
In addition, Walter P. Havenstein, the firm’s CEO, said in a recent conference call with financial analysts SAIC has lowered its forecasts for 2011 sales and earnings because of what he called a “challenging government contracting environment.”
Ironically, Havenstein told the financial community SAIC submitted proposals for up to $30 billion worth of federal work, roughly one-third higher than submitted a year ago. He said winning all the bids depends on “having active contracting and the government’s willingness to let that funding through.”