From saic at vision.moundalexis.com Thu Sep 1 12:47:00 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 1 Sep 2005 08:47:00 -0400 (EDT) Subject: [saic] Illinois inks toll system deal with SAIC Message-ID: <20050901084547.H673-100000@vision.moundalexis.com> 31 August 2005 ; Government Computer News Illinois inks toll system deal with SAIC http://www.gcn.com/vol1_no1/daily-updates/36843-1.html --- By Doug Beizer Contributing Staff Writer The Illinois Tollway authority has awarded Science Applications International Corp a $6.6 million contract to assist in systemwide conversion to a barrier-free electronic toll collection system, the company has announced. Under the contract, SAIC.s Security and Transportation Technology business unit will provide equipment to upgrade the tollway.s violation enforcement system. The system enforces toll fees by capturing license plate images of cars and trucks that pass through toll lanes without paying. The Illinois Tollway includes more than 180 toll lanes with license plate image capture, coupled with SAIC-provided optical character recognition capability to process more than tens of thousands of violations each day. The system can capture images of license plates of vehicles traveling up to 100 mph and is installed in more than 650 toll lanes throughout the United States. Doug Beizer is a staff writer for Government Computer News. sister publication, Washington Technology. From saic at vision.moundalexis.com Thu Sep 1 13:10:24 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 1 Sep 2005 09:10:24 -0400 (EDT) Subject: [saic] SAIC Capital Restructuring & Initial Public Offering (IPO) Message-ID: <20050901090817.B673-100000@vision.moundalexis.com> 1 September 2005 ; SAIC SAIC Capital Restructuring & Initial Public Offering (IPO) http://www.saic.com/saic-ipo/letter.html --- Letter from Ken Dahlberg September 1, 2005 Dear Fellow Employees and Stockholders, As I reported to you in June, your senior management team and Board of Directors have been thoroughly reviewing various capital structure alternatives to determine the best business model to enable the company to execute our vision and long-term strategy. Over the past five years, we have used more than $2.5 billion of cash to balance our stock system. We have maintained excess cash to address the ongoing imbalance and projected that this imbalance would have continued for the foreseeable future. We should be using our cash on hand and cash flows from operations to fund our organic growth as well as strategic acquisitions. We deliberated and weighed the risks and potential rewards of each option - paying particular attention to the potential impact of each alternative on our culture, cash needs for our stock system, ability to implement our strategy, our desire to remain independent and our continued focus on maintaining an environment where entrepreneurism flourishes. One option, an initial public offering (IPO), stood out as best satisfying all of our needs. As part of our review, we visited or studied a number of companies that have transformed from private, employee-owned companies into public ones with significant employee ownership to determine the impact the transition had on their culture. Those findings - as well as the results of the task team I chartered to affirm the true values of our company - led me, our senior leadership team and the Board to conclude that an IPO can allow us to sustain our culture - but only if all of us preserve, honor and respect our heritage and hold constant the truly intrinsic values of our culture. These are core, fundamental and everlasting, no matter what capital structure we adopt; if we integrate our values of ethics and integrity, significant employee ownership, technical excellence, customer satisfaction, entrepreneurial spirit, empowerment, pride and long-term perspective into our approach to our markets, customers, employees, strategy and reward system, then they will continue to be real, vibrant and everlasting. We believe the IPO option provides several key attributes: * An IPO will preserve future operating cash flows to be used to implement our vision and strategy of organic and acquisitive growth rather than balance our stock system. * An IPO will provide us with a public currency to pursue acquisitions that otherwise might not be available to us. Of course, we will continue our disciplined approach to internal investments and acquisitions that support our strategic growth plans. * An IPO will offer SAIC stockholders greater liquidity for their shares should they desire to diversify their holdings. Following the IPO, SAIC will remain predominately owned by existing stockholders. Further, we intend to continue programs for sharing ownership among those employees who contribute to our success, and we will continue to attract, motivate and retain our employees through equity incentives and cash-based rewards. Next Steps in the IPO Process As a first step in the process of becoming a publicly traded company, we filed legal documents today with the Securities and Exchange Commission (SEC). These documents consist of a Form S-1 registration statement, which includes a prospectus, and a Form S-4 registration statement, which includes a proxy statement/prospectus. These documents are in preliminary form and are subject to future amendment. I encourage you to review the final versions of these documents carefully. The preliminary versions of these documents are and the final versions will be available on the SEC.s website at www.sec.gov. We will post a link on our website to the filings on the SEC.s website. Once the relevant documents have been declared effective by the SEC, we will distribute information to stockholders of record and hold a special stockholders meeting to vote on the transaction. While it is difficult to predict when the entire process will be completed, if approved by our stockholders, we expect that the IPO will occur early next year. Please bear in mind that since we decided to pursue an IPO, our company is in a so-called .quiet period. that places legal limits on what it can say. This quiet period lasts until about a month after the IPO. This means that any comment about the IPO and related matters by any SAIC employee outside of the contents of legal filings - even internally - generally is prohibited by the SEC. In addition, I would remind you that our media policy allows only specifically authorized SAIC employees to speak to the media. I can.t overemphasize the importance of these quiet period limitations for the protection of the company and its stockholders, and this policy must be strictly observed throughout this process. Limited Market Trade / Lockup Periods The next limited market trade will be the last one prior to the IPO, so you must keep this in mind in assessing your financial needs during this period. In addition, immediately following the IPO, your shares will be subject to temporary trading restrictions that will be released incrementally over the course of one year. These lockup periods, which for some companies have lasted as long as two years, are typical in these situations. Over the long-term, however, we believe our stockholders will enjoy greater liquidity in the public markets, where shares trade every day rather than four times per year. To provide our stockholders with additional time to assess their financial needs before the limited market trade, our Board of Directors decided to postpone the September trade by three weeks until October 14th. To help address any hardships this trade delay may cause, we will purchase stock from stockholders with qualifying hardships pursuant to our existing Financial Hardships Policy. Special Dividend Again, we are pursuing an IPO to achieve greater financial flexibility and stability for our stock system, so raising capital is not the primary goal of our IPO. The offering size is primarily driven by the need to issue enough shares to create an effective market in our stock. Therefore, we plan to use a substantial portion of the IPO proceeds to pay a special dividend to our stockholders of record prior to the IPO. Given our already comfortable cash position, we believe that paying a special dividend is the most efficient and fairest way to use the IPO proceeds. Questions and Answers I know you will have questions about this process. As a first step, I recommend that you carefully review our filings posted on the SEC.s website. The Form S-4 registration statement contains an extensive Q&A, which will provide answers to some of your questions. If the documents we filed do not answer your specific questions, I encourage you to visit the SAIC Capital Restructuring and Initial Public Offering webpage (on our employee intranet at https://issaic.saic.com/saic-ipo or on our public website at http://www.saic.com/saic-ipo) or call the SAIC Capital Restructuring and Initial Public Offering Call Center at (866) 676-4357 or, for National Capital Region or international callers, (703) 676-6200 between 8:00am and 8:00pm, eastern time, Monday through Friday. Because we are in the quiet period, we won.t be responding to emails individually. However, we will continue to distribute information to address questions. As we move forward it is critically important that we continue to execute on our business plan successfully and build on our position as an industry leader and a mission-critical partner to our customers. This is an exciting time in SAIC.s history, and I.m looking forward to working with all of you to build a great future. Sincerely, [signature] Kenneth C. Dahlberg Chairman of the Board and Chief Executive Officer --- Forward-looking Statements This communication may contain forward-looking statements that are based on our management's belief and assumptions and on information currently available to our management. Any such forward-looking statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, achievements or benefits to be materially different from any future results, levels of activity, performance, achievements or benefits expressed or implied by such forward-looking statements. As a result of these risks, uncertainties and other factors, readers are cautioned not to place undue reliance on any forward-looking statements included in this communication. These risks, uncertainties and factors are discussed in the filings of Science Applications International Corporation and SAIC, Inc. with the SEC, which are available without charge at the SEC's internet site at http://www.sec.gov. The forward-looking statements speak only as of the date made. Neither Science Applications International Corporation nor SAIC, Inc. assume any obligation to update any forward-looking statements to reflect events or circumstances arising after the date as of which they are made or to conform such statements to actual results. Additional Information and Where to Find It More detailed information pertaining to the merger and related proposals of Science Applications International Corporation will be set forth in appropriate filings that have been and will be made with the SEC, including the proxy statement/prospectus contained in the registration statement on Form S-4 filed by SAIC, Inc. concerning the proposed merger and related proposals. We urge stockholders to read such documents that are or may be filed with the SEC when they are available because they will contain important information about the proposed merger and related proposals. Stockholders will be able to obtain a free copy of any filings, containing information about Science Applications International Corporation or SAIC, Inc., without charge, at the SEC's internet site at http://www.sec.gov. Copies of any filings by Science Applications International Corporation or SAIC, Inc. can also be obtained, without charge, by directing a request in writing to Science Applications International Corporation, 10260 Campus Point Drive, M/S F-3, San Diego, California 92121, Attention: General Counsel or by email to SECfilings at saic.com. This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. Participants in the Solicitation Science Applications International Corporation, SAIC, Inc. and their respective directors and executive officers may be deemed, under the SEC's rules, to be participants in the solicitation of proxies from the stockholders of Science Applications International Corporation in connection with the proposed merger and related proposals. The names of the directors and executive officers of Science Applications International Corporation and SAIC, Inc. and their interests, direct or indirect, by security holdings or otherwise, in the proposed merger and related proposals are contained in the proxy statement/prospectus contained in a registration statement on Form S-4 filed by SAIC, Inc., which may be obtained without charge at the SEC's internet site at http://www.sec.gov, or by directing a request in writing to Science Applications International Corporation, 10260 Campus Point Drive, M/S F-3, San Diego, California 92121, Attention: General Counsel or by email to SECfilings at saic.com. From saic at vision.moundalexis.com Thu Sep 1 18:49:46 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 1 Sep 2005 14:49:46 -0400 (EDT) Subject: [saic] SAIC files with SEC for $1.73 billion IPO Message-ID: <20050901144836.C673-100000@vision.moundalexis.com> 1 September 2005 ; Reuters SAIC files with SEC for $1.73 billion IPO http://today.reuters.com/investing/financeArticle.aspx?type=newIssuesNews&storyID=2005-09-01T115242Z_01_N01345408_RTRIDST_0_TECH-SAIC-IPO-UPDATE-1.XML --- WASHINGTON, Sept 1 (Reuters) - SAIC Inc., which provides scientific, engineering, systems integration and technical services to the U.S. military and government agencies, filed with regulators on Thursday to raise up to $1.73 billion in an initial public offering of common stock. The San Diego, California-based company said in a preliminary prospectus filed with the U.S. Securities and Exchange Commission that Morgan Stanley and Bear Stearns & Co. are underwriting the offering. The filing did not reveal how many shares the company plans to sell or at what prices, as those details are expected to be in future filings. SAIC, which focuses on solving complex technical issues in the areas of national security, intelligence and homeland defense, said in the filing that it has seen increasing demand for its services because of the global war on terror and the transformation of the U.S. military. For the three months ended April 30, the company earned $585 million on $1.85 billion in revenues. For the year-earlier period, the company earned $89 million on $1.71 billion in revenues. The U.S. government is SAIC's largest company, representing 86 percent of it total consolidated revenues in fiscal 2005. SAIC said it intends to use all of substantially all of the net proceeds from the offering to pay a special dividend to its class A preferred stockholders. The company said it will apply to list its stock on the New York Stock Exchange under the symbol "SAI" (SAI.N). From saic at vision.moundalexis.com Thu Sep 1 18:50:47 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 1 Sep 2005 14:50:47 -0400 (EDT) Subject: [saic] SAIC Inc Files IPO For Up To $1.73 Billion In Common Stock Message-ID: <20050901144947.B673-100000@vision.moundalexis.com> 1 September 2005 ; The Business Online SAIC Inc Files IPO For Up To $1.73 Billion In Common Stock http://www.thebusinessonline.com/DJStory.aspx?DJStoryID=20050901DN007331 --- WASHINGTON -(Dow Jones)- SAIC Inc. filed an initial public offering Thursday to sell up to $1.73 billion in common stock, according to a filing with the Securities and Exchange Commission. Details about the number of shares offered and estimated price range for the IPO weren't disclosed in Thursday's filing. The company said it will the proceeds to pay a special dividend to holders of the company's Class A preferred stock. SAIC said the principal purpose of the IPO is to better enable the company to use its cash and cash flows from operations to fund organic growth and growth through acquisitions, as well as to provide it with publicly traded stock that can be used for future acquisitions. Morgan Stanley and Bear, Stearns & Co. were listed as underwriters for the offering. The company expects the IPO to commence in early 2006. SAIC, based in San Diego, is a provider of scientific, engineering, systems integration and technical services and solutions to all branches of the U.S. military, agencies of the Defense Department, the intelligence community and the Department of Homeland Security and other civil agencies. For the three months ended April 30, SAIC reported net income of $585 million, up from $89 million in the 2004 three-month period. For the year ended Jan. 31, SAIC reported net income of $409 million, up from $351 million in 2004. The company said it plans to list its common stock on the New York Stock Exchange under the symbol SAI. -By Brian Coyle, Dow Jones Newswires; 202-862-3545 From saic at vision.moundalexis.com Thu Sep 1 18:58:24 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 1 Sep 2005 14:58:24 -0400 (EDT) Subject: [saic] SAIC announces first public stock offering Message-ID: <20050901145659.B673-100000@vision.moundalexis.com> 1 September 2005 ; San Digeo Union-Tribune SAIC announces first public stock offering http://www.signonsandiego.com/news/business/20050901-0937-bn01saic.html --- By Bruce V. Bigelow UNION-TRIBUNE SAN DIEGO - San Diego-based SAIC, a $7.2 billion conglomerate founded 36 years ago by a group of nuclear scientists, notified government regulators today it plans to sell stock through an initial public offering. The number of shares to be offered and the price range of the proposed offering have not yet been determined. SAIC expects the offering, or IPO, will take place early next year. The move represents a fundamental reorganization of the capital structure of SAIC, which has operated as an employee-owned company since it was founded in La Jolla by J. Robert Beyster, who retired as chairman in 2005. With roughly 42,000 employees, the company also known as Science Applications International Corp. ranks as one of the nation's largest employee-owned companies. The U.S. government is SAIC's largest customer, representing 86 percent of its total consolidated revenues in fiscal 2005. The decision to turn SAIC into a public company was led by Ken Dahlberg, who replaced Beyster as chief executive in 2004 and was named chairman last year. SAIC said that substantially all of the proceeds from its IPO will be used to pay a special dividend to the company's existing shareholders, that is, its employee owners. The company explained that the chief purpose of the IPO is to better enable SAIC to use its cash to make acquisitions, to fund growth and to provide the company with publicly traded stock to make future acquisitions. It also would end a substantial drain on the cash the company has to pay when its employee owners decide to sell their shares. Over the past five years, SAIC has used more than $2.5 billion to buy shares that employees wanted to sell. From saic at vision.moundalexis.com Thu Sep 1 19:04:50 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 1 Sep 2005 15:04:50 -0400 (EDT) Subject: [saic] Who Killed the Virtual Case File? Message-ID: <20050901145834.O673-100000@vision.moundalexis.com> 1 September 2005 ; IEEE Spectrum Who Killed the Virtual Case File? http://www.spectrum.ieee.org/WEBONLY/publicfeature/sep05/0905fbi.html --- How the FBI blew more than $100 million on case-management software it will never use By Harry Goldstein In the early 1990s, Russian mobsters partnered with Italian Mafia families in Newark, N.J., to skim millions of dollars in federal and New Jersey state gasoline and diesel taxes. Special Agent Larry Depew set up an undercover sting operation under the direction of Robert J. Chiaradio, a supervisor at the Federal Bureau of Investigation's Washington, D.C., headquarters. Depew collected reams of evidence from wiretaps, interviews, and financial transactions over the course of two and a half years. Unfortunately, the FBI couldn't provide him with a database program that would help organize the information, so Depew wrote one himself. He used it to trace relationships between telephone calls, meetings, surveillance, and interviews, but he could not import information from other investigations that might shed light on his own. So it wasn't until Depew mentioned the name of a suspect to a colleague that he obtained a briefcase that his friend had been holding since 1989. "When I opened it up, it was a treasure trove of information about who's involved in the conspiracy, including the Gambino family, the Genovese family, and the Russian components. It listed percentages of who got what, when people were supposed to pay, the number of gallons. It became a central piece of evidence," Depew recalled during an interview at the FBI's New Jersey Regional Computer Forensic Laboratory, in Hamilton, where he is the director. "Had I not just picked up the phone and called that agent, I never would have gotten it." A decade later, Depew's need to share information combined with his do-it-yourself database skills and connection to his old supervisor, Chiaradio, would land him a job managing his first IT project.the FBI's Virtual Case File. Depew's appointment to the FBI's VCF team was an auspicious start to what would become the most highly publicized software failure in history. The VCF was supposed to automate the FBI's paper-based work environment, allow agents and intelligence analysts to share vital investigative information, and replace the obsolete Automated Case Support (ACS) system. Instead, the FBI claims, the VCF's contractor, Science Applications International Corp. (SAIC), in San Diego, delivered 700 000 lines of code so bug-ridden and functionally off target that this past April, the bureau had to scrap the US $170 million project, including $105 million worth of unusable code. However, various government and independent reports show that the FBI.lacking IT management and technical expertise.shares the blame for the project's failure. In a devastating 81-page audit, released in 2005, Glenn A. Fine, the U.S. Department of Justice's inspector general, described eight factors that contributed to the VCF's failure. Among them: poorly defined and slowly evolving design requirements; overly ambitious schedules; and the lack of a plan to guide hardware purchases, network deployments, and software development for the bureau. Fine concluded that four years after terrorists crashed jetliners into the World Trade Center and the Pentagon, the FBI, which had been criticized for not "connecting the dots" in time to prevent the attacks, still did not have the software necessary to connect any new dots that might come along. And won't for years to come. "The archaic Automated Case Support system.which some agents have avoided using.is cumbersome, inefficient, and limited in its capabilities, and does not manage, link, research, analyze, and share information as effectively or timely as needed," Fine wrote. "[T]he continued delays in developing the VCF affect the FBI's ability to carry out its critical missions." This past May, a month after it officially ended the VCF project, the FBI announced that it would buy off-the-shelf software at an undisclosed cost to be deployed in phases over the next four years. Until those systems are up and running, however, the FBI will rely on essentially the same combination of paper records and antiquated software that the failed VCF project was supposed to replace. The only recent addition has been a new "investigative data warehouse" that combines several of the FBI's crime and evidence databases into one. It was completed as the VCF started its final slide into oblivion. In addition, the FBI recently digitized millions of its paper documents and made them available to agents. As the FBI gears up to spend hundreds of millions more on software over the next several years, questions persist as to how exactly the VCF went so terribly wrong and whether a debacle of even bigger proportions looms on the horizon. Despite high-profile Congressional hearings, hundreds of pages of reports churned out by oversight bodies, and countless anguished articles in the trade press and mainstream media, the inner workings of the project and the major players have remained largely invisible. Now, detailed interviews with people directly involved with the VCF paint a picture of an enterprise IT project that fell into the most basic traps of software development, from poor planning to bad communication. Lost amid the recriminations was an early warning from one member of the development team that questioned the FBI's technical expertise, SAIC's management practices, and the competence of both organizations. Matthew Patton, a security expert working for SAIC, aired his objections to his supervisor in the fall of 2002. He then posted his concerns to a Web discussion board just before SAIC and the FBI agreed on a deeply flawed 800-page set of system requirements that doomed the project before a line of code was written. His reward: a visit from two FBI agents concerned that he had disclosed national security secrets on the Internet. To understand why the VCF was so important, you've got to understand the FBI. And to understand the FBI, you've got to understand its organization and its agents. The bureau, headquartered in the J. Edgar Hoover Building in Washington, D. C., currently has 23 divisions, including counterintelligence, criminal investigation, and cybercrime. The divisions fall under the control of five executive assistant directors responsible for intelligence, counterterrorism and counterintelligence, criminal investigations, law enforcement services (such as labs and training), and administration. Until last year, each division had its own IT budget and systems. And because divisions had the freedom and money to develop their own software, the FBI now has 40 to 50 different investigative databases and applications, many duplicating the functions and information found in others. Last year, in an effort to centralize IT operations and eliminate needless redundancies, the FBI's chief information officer, who reports to the director, took charge of all its IT budgets and systems. The bureau's 12 400 agents work out of 56 field offices and 400 satellite.or resident agency.offices, as well as 51 Legal Attach offices scattered across the globe in U.S. embassies and consulates. A field agent works as part of a squad; each squad has a supervisor, who reports to the assistant special agent in charge, who in turn reports to the special agent in charge of the field office. Agents investigate everything from counterterrorism leads to bankruptcy fraud, online child pornography rings to corrupt public officials, art thefts to kidnappings. They interview witnesses, develop informants, conduct surveillance, hunt for clues, and collaborate with local law enforcement to find and arrest criminals. Agents document every step and methodically build case files. They spend a tremendous amount of time processing paperwork, faxing and FedEx-ing standardized memo and requisition forms through the approval chain.up to the squad supervisor and eventually to the special agent in charge. This system of forms and approvals stretches back to the 1920s, when J. Edgar Hoover, director from 1924 to 1972, standardized all of the bureau's investigative reports on forms, so an agent could walk into any FBI office and find the same system. Today, the bureau has hundreds of standard forms. To record contact with an informant, fill out Form FD-209. When getting married or divorced, complete Form FD-292. To report information gleaned from an interview that may later become testimony, use Form FD-302. To conduct a wiretap, file Form FD-472. To wire an informant with a body recorder and transmitter, submit Form FD-473. After traveling overseas for business or pleasure, report the experience on Form FD-772. Plan an arrest with Form FD-888. Open a drug investigation with Form FD-920. Forms related to investigations, such as those used to report interviews with witnesses, wend their way up and down the approval chain. Once the appropriate supervisors sign off on the form, it goes back to the agent, who gives it to a clerk to enter into the ACS system. From there, the paper form is filed as part of the official record of the case. Sometimes, though the FBI officially denies this, an agent doesn't enter all case notes into ACS. Some agents think, "If I don't trust ACS because I don't think it will protect my informant or my asset, I'm not putting the data in there," said Depew, an avid user of ACS who touted the electronic system to his fellow agents as safer than a paper filing system. FBI spokesperson Megan Baroska emphasized in an e-mail that Depew did not speak for the bureau in this instance. "The FBI policy is for all official records to be entered into ACS. Additionally, 'notes' per say [sic] are not entered into ACS; they are first memorialized in a 302 form, and that form is entered into ACS. As for the 'notes,' they are kept in storage as a paper file because they legally have to be discoverable." When asked during an interview at FBI headquarters if agents felt uncomfortable about exchanging a paper-based system for an electronic one, the FBI's current CIO, Zalmai Azmi, didn't think agents would find it hard to get into the habit of processing forms electronically. But introducing an electronic record-keeping system does raise legal policy questions in their minds. "What is a record and what is available under discovery? In a paper world, you do your job, you do your notes, and if you don't like it, it goes somewhere," Azmi said. "In an electronic world, nothing really is destroyed; it's always somewhere." DESPITE AGENTS' RELUCTANCE to embrace the digital age, in 2000 the bureau finally began to deal with its outdated IT systems. At the time, under the direction of Louis J. Freeh, the bureau had neither a CIO nor documentation detailing its IT systems, much less a plan for revamping them. The task of creating such a plan fell to former IBM executive Bob E. Dies, who became assistant director in charge of the FBI Information Resources Division on 17 July 2000. He was the first of five officials who, over the next four years, would struggle to lead the FBI's sprawling and antiquated information systems and get the VCF project under way. According to a 2002 report from the DOJ's Office of the Inspector General, when Dies arrived, 13 000 computers could not run modern software. Most of the 400 resident agency offices were connected to the FBI intranet with links about the speed of a 56-kilobit-per-second modem. Many of the bureau's network components were no longer manufactured or supported. And agents couldn't e-mail U.S. Attorney offices, federal agencies, local law enforcement, or each other; instead, they typically faxed case-related information. In September 2000, Congress approved $379.8 million over three years for what was then called the FBI Information Technology Upgrade Project. Eventually divided into three parts, the program became known as Trilogy. The Information Presentation Component would provide all 56 FBI field offices, some 22 000 agents and support staff, with new Dell Pentium PCs running Microsoft Office, as well as new scanners, printers, and servers. The Transportation Network Component would provide secure local area and wide area networks, allowing agents to share information with their supervisors and each other. But the User Applications Component, which would ultimately become the VCF, staked out the most ambitious goals. First, it was to make the five most heavily used investigative applications.the Automated Case Support system, IntelPlus, the Criminal Law Enforcement Application, the Integrated Intelligence Information Application, and the Telephone Application.accessible via a point-and-click Web interface. Next, it would rebuild the FBI's intranet. Finally, it was supposed to identify a way to replace the FBI's 40-odd investigative software applications, including ACS. Based on the 1970s-era database Adabas and written in a programming language called Natural, both from Software AG, Darmstadt, Germany, the Automated Case Support system, which debuted in 1995, was antiquated even as it was deployed.and it is still being used today. Originally, agents and clerks accessed the program via vintage IBM 3270 green-screen terminals connected to a mainframe over dedicated lines. Eventually, the 3270 terminals were emulated on standard desktop PCs. By navigating complicated menus using function keys and keystroke commands, agents could do basic Boolean and keyword searches for things like an informant's name or the dates of a wiretap surveillance, information related to cases they were working. But according to Depew, only the most dedicated, computer-savvy agents had the skills and patience to learn the arcane system, let alone exploit it to its full potential. "Nobody really understood why we would even use ACS other than as an index," said Depew. A notable exception: Robert Hanssen, the notorious FBI traitor, used the system to find documents his Russian handlers might find useful, as well as to check to see if anyone at the FBI was onto him [see "Mission Impossible," IEEE Spectrum, April 2003]. In May and June 2001, the bureau awarded Trilogy contracts to two major U.S. government contractors: DynCorp, of Reston, Va., for the hardware and network projects, and to SAIC for software. All three Trilogy components were to be delivered by the middle of 2004. Instead of paying a fixed price for the hardware, networks, and software, the FBI used cost-plus-award fee contracts. These would pay the cost of all labor and materials plus additional money if the contractor managed costs commendably. Crucially, if the scope of the project expanded or if the contractor incurred other unforeseen costs, the FBI would have to pick up those, too. ON 4 SEPTEMBER 2001, Robert S. Mueller III became the tenth director in FBI history. One week later, terrorists pulverized New York City's World Trade Center and a piece of the Pentagon. The inability of FBI agents to share the most basic information about Al Qaeda's U.S. activities blew up into a front-page scandal. Within days, the FBI's pathetic technology infrastructure went from being so much arcane trivia to a subject of daily fulmination by politicians and newspaper columnists. As The 9/11 Commission Report would conclude in 2004, "the FBI's information systems were woefully inadequate. The FBI lacked the ability to know what it knew; there was no effective mechanism for capturing or sharing its institutional knowledge." In the face of intense public and congressional pressure, Mueller shifted Trilogy into high gear. In October, he pulled Chiaradio up from his position as special agent in charge of the field office in Tampa, Fla., to Hoover Building headquarters in Washington, to advise him on the all-important software component of Trilogy. An accountant by training, Chiaradio would become the FBI's executive assistant director for administration in December 2001. After discussions with Mueller, Chiaradio determined that the FBI's basic plan for the software portion of Trilogy.slapping a Web interface onto the ACS system and the four other programs.wasn't going to make agents more effective. So to help him figure out what would work, he brought in Depew. [See timeline, "Countdown to Catastrophe."] Partial to dark suits and wraparound shades, Depew kept his gray hair closely cropped and a pistol holstered on his belt. He was a G-man's G-man. And he embraced technology with an almost evangelical zeal. When he was working the New Jersey fuel oil case in the early 1990s, Depew not only coded his own case management database using the FoxPro program, but he put it on floppy disks and gave it to any agent who asked for a copy. Depew joined a team of seven that assessed the Web interface SAIC was designing for the ACS system. When completed, the interface would let agents point and click their way through the tedious process of filling out official forms, but not much else. Recognizing the limitations of the interface and ACS, Chiaradio and Depew met with Dies. They convinced him, and later the director himself, that the bureau needed an entirely new database, graphical user interface, and applications, which would let agents search across various investigations to find relationships to their own cases. The new case management system would host millions of records containing information on everything from witnesses, suspects, and informants to evidence such as documents, photos, and audio recordings. To address concerns being raised by intelligence experts and lawmakers in the wake of 9/11, these records would be accessible to both the FBI's agents and its intelligence analysts. Chiaradio dubbed the new system the Virtual Case File. Dies wanted to provide agents with this software as fast as possible. In Depew's view that meant "shooting from the hip." This cavalier approach to software development would prove fatal to the VCF. Today, many organizations rely on a blueprint.known in IT parlance as an enterprise architecture.to guide hardware and software investment decisions. This blueprint describes at a high level an organization's mission and operations, how it organizes and uses technology to accomplish its tasks, and how the IT system is structured and designed to achieve those objectives. Besides describing how an organization operates currently, the enterprise architecture also states how it wants to operate in the future, and includes a road map.a transition plan.for getting there. The problem was, the FBI didn't have such a blueprint, as numerous reports from the Government Accountability Office, the DOJ's inspector general, and the National Research Council subsequently pointed out. Without it, the bureau could not, as a 2004 report from the NRC stated, "make coherent or consistent operational or technical decisions" about linking databases, creating policies and methods for sharing data, and making tradeoffs between information access and security. With no detailed description of the FBI's processes and IT infrastructure as a guideline, Depew said that his team of agents began "to feel our way in the dark," to characterize investigative processes such as witness interviews and surveillance operations and map them to the FBI's software and databases. Over a six-week period in the fall of 2001, Depew's group defined how agents worked, how they gathered information, and how that information was fed into ACS. Working with engineers from SAIC, they drew up diagrams and flowcharts of how the case management system operated then and how they wanted the new case management system, the VCF, to operate in the future. Mueller himself attended one of these meetings to tell the agents to design a system that would work best for them and not to feel constrained by 50-year-old business rules. Depew's team also called in people from across the FBI: a dozen in the first few weeks; 40 by the end of November. These "subject matter experts" explained how their divisions or units functioned internally and with the rest of the bureau. In December 2001, the FBI asked SAIC to stop building a Web front end for the old programs. (Later, FBI computer specialists would create a Web interface as a stopgap, which is still used by agents today, until the VCF was delivered.) Instead, SAIC was asked to devise a new application, database, and graphical user interface to completely replace ACS. To formally define what users needed the VCF to do for them, SAIC embarked on a series of Joint Application Development (JAD) sessions. In these meetings, Depew's team of agents and experts got together with a group of SAIC engineers to hash out what functions the VCF would perform. Ideas captured in these sessions formed the basis of the requirements document that guided SAIC's application designers and programmers. In January 2002, the FBI requested an additional $70 million to accelerate Trilogy; Congress went further, approving $78 million. DynCorp committed to delivering its two components by July 2002. SAIC agreed to deliver the initial version of the VCF in December 2003 instead of June 2004. SAIC and the FBI were now committed to creating an entirely new case management system in 22 months, which would replace ACS in one fell swoop, using a risky maneuver known in the IT business as a flash cutover. Basically, people would log off from ACS on Friday afternoon and log on to the new system on Monday morning. Once the cutover happened, there was no going back, even if it turned out that the VCF didn't work. And there was no plan B. But while the Trilogy contracts were changed to reflect the aggressive new deadlines, neither the original software contract nor the modified one specified any formal criteria for the FBI to use to accept or reject the finished VCF software, as the Inspector General reported earlier this year. Furthermore, those contracts specified no formal project schedules at all, let alone milestones that SAIC and DynCorp were contractually obligated to meet on the way to final delivery. In reaction to the new deadline, SAIC broke its VCF development group into eight teams, working in parallel on different functional pieces of the program, in order to finish the job faster. But the eight threads would later prove too difficult for SAIC to combine into a single system. Nevertheless, in an interview at SAIC's McLean, Va., office complex, Rick Reynolds, vice president and operations manager for SAIC, defended the decision to change tactics. "People forget the urgency that we were under and our customer was under. And we were right beside them," he declared. "We were in the foxhole together." AT HOOVER BUILDING HEADQUARTERS, Depew's team was hard at work describing the FBI's investigative and administrative processes: how agents built case files, how case files were used, and what additional functions they wanted the Virtual Case File to perform. While Depew and his team prepared to communicate the processes that define the FBI to SAIC engineers, Mueller, Dies, and Chiaradio recruited a seasoned IT program manager. Before coming to the FBI, C.Z. ("Sherry") Higgins, a 29-year veteran of AT&T and Lucent, was running the help desk at the Technology Command and Control Center for the 2002 Winter Olympics in Salt Lake City. As project management executive for the Office of the Director, Higgins was brought in to create the Office of Program Management. Higgins's new office would centralize IT management and oversee, develop, and deploy the bureau's most expensive, complex, and risky projects. But her most important assignment was to manage Trilogy. Higgins, who left the FBI in June 2004, lives in a Cape Codstyle house overlooking a pond deep in the exurbs of Atlanta, in her native Georgia. During an interview in her living room, three fat scrapbooks of her two and a half years at the FBI peeked out from beneath a coffee table covered with candles. Her first move when she came on board in March 2002, she explained, was to appoint Depew, who had no IT project management experience, the VCF project manager. "I'm totally accountable for that," she acknowledged. "We talked a long time about could he play the role of project manager and still be customer advocate. And we felt like he could." Higgins and Depew had developed a rapport quickly. Just a couple of weeks after she started work at FBI headquarters, Depew invited her to the Thursday "board meeting".pizza and beer with his team at a neighborhood joint. As the group started walking to the restaurant, Higgins, surrounded by agents in dark suits and sunglasses, asked them to stop so she could savor the moment. "I have arrived," she announced. "I'm on Pennsylvania Avenue with men in black!" The men in black had been specifying the VCF's requirements with SAIC engineers for several weeks when Higgins shifted Depew into the driver's seat. By this point, Depew, the former Trenton, N.J.based bureau man, had rented an apartment in Washington, where he would live, separated from his family, for the next three years. He was responsible for a team of seven agents, each of whom acted as an advocate for a group of subject matter experts in the periodic JAD meetings with SAIC engineers that the team was attending. Over a six-month period, the JAD team met in two-week sessions, laying the unstable foundation for the VCF. Every day of each session, engineers from SAIC would sit with the agents and experts to chart existing and future processes on whiteboards. According to Higgins, sometimes agents would propose Web-page designs for particular portions of the user interface. So that the crowded meetings would stay orderly, people were assigned speaker and observer cards. Depew acted as a facilitator, running the meetings and telling people whether something they wanted was or was not within the scope of the project. "There were times when SAIC and I disagreed on what's in the scope," Depew recalled. Sometimes they would agree to "push that off to other people to decide whether that's in the scope of the current contract." After a two-week JAD session finished, a two-week feedback cycle would begin. SAIC provided Depew's team with information gleaned from the session, including needs statements, flow charts, and meeting minutes. Depew's team reviewed these materials and gave SAIC feedback while simultaneously preparing subject matter experts for the next round of JAD sessions, which immediately followed the feedback cycle. There were no breaks. "I worked seven days a week, 14 hours a day," Depew recalled. "Six months of JAD was hell." MEANWHILE, HIGGINS was finding it rough going herself. She asked her colleagues at the FBI and managers at DynCorp, which was working on the hardware (computers and network) portions of Trilogy, for copies of the two project schedules. She was told the delivery dates instead. In contrast, SAIC, with its programmers pecking away at its secure data center in Vienna, Va., always had a detailed schedule posted prominently in the "war room" there, which Higgins's team would review with SAIC periodically, she said. In mid-April 2002, Higgins gave DynCorp a week to deliver a detailed schedule. After she got it, she pulled the project teams from the FBI and DynCorp into a meeting and went through the document. Shortly after that, Higgins broke the news to the director: the computers and networks would not be delivered in July of that year as had been scheduled. She told Mueller that DynCorp didn't stand a chance of hitting the delivery target, because it didn't have a detailed schedule that mapped out how it would deploy, integrate, and test the new computers and networks. Mueller blamed himself for the delay, because he'd asked for an accelerated schedule. But Higgins blamed Mueller's staff for not being straight with him about his agency's ability to deliver what he wanted. "Did somebody come to you and say, okay, Mr. Director, sir, you can have it sooner, but it's going to cost you this much more money or you're going to have to do without something?" Higgins remembered asking Mueller. "And he said, 'No, nobody ever told me that.' And I said, 'Well, lesson No. 1: faster, cheaper, better. Pick two, but you can't have all three.'" With costs escalating and schedules slipping, Mueller had just one choice left: better. And he didn't even get that with the VCF. But in the summer of 2002, it certainly seemed as if the Virtual Case File would be a vast improvement over the Automated Case Support system. The JAD sessions had produced an exhaustively detailed requirements document. This plan for a case-management system would combine the ACS with two other systems: the Telephone Application, the bureau's central repository of telephone records related to investigations, and parts of the Criminal Law Enforcement Application, a repository for investigative data about people, organizations, locations, vehicles, and communications. The VCF system would accept scanned documents, photographs, and other electronic media.to simplify evidence tracking. People with the proper credentials would be able to access that evidence from any FBI office. The way work flowed through the bureau would change dramatically, too. Instead of filling out a form either by hand or in a word-processing program and then faxing or FedEx-ing the paper form to a supervisor, an agent would fill out a form online and, with a click of the mouse, route it to the supervisor. The document would pop up in a supervisor's in-box, and the agent could track it to see if it had been approved. And perhaps most important, information collected within a case file would eventually be available to software applications that would compare data among cases to search for correlations.to connect the proverbial dots. In a Senate hearing in July 2002, Higgins impressed lawmakers, including Senator Charles E. Schumer (D-N.Y.)."That Southern charm gets me every time," an apparently smitten Schumer gushed.with a PowerPoint presentation about the VCF. Higgins contrasted the 12 different screens agents had to navigate to upload one form into ACS with the single screen they would use to perform a similar task in the new system. Higgins told the senators that the initial version of a user-friendly, secure system would be delivered by December 2003. The senators seemed satisfied that the VCF would address their gravest concerns about the FBI's IT systems by giving agents and intelligence analysts the ability to correlate and share the data needed to prevent future terrorist attacks. Higgins had reassured the senators.and scored some choice memorabilia: a Senate coaster and her nameplate for her scrapbook. IN THE SUMMER OF 2002, turmoil roiled the FBI's IT management. In May, Bob Dies, the CIO who had launched Trilogy, left the bureau, turning over his duties to Mark Tanner, who held the position of acting CIO for just three months, until July 2002. He stepped aside for Darwin John, former CIO for the Mormon Church. Chiaradio, who declined to be interviewed for this article, left for a lucrative job in the private sector with BearingPoint Inc., a global consultancy in McLean, Va., and was replaced by W. Wilson Lowery Jr. Within a year, Lowery would replace John. At the same time, SAIC was staffing up. By August 2002, it had around 200 programmers on the job. It was still looking for help, particularly for its security team, which was reviewing design documents that described the VCF software's overall structure, algorithms, and user interface, along with the ways data would be defined and handled. Matthew Patton answered an ad on SAIC's Web site for security engineers. A 1995 Carnegie Mellon University graduate with a B.S. in information and decision systems, Patton had financed college through service as a cadet in the U.S. Air Force Reserve Officers' Training Corps. After college, he spent his four-year tour of military duty at the Pentagon in the Office of the Secretary of Defense. There he designed and helped program the database and security components for a Web-based application used to plan the Department of Defense's $400 billion budget. Patton's still-valid top-secret DOD clearance qualified him to start work as part of the VCF security team. His clearance was provisional.the FBI would have to conduct its own background investigation (as it does for all contract employees) and grant him FBI top-secret clearance. So he was not allowed to see the data the FBI was sending to SAIC, which included information on all of the cases the bureau had digitized to that point, from the 1995 Oklahoma City bombing to 9/11. Instead, he spent a lot of time going through the requirements in his cubicle, segregated from his five colleagues and his boss. He left SAIC in November 2002, after only three months on the job. Patton regards himself as a straight shooter. "I'm not much of a culture guy," he admits. "I say my piece, and if they don't like it, that's too damn bad." But he quickly realized that SAIC didn't hire him for his opinions. When he began expressing concerns that security was not a top priority on the project, even in the post-Hanssen era, he was told not to rock the boat. "My refrain to my boss was, 'Why aren't we more involved? We should be in the thick of things.' But it was more that we weren't really invited and [SAIC teams working on the VCF] aren't actively seeking our involvement," Patton said in an interview in Chicago earlier this year. "So his take on it was basically, once the designers come up with something, we say good, bad, or indifferent, and if it's not too bad, then we let it go." Patton recounted his experience purely from memory. Unlike Higgins, who meticulously inserted internal FBI e-mails about Trilogy into her scrapbooks alongside photos of her kids visiting her in D.C., Patton said that he discarded the notebook he kept while he was at SAIC. The only existing artifact of his experience is a copy of the 26 October 2002 Internet posting that essentially got him kicked off the VCF project. The posting, archived at http://archives.neohapsis.com/archives/isn/2002-q4/0090.html, expressed specific security-related concerns and depicts SAIC as giving a clueless FBI exactly what it was asking for, no matter how impractical. Patton's descriptions of the 800-plus pages of requirements show the project careening off the rails right from the beginning. For starters, this bloated document violated the first rule of software planning: keep it simple. According to experts, a requirements document should describe at a high level what functions the program should perform. The developers then decide how those functions should be implemented. Requirements documents tend to consist of direct, general phrases: "The user shall be able to search the database by keyword," for instance. "In a requirements document, you want to dictate the whats, not the hows," Patton said. "We need an e-mail system that can do x, and there's 12 bullets. Instead, we had things like 'there will be a page with a button that says e-mail on it.' We want our button here on the page or we want it that color. We want a logo on the front page that looks like x. We want certain things on the left-hand side of the page." He shook his head. "They were trying to design the system layout and then the whole application logic before they had actually even figured out what they wanted the system to do." Recalling the Web pages the agents would bring into the JAD sessions to demonstrate how they wanted the VCF to look, Higgins blamed both SAIC and the agents for creating the overstuffed requirements document. "The customer should be saying, 'This is what we need.' And the contractor should be saying, 'Here's how we're going to deliver it.' And those lines were never clear," Higgins said. "The culture within the FBI was, 'We're going to tell you how to do it.'" Zalmai Azmi, the FBI's current CIO, has been in that job since December 2003. Originally brought on as a consultant to Mueller that November, Azmi had worked with the director when Mueller was U.S. Attorney in San Francisco and Azmi was CIO of the Executive Office for United States Attorneys. Azmi saw the Virtual Case File through its final death throes. In an hour-long interview in his office at the Hoover Building, Azmi also traced the VCF's demise to flawed requirements and emphasized that his office is taking pains to make sure it doesn't happen again. Azmi insisted that SAIC should have clarified user needs in the JAD sessions rather than working with requirements that were not "clear, precise, and complete." On the other hand, the FBI's lax project management didn't stop the requirements from snowballing. "There was no discipline to say enough is enough," Azmi said. The overly specific nature of the requirements focused developers on their tiny piece of the puzzle. They were writing code, Patton said, with no idea of how their piece fit with the others. This presaged the integration problems that would later plague the project. "The whole working procedure [SAIC project managers] had was very much, 'We'll give you your marching orders and you go,' without too much consideration of how in the world do you glue this sucker back together when all these different divergent pieces come back," Patton said. Patton also claimed that SAIC was determined to write much of the VCF from scratch. This included an e-mail-like system that at least one team, to his knowledge, was writing, even though the FBI was already using an off-the-shelf software package, Novell's GroupWise, for e-mail. "Every time you write a line of code, you introduce bugs," noted Patton. "And they had a bunch of people slinging code. I'm not saying that the guys were technically incompetent. But bugs happen, and not all programmers are great." After several weeks of asking his boss questions and being repeatedly told that he needed to calm down and be "a team player," Patton posted a message to InfoSec News, an e-mail forum which distributes information security news articles and comments from its subscribers. Without naming the VCF specifically, he mentioned that he was working on Trilogy's case management system and complained that no one was taking security issues seriously. He pointed to some security measures the FBI already had in place that might make the case management system more secure. These included PKI, or public-key infrastructure, a system of digital certificates and independent authorities that verify and authenticate the validity of each party involved in an Internet transaction. He also mentioned Bedford, Mass.based RSA Security Inc.'s SecurID, which uses a combination of passwords and physical authenticators that function like ATM cards to protect various kinds of electronic transactions. He asked for help in getting in touch "with some heavy-hitting clued-in people over at the FBI," who would "demand some real accountability from the contractors involved. "They [the FBI] don't know enough to even comment on a bad idea, let alone tear it apart," he went on. "As a two-bit journeyman I can't seem to get anyone to pay the slightest attention, nor do they apparently (want to) understand just how flawed the whole design is from the get-go." He ended by asking, "Shouldn't somebody care?" Somebody did. Sherry Higgins saw the message and promptly reported Patton to the FBI's Security Division. "He had posted information that was not true and was sensitive," she told me in an e-mail. "He was pretty much a disgruntled employee. Instead of bringing his concerns up the ladder, he chose to post them on the Internet. He blasted the team both at SAIC and the FBI." "Be careful of him," she warned. "In hindsite [sic], I guess it looks like he is saying now, 'I told you so.' However, at the time, he was disruptive instead of constructive." In response to Higgins's concerns, FBI agents questioned Patton about whether he had disclosed national security information and breached his top-secret DOD clearance. "There was nothing in there that was sensitive material," Patton maintained. "It was just not flattering of the FBI and the project itself." After the interview, the FBI decided not to grant Patton top-secret clearance, making it impossible for him to continue working on the VCF. SAIC did invite him to find another position within the company, but it didn't have anything for him in Chicago, to which he was relocating for personal reasons. So at the end of November 2002, Patton left SAIC and the VCF. That same month the FBI and SAIC agreed to a basic set of requirements, the baseline that SAIC would start from to build the VCF. IN DECEMBER 2002, Higgins asked lawmakers to invest an additional $137.9 million in Trilogy and the inspector general issued a report on the FBI's management of information technology that included a case study of the program. It found that "the lack of critical IT investment management processes for Trilogy contributed to missed milestones and led to uncertainties about cost, schedule, and technical goals." Apparently unperturbed by the findings, Congress approved another $123.2 million for a project whose total cost had now ballooned to $581 million. Meanwhile, SAIC programmers were cranking out code. The company had settled on a spiral development methodology, an iterative approach to writing software. Basically, SAIC programmers would write and compile a block of code that performed a particular function, then run it to show Depew's agents what it would do. The agents.some of whom were working at SAIC's data center in Vienna, Va..gave the programmers feedback, and the programmers tried to incorporate the suggested changes. If there was some dispute as to whether the change could or should be made, the agents sent an official request to the change control board, composed of SAIC engineers and FBI personnel, for review. It wasn't long before the change requests started rolling in.roughly 400 from December 2002 to December 2003, according to SAIC. "Once they saw the product of the code we wrote, then they would say, 'Oh, we've got to change this. That isn't what I meant,'" said SAIC's Reynolds. "And that's when we started logging change request after change request after change request." Reynolds added that SAIC's bid on the original contract, and each subsequently revised cost estimate, was based on there being "minimal, minor changes" to the program once a baseline set of requirements had been agreed on. Instead, SAIC engineers were like a construction crew working from a set of constantly changing blueprints. Some of the changes were cosmetic.move a button from one part of the screen to another, for instance. Others required the programmers to add a new function to a part of the program, such as the graphical user interface, common to all eight development threads. For example, according to SAIC engineers, after the eight teams had completed about 25 percent of the VCF, the FBI wanted a "page crumb" capability added to all the screens. Also known as "bread crumbs," a name inspired by the Hansel and Gretel fairy tale, this navigation device gives users a list of URLs identifying the path taken through the VCF to arrive at the current screen. This new capability not only added more complexity, the SAIC engineers said, but delayed development because completed threads had to be retrofitted with the new feature. Once SAIC engineers agreed on how the page crumbs would work, one of the development teams created a set of page-crumb-equipped screens for the other seven teams to use as a model. The design model and supporting documentation were updated, the teams made the change.and the schedule slipped again. When asked how SAIC programmers reacted to agents' change requests, Depew replied, "Let's just say that we gave them feedback on what they were developing, where it met the requirements and where it didn't. And there was a lot of inconsistency between their development teams." Higgins was aware that tensions were mounting inside the VCF project over the course of the winter and spring of 2003. Sometimes Depew's team had only two days to review a batch of code. Agents would pull all-nighters to get the evaluation finished, "and in the next iteration their comments wouldn't be taken into account," she said. Sometimes, she acknowledged, these evaluations would include changes to the requirements.functions that the agents had decided that they needed once they saw what they were going to get. Other times the FBI team would find bugs that needed to be fixed. In March 2003, Computer Sciences Corp., in El Segundo, Calif., which had acquired DynCorp that month, told Higgins that the final deployment of the computers and networks would be delayed until October. In August, October became December. And in October, December became April 2004. The problem wasn't the PCs, which had been trickling in since 2001, but changing the e-mail system from Novell's GroupWise to Microsoft Outlook and, according to the inspector general's 2005 audit, obtaining the components needed to connect the field offices to the wide area network. Higgins added that the delays were compounded by the FBI's own sloppy inventories of existing networks and its underestimation of how taxing the network traffic would be once all 22 000 users came online using their new PCs. While the FBI and SAIC waited for the networks to go live so they could test the VCF on a real system, changes and fixes continued to strangle the VCF in the crib. Many of the changes had to be to made by all eight of SAIC's development teams. Arnold Punaro, SAIC executive vice president and general manager, admitted in a posting on the company's Web site that in the rush to get the program finished by December, SAIC didn't ensure that all of its programmers were making the changes the same way. That inconsistency occasionally meant that different modules of the VCF handled data in different ways. Consequently, when one module needed to communicate with another, errors sometimes occurred. "This, however, did not compromise the system," according to Punaro. The real killers, he said, were "significant management turbulence" at the FBI, "the ever-shifting nature of the requirements," and the agents' "trial-and-error, 'We will know it when we see it' approach to development." Through the summer of 2003, frustration between the agents and the engineers mounted. To quell tensions and discuss design flaws the agents believed were creeping into the VCF, Depew's team asked for a sit-down, what one agent called the "emperor has no clothes" meeting. One Sunday in late September, the agents and the engineers gathered to hash out their differences. Higgins listened in by phone to the first part of the day-long meeting. "There was an awful lot of anger on both sides and a lot of finger-pointing," she recalled. "Nobody's hands were clean." Depew, on the other hand, characterized the meeting as a frank exchange of views. "There was never any animosity shown by my team to the SAIC team," Depew said. Also in September, the U.S. General Accounting Office (renamed the Government Accountability Office on 7 July 2004) released a report titled "FBI Needs an Enterprise Architecture to Guide Its Modernization Activities." The GAO warned that without a blueprint that provides, in essence, the mother of all requirements documents, the bureau was exposing its modernization efforts, including the VCF, to unnecessary risk. "I suspect what happened with the VCF is that in the rush to put in place a system, you think you got your requirements nailed, but you really don't," said GAO's Randolph C. Hite, who worked on the report. "It was a classic case of not getting the requirements sufficiently defined in terms of completeness and correctness from the beginning. And so it required a continuous redefinition of requirements that had a cascading effect on what had already been designed and produced." While stressing that there are no guarantees, Hite believes that "had there been an architecture, the likelihood of these requirements problems would have been vastly diminished." But the abundantly funded VCF juggernaut was already hurtling toward delivery. SAIC began testing the program in the fall of 2003, and according to Higgins, problems started cropping up, some of which the agents had warned SAIC about over the previous summer. SAIC officials complained to Higgins that Computer Sciences Corp. didn't have its hardware and network in place, so SAIC couldn't adequately test the VCF, crucial for a successful flash cutover. They informed her that they would deliver a version of the VCF to be in technical compliance with the terms of the contract and that the FBI should feel free to make changes to it afterward. "The feeling was, they knew that they weren't going to make it in December of '03," but they were not forthright about the fact, Higgins said. ON 13 DECEMBER 2003, SAIC delivered the VCF to the FBI, only to have it declared DOA. Under Azmi's direction, the FBI rejected SAIC's delivery of the VCF. The bureau found 17 "functional deficiencies" it wanted SAIC to fix before the system was deployed. As an April 2005 report from a U.S. House of Representatives committee pointed out, there were big deficiencies and small ones. One of the big ones was not providing the ability to search for individuals by specialty and job title. Among the small ones was a button on the graphical user interface that was labeled "State" that should have read "State/Province/Territory." SAIC argued that at least some of these deficiencies were changes in requirements. An arbitrator was called in. The arbitrator's findings, released on 12 March 2004, found fault with both SAIC and the FBI. Of the 59 issues and subissues derived from the original 17 deficiencies, the arbitrator found that 19 were requirements changes.the FBI's fault; the other 40 were SAIC's errors. While SAIC fixed bugs, Azmi, with the help of Depew's team, created investigation scenarios that would take different cases from opening to closing and tested them on the VCF. Those tests revealed an additional 400 deficiencies. "We have requirements that are not in the final product, yet we have capabilities in the final product that we don't have requirements for," Azmi said in an interview. On 24 March, days after the arbitrator's findings were released, Director Mueller testified to the Senate Committee on Appropriation's Subcommittee on Commerce, Justice, State, and the Judiciary that the VCF would be "on board".and presumably operational.by the summer of 2004. The director had scant reason to be so optimistic. True, Computer Sciences Corp. was then delivering the final pieces of equipment to the FBI. By April, 22 251 computer workstations, 3408 printers, 1463 scanners, 475 servers, and new local and wide area networks would all be up and running, 22 months later than the accelerated schedule called for. But Azmi and SAIC had yet to agree on the VCF's ultimate fate, much less when it would be deployed. And when SAIC finally offered to take one more year to make all the changes the FBI wanted at the cost of an additional $56 million, Azmi rejected the proposal. Azmi was promoted from interim to permanent CIO on 6 May 2004. Four days later, the Computer Science and Telecommunications Board of the National Research Council delivered a report on Trilogy that the FBI had commissioned. The "graybeards," as Mueller dubbed them, were led by James C. McGroddy, who had headed IBM Research from 1989 to 1995. The report made two major recommendations. The flash cutover that would start up the VCF and shut down ACS all at once must not happen, as a potential failure would be catastrophic for the bureau. And the FBI should create an enterprise architecture to guide the development of its IT systems. The same committee had made both of these recommendations in September 2002, and according to McGroddy, both suggestions had been ignored until Azmi took charge. Azmi invited the graybeards to talk with him, Mueller, Higgins, and a few other FBI officials on 20 May 2004. Azmi told the gathering that he had already contracted BearingPoint, where Robert Chiaradio was a managing director and lead advisor on homeland security, to construct the current and future versions of the enterprise architecture by September 2005. And he abandoned the flash cutover idea. In June, the FBI contracted an independent reviewer, Aerospace Corp., in El Segundo, Calif., to review the December 2003 delivery of the VCF to determine, among other things, whether the system requirements were correct and complete and to recommend what the FBI should do with the VCF. At the same time, Azmi asked SAIC to take the electronic workflow portion of the VCF, code that was in relatively good shape, and turn that into what was eventually called the Initial Operating Capability (IOC), at an additional fixed price to the FBI of $16.4 million. SAIC and the FBI project team had six months to deliver a software package that would be deployed to between 250 and 500 field personnel in the New Orleans field office, the Baton Rouge, La., resident agency, and a drug enforcement unit at the Hoover Building. The objectives for the new project were clear: test-drive the VCF's electronic workflow; see how people reacted to the graphical user interface; create a way to translate the output from the VCF forms, which was in the eXtensible Markup Language, into the ACS system; check out network performance; and develop a training program. The IOC was the perfect guinea pig for Azmi's rigorous approach to software development and project management, which he called the Life Cycle Management Directive. The project also needed different managers. On SAIC's side, Rick Reynolds assumed executive oversight on the project from Brice Zimmerman. Reynolds replaced VCF project manager Pat Boyle with Charlie Kanewske. (SAIC declined repeated requests to interview them.) Depew, like other FBI officials, had only good things to say about Kanewske. He had been Kanewske's project manager counterpart for a portion of the Investigative Data Warehouse project, the newest, shiniest tool at the disposal of FBI agents and intelligence analysts. Successfully deployed in January 2004, the warehouse translates and stores data from several FBI databases, including parts of ACS, into a common form and structure for analysis. But Depew would not be Kanewske's counterpart for the IOC project. He moved back to New Jersey, where he became director of the FBI's New Jersey Regional Computer Forensic Laboratory. When interviewed this past spring, he was overseeing the lab's daily operations and construction of a new wing. He was also anticipating retirement after 31 years of public service and thinking of pursuing job opportunities in the private sector. His final take on the VCF was to the point: "We wanted it really bad, and at the end it was really bad." As for Sherry Higgins, she went back home to Georgia before the IOC project launched. She now consults and teaches project management courses for the International Institute for Learning Inc., in New York City. "When it's not fun anymore, Sherry's not a happy girl," Higgins said of her mood just prior to her departure. "The writing was on the wall that IOC was going to be Zal's project. And I just felt like it would be better for me and for Zal for me to leave." Azmi handpicked his IOC project manager. He chose the bureau's gadget guru (think of "Q" from the James Bond movies).a man with 20 years of experience delivering surveillance technologies on tight schedules. At a meeting this past May at the Hoover Building, the IOC project manager, whom the bureau made available on condition of anonymity, let me read through an internal FBI report on the IOC and explained the development process in detail. He stressed that the IOC was never meant to be deployed to all 28 000 FBI employees but was intended to test Azmi's methodology. "We followed all of this [process], even in this aggressive timeline, to prove he's got a good framework for managing these projects," he said. With new management in place, about 120 SAIC engineers began work on the IOC project in June 2004. The FBI and SAIC agreed to keep to a strict development schedule, define acceptance criteria, and institute a series of control gates.milestones SAIC would have to meet before the project could continue. Azmi, unlike the previous three CIOs, inserted himself into the day-to-day operations of the IOC project. All through the second half of 2004, he met with his project manager every morning at 8:15. Every night before 10 p.m., the project manager would issue a status report indicating what milestones had been hit, identifying risks, and suggesting actions to be taken to avoid mistakes and delays. Azmi's project manager worked closely with Kanewske to adhere to the baseline requirements SAIC and the FBI had agreed on for the IOC in July, thus avoiding a death spiral of change requests. In January, the IOC was rolled out as a pilot right on schedule, and just before the inspector general's stinging critique of the VCF was released. The report on the VCF from Aerospace Corp., the $2 million study of the December 2003 delivery commissioned by the FBI, began circulating on Capitol Hill at the same time. [Spectrum's attempt to obtain a copy of the report under the Freedom of Information Act was still being litigated at press time.] But during a hearing this past 3 February, Senator Judd Gregg (R-N.H.) disclosed that the report said that "the [VCF] architecture was developed without adequate assessment of alternatives and conformance to various architectural standards, and in a way that precluded the incorporation of significant commercial off-the-shelf software." Furthermore, "high-level documents, including the concept of operations, systems architecture, and system requirements were neither complete nor consistent, and did not map to user needs." Finally, "the requirements and design documentation were incomplete, imprecise, requirements and design tracings have gaps, and the software cannot be maintained without difficulty. And it is therefore unfit for use." The IOC pilot, meanwhile, ended in March. The verdict: "Although the IOC application was an aid to task management, its use did not improve the productivity of most users," according to an internal FBI assessment. When asked why the IOC did not improve productivity, the FBI project manager emphasized, "The goal was not to achieve improved productivity. What we learned through this is that when they deploy the work flow, there's a need to roll out an electronic records management capability simultaneously." In other words, FBI employees, particularly agents, found that the IOC actually increased their workload. Why? Agents filled out forms electronically and routed them to superiors for approval, after which the electronic form was uploaded to the ACS, still in use, to be shared with the rest of the FBI. But to comply with the FBI's paper-based records management system, the form had to be printed out, routed, signed, and filed. So what did the FBI get out of the VCF's last gasp? "We harvested some of the good work from the past," the FBI project manager told me. "We focused that into a pilot. We tested that life-cycle development model of Zal's, and that is a valid, repeatable process. And now we're in a good position to move on." FBI officials say they are taking what they learned from the VCF and charging ahead with new IT projects on two major fronts. Last September, the White House's Office of Management and Budget tapped the bureau to spearhead the development of a framework for a Federal Investigative Case Management System, an effort involving the National Institutes of Health and the departments of Justice and Homeland Security. The goal here is to provide a guide for any agency in the federal government to use when creating a case-management system. Then, late last May, Mueller announced Sentinel, a four-phase, four-year project intended to do the VCF's job and provide the bureau with a Web-based case- and records-management system that incorporates commercial off-the-shelf software. Sentinel's estimated cost remains a secret. The bureau expects to award the contract for phase one by the end of this year for delivery by December 2006. SAIC is one of only a handful of preapproved government contractors eligible to bid on the project. The FBI's Azmi seems confident that the bureau is ready to handle a project as complex as Sentinel. He said that the FBI has been planning the program for a year, evaluating commercial off-the-shelf software, creating an enterprise architecture, and establishing a number of IT management oversight boards. The bureau has also provided project management training to 80 IT staff members over the last year. Even so, Ken Orr, an IT systems architect and one of Mueller's graybeards, remains skeptical. He rated Sentinel's chances of success as very low. "The sheer fact that they made that kind of announcement about Sentinel shows that they really haven't learned anything," Orr said, from his office in Topeka, Kan. "To say that you're going to go out and buy something and have it installed within a year, based on their track record," isn't credible. "They need to sit down and really plan this out, because if they had working software today, they'd have only 25 percent of the problem solved," Orr estimated. The major questions the FBI needs to answer, he contended, include how to bring these new software programs online incrementally and train more than 30 000 people to use them. Then they could focus on converting millions of paper records as well as all of the audio, video, photographic, and physical evidence that has piled up over the years, which will continue to grow at an increasing rate to support the bureau's counterterrorism mission. "I would guess that it would be closer to 2010 or 2011 before they have the complete system up and running," Orr said. "That's assuming that you have a match between the software and the underlying requirements, which we know are subject to change." From saic at vision.moundalexis.com Thu Sep 1 21:20:50 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 1 Sep 2005 17:20:50 -0400 (EDT) Subject: [saic] SAIC Plans $1.7B Offering Message-ID: <20050901171918.Q673-100000@vision.moundalexis.com> 1 September 2005 ; San Jose Mercury News SAIC Plans $1.7B Offering http://www.mercurynews.com/mld/mercurynews/news/breaking_news/12534985.htm --- The employee-owned government contractor is raising cash for a shopping spree. With an eye on acquisitions, IT provider Science Applications International Corporation said Thursday it would make a public offering of stock in 2006. The employee-owned San Diego company aims to raise $1.7 billion with the offering. With revenue in 2004 of $7.2 billion and a net income of $409 million, SAIC is one of the largest information technology providers to the U.S. federal government. In 2004, it won $2.5 billion in contracts from the U.S. Department of Defense, making it the ninth-largest Pentagon contractor. SAIC is looking ahead to a time when the Pentagon's annual budget stops growing by as much as 5 percent, as it did between 2005 and 2006 when the White House asked Congress for $419 billion, said Paul Nisbet, an analyst with JSA Research. "One way to combat a period of lesser growth is through acquisitions," he said. Founded in 1969, by a group of scientists, SAIC has 43,000 employees in 150 cities across the world. Just about any sort of information technology company could find itself the target of an SAIC acquisition From saic at vision.moundalexis.com Fri Sep 2 12:29:40 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 08:29:40 -0400 (EDT) Subject: [saic] SAIC to Go Public, Ending Employee-Owned Run Message-ID: <20050902082927.Q673-100000@vision.moundalexis.com> 2 September 2005 ; The Washington Post SAIC to Go Public, Ending Employee-Owned Run http://www.washingtonpost.com/wp-dyn/content/article/2005/09/01/AR2005090101844.html --- By ELLIOT SPAGAT The Associated Press Thursday, September 1, 2005; 7:49 PM SAN DIEGO -- Science Applications International Corp. said Thursday it will sell shares to the public, upending a major legacy of its founder and recently retired chairman, who insisted the defense contractor be owned by its workers. SAIC, one of the nation's largest employee-owned companies, said it will sell up to $1.73 billion in common stock early next year. The number of shares, the exact date of the sale and the price have yet to be determined. The company said it will use the proceeds to pay a special dividend to its employee-owners. SAIC is enmeshed in some of the government's most sensitive work, from redesigning Army combat systems to bioweapons defense and improving electronic snooping for the ultra-secretive National Security Agency. Its research prowess and Washington connections have landed it some of the most prized government contracts. SAIC, which has more than 43,000 employees, said it decided on the IPO because it was too expensive to continue buying stock. Employees buy and sell shares among themselves once every three months at a price fixed by an outside auditor, based on SAIC's financial performance and competitors' stock prices. They must agree to sell when leaving the company. SAIC said it spent more than $2.5 billion in the last five years to buy stock. Chairman and CEO Kenneth Dahlberg told employees that the cash drain would have continued "for the foreseeable future" if the ownership structure remained intact. "If the imbalance in our stock system were to continue, we might be unable to make the necessary investments to support our organic growth and growth through acquisitions," the company said in a filing with the Securities and Exchange Commission. San Diego-based SAIC said it also wanted to use its publicly traded stock as currency for acquisitions. The company declined to make officials available for comment, citing SEC restrictions. Dahlberg, a former General Dynamics Corp. executive who joined SAIC in 2003, signaled in June that the company might go public but would also consider other alternatives, such as raising more debt or selling shares in a private placement. The company plans to list its stock on the New York Stock Exchange under the symbol SAI. Morgan Stanley & Co. and Bear, Stearns & Co. were listed as underwriters for the offering. SAIC was founded in 1969 by Robert Beyster, a nuclear physicist who made employee ownership his most sacred management tenet. The company has posted 36 straight years of profits and now ranks 276th on the Fortune 500 list of the largest U.S. companies. It earned $409 million on revenue of $7.19 billion in its fiscal year that ended Jan. 31. Recently, the company has weathered criticism for a $170 million computer overhaul to allow the FBI to better manage criminal and terrorism cases. In January, the Justice Department's inspector general said the project would have to be scrapped or require much additional work. Beyster stepped down as chief executive in 2003 and as chairman less than a year later. He is currently chairman of the Beyster Institute, a nonprofit group that promotes employee ownership. A Beyster representative did not immediately respond to a phone message. From saic at vision.moundalexis.com Fri Sep 2 12:32:45 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 08:32:45 -0400 (EDT) Subject: [saic] Long owned by employees, SAIC says it's going public Message-ID: <20050902083222.A673-100000@vision.moundalexis.com> 2 September 2005 ; San Diego Union-Tribune Long owned by employees, SAIC says it's going public http://www.signonsandiego.com/news/business/20050902-9999-1n2saic.html --- By Bruce V. Bigelow UNION-TRIBUNE STAFF WRITER After operating for 36 years as an employee-owned company, San Diego's SAIC is going public. The company notified government regulators yesterday that it plans to raise more than $1.7 billion through an initial public offering. The move represents a significant departure from the course set by founder J. Robert Beyster, who used employee ownership to build SAIC into a $7.2 billion government contractor. But an IPO is only part of a deeper retooling of the structure that SAIC uses to raise capital, fund its operations and reward its employees, according to a series of filings yesterday to the Securities and Exchange Commission. Although the restructuring would preserve many aspects of employee ownership, such as giving employee shareholders a tenfold advantage in voting rights, going public represents a fundamental change for the research and engineering conglomerate. The company, also known as Science Applications International Corp., ranks second only to Florida's Publix Supermarkets among the biggest U.S. employee-owned companies, according to the National Center for Employee Ownership. It is No. 276 on the Fortune 500 list of largest U.S. companies. In recent years, SAIC has said that it wants to grow larger by acquiring rival defense contractors. But the company's cash has been constrained because it has operated an internal stock market that enables employees to buy and sell their shares. The company has maintained billions in reserve, partly to ensure that it had the money to buy back employees' shares. By restructuring itself, SAIC can dismantle its internal trading mechanism and create a public market for its shares. SAIC's existing shareholders must vote to approve the proposed changes before an IPO can proceed, according to the SEC filings. If all goes as planned, the public offering of newly created common shares would take place early next year. Unlike many companies that sell stock, however, SAIC does not intend to use the $1.7 billion it expects to raise to expand its business. Rather, the company plans to distribute nearly all of the proceeds as a dividend to current and former employees who own the company's shares. The company has 42,500 employees. The dividend probably would range between $8 and $10 for each existing SAIC share, according to the SEC filings. Current and former employees "like this a whole lot," said David Overskei, who resigned from SAIC as a vice president in 1999. "There's a lot of enthusiasm and interest." SAIC's IPO also should be well-received by investors, said Joel Reed of Relational Advisors, a San Diego investment banking firm. "Companies like SAIC, with their deep expertise in federal information technology services, are trading very well," Reed said. The U.S. government is SAIC's largest customer, representing 86 percent of its revenue in fiscal 2005. Jon Kutler, a Los Angeles investment banker with Jefferies Quarterdeck, agreed, noting that shares of defense companies have been riding high on Wall Street for about four years. "Usually they only come into favor for a couple a years a decade, and I'm going back three decades on that," Kutler said. He cited L-3 Communications' recent $2 billion buyout of San Diego's Titan Corp. as another example of strong market activity. On the other hand, Reed and Kutler agreed that the economic toll of Hurricane Katrina and soaring gasoline prices raise the threat of a recession that could soften Wall Street's interest in new stock offerings. The number of SAIC shares to be offered, the price range of the proposed offering and its timing have not yet been determined. SAIC plans to convert its existing shares into new preferred shares that would represent a controlling stake in the new SAIC holding company. At the same time, the company would create a new class of common shares that would be listed on the New York Stock Exchange under the symbol "SAI." Only the common shares would be publicly traded. After the IPO, the preferred shares would amount to between 80 percent and 90 percent of the new company. The preferred shares would have the same value as SAIC's common shares, but each preferred share would carry voting rights equivalent to 10 votes. The proposed changes would give SAIC's employee shareholders dominating control in the restructured company. In its filings, SAIC said the restructuring provides a better way for the company to use its available cash. It also said that the ability to sell its stock through a public market offers a more efficient way to acquire other companies and to fund internal growth. But it marks a change from the model the company has followed for the past 36 years. Since Beyster founded SAIC in La Jolla in 1969, he offered ownership in the business to scientists and others he recruited to work on nuclear weapons research and other government programs. Employee ownership was one of his highest priorities, and one of the few topics he was willing to discuss publicly. Beyster, who retired as chairman last year, could not be reached yesterday to comment on SAIC's plans. Under Beyster, SAIC went to extraordinary lengths to maintain employee ownership as it evolved from a specialized research firm into a federation of businesses holding billions of dollars in government contracts. It devised an elaborate process to set the value of its shares and even created an internal brokerage to match employee stock purchases with sales in trades held every three months. On June 10, for example, SAIC's board of directors declared a new price of $41.80 per share for the company's common stock. The process uses a mathematical formula to calculate the price and includes an outside appraisal of comparable companies to ensure that the pricing mechanism is fair. The proposed restructuring would eliminate SAIC's internal pricing and trading mechanisms. The drive to take SAIC public was led by Ken Dahlberg, who replaced Beyster as chief executive in 2004 and was named chairman last year. "Our board of directors has carefully studied this question and unanimously believes that creating a publicly traded stock is in the best interests of SAIC and our stockholders and employees," the company said in a statement distributed yesterday to its employees. In recent years, SAIC has confronted an intractable problem as employees' orders to sell their shares far exceeded their orders to buy. The recurring imbalance prompted the company to step in to buy shares that employees wanted to sell, which became a significant drain on SAIC's cash reserves. Over the past five years, SAIC has used more than $2.5 billion to buy such shares. Stock buybacks have consumed about $500 million a year . roughly equivalent to SAIC's annual cash flow. Top executives have said the drain on the company was not critical because SAIC has cash reserves of nearly $3.2 billion. But the situation could not continue indefinitely. "We expect that a significant stock system imbalance would have continued for the foreseeable future without the IPO," the company said in SEC filings. From saic at vision.moundalexis.com Fri Sep 2 23:41:25 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 19:41:25 -0400 (EDT) Subject: [saic] CONTRACTS from the United States Department of Defense Message-ID: <20050902194028.F673-100000@vision.moundalexis.com> 2 September 2005 ; U.S. Department of Defense CONTRACTS from the United States Department of Defense http://www.defenselink.mil/contracts/2005/ct20050902.html --- NAVY Science Applications International Corp., San Diego, Calif., is being awarded a $8,529,727 cost-plus-fixed-fee, indefinite-delivery/indefinite-quantity contract for program management, engineering, and technical services in support of the Navy Automatic Information Technology (AIT) Program Office. This contract includes options, which, if exercised, bring the total estimated value of the contract to $104,920,784. Work will be performed in San Diego, Calif. (94 percent); Mechanicsburg, Pa. (4 percent); and Washington, D.C. (2 percent), and work is expected to be completed by September 2006. This contract was competitively procured through Navy Electronic Commerce Online, with 14 offers received. The Fleet and Industrial Supply Center Norfolk Philadelphia Division is the contracting activity (N00140-06-D-0003). From saic at vision.moundalexis.com Fri Sep 2 23:49:11 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 19:49:11 -0400 (EDT) Subject: [saic] Science Applications Files Plan for IPO Message-ID: <20050902194757.R673-100000@vision.moundalexis.com> 2 September 2005 ; Los Angeles Times Science Applications Files Plan for IPO http://www.latimes.com/business/la-fi-saic2sep02,1,7822881.story?coll=la-headlines-business --- Science Applications International Corp., the largest employee-owned research and engineering firm in the country, plans to make an initial public offering of stock worth up to $1.73 billion, the company said in a government filing Thursday. San Diego-based Science Applications did not disclose the number of shares it will offer or their price. "The principal purpose of the initial public offering is to better enable SAIC to use its cash and cash flows from operations to fund organic growth and growth through acquisitions, as well as to provide SAIC with publicly traded stock that it can use for future acquisitions," the company said in a statement. "Creating a publicly traded stock also eliminates the need for SAIC to use its cash to provide liquidity to its stockholders through its internal stock market," SAIC said. The company - which provides scientific, engineering, systems integration and technical services to the U.S. military and government agencies - said in a preliminary prospectus filed with the Securities and Exchange Commission that Morgan Stanley and Bear Stearns & Co. would underwrite the offering. The company also filed a proxy statement Thursday for a proposed capital restructuring in which Science Applications would form a new parent company, SAIC Inc., in a transaction that would close shortly before the IPO. The company said in a statement that it expected the IPO to commence in early 2006. For its fiscal first quarter ended April 30, the company earned $585 million on $1.85 billion in revenue. For the year-earlier period, it earned $89 million on $1.71 billion in revenue. The U.S. government is its largest customer, representing 86% of its total consolidated revenue in fiscal 2005. The company said it would use substantially all of the net proceeds from the offering to pay a special dividend to its Class A preferred stockholders. It said the offering would better enable it to use its cash to fund growth, rather than to provide liquidity to its shareholders, and provide it with publicly traded stock that could be used for acquisitions. Science Applications had $3.19 billion in cash, cash equivalents and short-term investments as of April 30, the filing said. According to the filing, Chairman and Chief Executive K.C. Dahlberg earned $2.5 million in salary and bonuses in fiscal 2005. Dahlberg, who joined the company in 2003, earned $1.26 million in fiscal 2004 for a partial year. The company said it would apply to list SAIC Inc.'s stock on the New York Stock Exchange under the symbol SAI. From saic at vision.moundalexis.com Fri Sep 2 23:50:56 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 19:50:56 -0400 (EDT) Subject: [saic] Top Private Defense Contractor Plans an IPO to Rival Google's Message-ID: <20050902194911.L673-100000@vision.moundalexis.com> 2 September 2005 ; The Washington Post Top Private Defense Contractor Plans an IPO to Rival Google's http://www.washingtonpost.com/wp-dyn/content/article/2005/09/01/AR2005090102407.html --- By Renae Merle Washington Post Staff Writer Friday, September 2, 2005; Page D01 Science Applications International Corp., the largest privately held defense contractor, announced yesterday that it would go public early next year,aiming to raise $1.7 billion for insiders cashing in on the post-Sept. 11 government spending boom that fueled the firm's growth. The public offering would rival Google Inc.'s $1.8 billion deal in 2004 in size and be the largest IPO of a government contractor in many years. The chief beneficiaries will be SAIC's more than 35,000 shareholders, which include many current and former employees, some of whom stand to make millions of dollars. The company has 16,000 employees in the Washington region. [Photo of "SAIC Drive" in McLean] Caption: An IPO at SAIC, which employs 16,000 in the Washington area, could make some millionaires. (By Robert A. Reeder -- The Washington Post) In a Securities and Exchange Commission filing, the San Diego-based company outlined its government work, which accounted for 87 percent of its $7.2 billion in revenue last year. Many of the company's 10,000 contracts are with the Defense Department, where it is known not for weapons, but for managing large projects to integrate information technology systems, including several in the intelligence field. SAIC cited its role in the Army's $100 billion modernization project, known as the Future Combat System, as one of its largest contracts. The filing did not hint at what type of classified work it does, but noted that about 20,000 of the firm's 42,500 employees have security clearances. It listed among its largest contracts one called "Trailblazer Technical Development Program," which has a "confidential" customer. Press reports have identified it as a modernization project at the National Security Agency, the agency that intercepts foreign communications. It also noted that SAIC is developing a wireless sensor, known as "smart dust," that can "self-configure into a network and gather and fuse information into actionable intelligence information." The increased government spending after the Sept. 11, 2001, terrorist attacks "has had a favorable impact on our business," the filing said. "Our results have also been favorably impacted by increased outsourcing of IT [information technology] and other technical services by the U.S. Government." In citing potential risks for investors, the filing noted that the company had uncovered material weaknesses in internal controls for income tax accounting this spring. And it noted that the company is still in a dispute with the Greek government over a large security contract for the 2004 Olympic Games. The IPO announcement has been expected since June when chief executive Kenneth C. Dahlberg told employees the company was considering several options for growth. An IPO will allow "us to sustain our culture," Dahlberg said in a letter to employees yesterday, noting that they would retain control of the firm. The public offering also is expected to help SAIC reach a goal set by Dahlberg to reach $12 billion in revenue by 2008. The company has made several acquisitions in the last two years. As a public company, SAIC would be able to target larger companies for acquisition, offering its stock, instead of cash, analysts said. "They've probably been the most active buyer in the federal IT market over the last two or three years," said Robert D. Kipps, the head of the aerospace and defense group at Houlihan Lokey Howard & Zukin, an investment bank. The challenge will be maintaining focus on long-term growth goals while answering the daily pressures of Wall Street, they said. SAIC said it has not determined how many shares to offer or the price range. Its ticker symbol is expected to be SAI. As an employee-owned firm, SAIC is unlike its chief rivals in the defense market. The company's internal stock is priced four times a year by the board of directors. The price is $41.80 as of June 10, down slightly from $42.27 in April. That values the company at $7.6 billion. Employees who have bought or accumulated hundreds or thousands of shares through bonuses stand to make a significant return if the company goes public. The filing said "all or substantially all of the net proceeds" of the IPO would be used for a special cash dividend for shareholders. The dividend is expected to be worth between $4 to $5 a share. Among SAIC's largest shareholders is Duane P. Andrews, who was promoted to chief operating officer this year and holds 406,489 shares, and John H. Warner Jr., SAIC's chief administrative officer, who holds 350,066 shares, according to the filing. Dahlberg, a former General Dynamics Corp. executive who joined SAIC last year, holds 87,434 shares. Staff writer Terence O'Hara contributed to this report. From saic at vision.moundalexis.com Fri Sep 2 23:52:11 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 19:52:11 -0400 (EDT) Subject: [saic] US defence giant SAIC plans an IPO Message-ID: <20050902195057.H673-100000@vision.moundalexis.com> 2 September 2005 ; Ovum US defence giant SAIC plans an IPO http://www.ovum.com/news/euronews.asp?id=3109 --- Science Applications International Corporation (SAIC), the private US defence-systems giant controlled by its employees, yesterday said it is planning an IPO in early 2006. The company has not yet decided the number of shares, nor the price range. SAIC said that "the principal purpose of the IPO is to better enable SAIC to use its cash and cash flows from operations to fund organic growth and growth through acquisitions, as well as to provide SAIC with publicly-traded stock that it can use for future acquisitions." SAIC is big - it recorded revenues of $7.2bn in its financial year to 31 January 2005, up 23% on 2004 thanks in part to its strong US Federal Government business. It claims to be "the largest employee-owned research and engineering firm in the US". It is reasonably profitable, having posted an overall 6.8% operating margin and a 5.6% pre-tax margin in financial year 2005. Comment: This looks like the move that will pave the way for SAIC to emerge from the shadows in Europe and become a leading tier-two or even a tier-one player over here. SAIC will now have more cash for acquisitions, and - just as importantly - it won't be hamstrung by an ownership structure that makes it difficult to pay for companies with stock. As readers will remember, SAIC tried to buy its (relatively much smaller) UK equivalent PA Consulting last year, but negotiations collapsed after disagreements over PA's valuation. SAIC already has European operations, having set up business in the UK back in 1989. In Europe, it specialises in defence, oil and gas, telecoms, and utilities. From saic at vision.moundalexis.com Fri Sep 2 23:53:13 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 19:53:13 -0400 (EDT) Subject: [saic] Science Applications International announces public offering Message-ID: <20050902195232.X673-100000@vision.moundalexis.com> 2 September 2005 ; North San Diego & Southwest Riverside County News Science Applications International announces public offering http://www.nctimes.com/articles/2005/09/02/business/news/18_39_299_1_05.txt --- By: BRADLEY J. FIKES - Staff Writer SAN DIEGO ---- Science Applications International Corp., which grew from a start-up to a defense contracting giant as an employee-owned corporation, announced Thursday that it would abandon that status and become a publicly traded company. It will trade on the New York Stock Exchange under the symbol SAI. SAIC said it will sell up to $1.73 billion in common stock early next year. The number of shares, the price and exact date have yet to be determined. A majority of the stock will continue to be owned by employees. Founded 37 years ago by J. Robert Beyster, a nuclear physicist, San Diego-based SAIC is the biggest, most famous and longest-existing example of a company whose stock is owned by its employees. The company has 43,000 employees worldwide. SAIC is enmeshed in some of the government's most sensitive work, from redesigning Army combat systems to bioweapons defense and improving electronic snooping for the ultra-secretive National Security Agency. Its research prowess and Washington connections have landed it some of the most prized government contracts. Under the current system, SAIC has to buy back stock from employees when they leave, and employees can trade among themselves every three months. The price is fixed by an outside auditor. The process was becoming too expensive to maintain, said Ken Dahlberg, the company's chief executive, in a letter posted on SAIC's Web site. The company had spent $2.5 billion in the last five years to buy stock, he said. This took away money SAIC could have used to support its growth, Dahlberg wrote, and the drain would have continued. Dahlberg's letter was thoughtful and reflected a commitment to keep SAIC's entrepreneurial culture, said Julie Meier Wright, president and chief executive of the San Diego Regional Economic Development Corp. Wright said she has "sympathy" for SAIC, because she is on the board of another employee-owned company, Maxim Systems. "It is a company that succeeds because it is a knowledge-based company," Wright said of SAIC. The planned initial public offering was designed so as to retain the incentives that keep the skilled employees who have this knowledge, she said. ---- Material from the Associated Press was used in this story. From saic at vision.moundalexis.com Fri Sep 2 23:54:24 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 2 Sep 2005 19:54:24 -0400 (EDT) Subject: [saic] SAIC proposes IPO Message-ID: <20050902195314.T673-100000@vision.moundalexis.com> 2 September 2005 ; SanDiego.com SAIC proposes IPO http://www.sandiego.com/sdbusiness.jsp?x=000&id=6556f1d2-ec97-41b7-892d-e6da3c90daae --- Contractor would go from employee-owned to publicly traded by Jennifer McEntee Science Applications International Corp. is ready to shed its status as the nation's largest "employee-owned" research and engineering firm in a bid for the public market. The San Diego-based defense conglomerate announced Thursday it would conduct at initial public offering of common stock worth up to $1.73 billion. SAIC intends to trade on the New York Stock Exchange under the ticker symbol "SAI." The specific number of shares and their price hasn't been determined. The IPO is planned for early-2006. Employees would be the early beneficiaries of the offering. SAIC intends to use all or substantially all of the net proceeds to pay a special dividend to SAIC stockholders of record before the IPO -- in other words, its employees. According to documents that SAIC filed with the U.S. Securities and Exchange Commission on Thursday, "Approximately 31,700 of our 42,500 employees own our stock and we intend to continue to provide our employees with equity participation opportunities after the completion of this offering." The purpose of going public, SAIC officials said, is to better enable the company to make acquisitions, both with cash and publicly traded stock. "Creating a publicly traded stock also eliminates the need for SAIC to use its cash to provide liquidity to its stockholders through its internal stock market," the company said in a statement. In a letter to employees, Chief Executive Ken Dahlberg said the decision to seek an IPO was made after several months of consideration by SAIC's senior management and board. Dahlberg said that SAIC has used more than $2.5 billion in cash over the past five year to balance its stock system. The imbalance in the system would have continued for the "foreseeable future," he said. "We deliberated and weighed the risks and potential rewards of each option -- paying particular attention to the potential impact of each alternative on our culture, cash needs for our stock system, ability to implement our strategy, our desire to remain independent and our continued focus on maintaining an environment where entrepreneurism flourishes," Dahlberg wrote. "One option, an initial public offering, stood out as best satisfying all of our needs." SAIC's filing with federal regulators for the IPO was coupled with a filing for a proposed capital restructuring, in which SAIC would form a parent company called SAIC Inc. SAIC's current stockholders would be stockholders of the parent company, and a stockholder-approved merger would take place before the completion of the IPO. Morgan Stanley & Co. Inc. and Bear, Stearns & Co. Inc. are serving as the joint book-running managers on the planned IPO. SAIC was founded in 1969 by a small group of scientists and J. Robert Beyster, who stepped down as CEO last year. The federal government is SAIC's largest customer, representing some 86 percent of its total $7.2 billion in revenues for fiscal 2005. From saic at vision.moundalexis.com Sun Sep 4 15:44:04 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Sun, 4 Sep 2005 11:44:04 -0400 (EDT) Subject: [saic] Prepare to Greet San Diego's New Set of Millionaires Message-ID: <20050904114033.E673-100000@vision.moundalexis.com> 5 September 2005 ; San Diego Business Journal Prepare to Greet San Diego's New Set of Millionaires http://www.sdbj.com/article.asp?aID=46284144.97672202.1192334.4181575.6931406.895&aID2=91709 --- SAIC's Planned Public Stock Offering Is the Year's Top IPO By MIKE ALLEN San Diego Business Journal Staff Science Applications International Corp.'s announced transition from employee-owned to a public company will likely change the way the research and engineering company operates, but once its planned stock offering occurs, it will create a lot of millionaires. SAIC filed a report Sept. 1 announcing its intention to conduct an initial public offering early next year that would be among the largest in recent years. Heretofore, only SAIC employees could own the stock and shares were internally traded. Following the IPO, the company's stock would be available for anyone, and shares would trade on the New York Stock Exchange. "Even the rank and file of the company are going to see an extreme growth in personal wealth because of this decision," said Bruce Ahern, a former SAIC employee who now is a business owner in Georgia. "There's going to be thousands of millionaires." With more than $7 billion in annual revenues and 43,000 employees, SAIC is the largest privately held company in San Diego and one of the city's fastest growing. SAIC is a diversified technology services company that does most of its business with the federal government. Propelled by dozens of acquisitions of smaller companies and its own internal growth in contracting, SAIC's revenues have soared 50 percent from $4.8 billion to $7.2 billion in the past three years. But a change at the very top when founder Robert Beyster retired as chairman last year signaled a shift in the company's strategy. New Chairman and Chief Executive Officer Ken Dahlberg said in a letter to employees after considering several options, the board determined going public would best satisfy the company's needs. At the top of the list of SAIC's reasons for going public and forsaking its private status was the use of some $2.5 billion in cash during the past five years to balance internal stock trading by employees. "We should be using our cash on hand and cash flows from operations to fund our organic growth as well as strategic acquisitions," Dahlberg wrote in his letter. The IPO will also give the company a public currency to pursue more acquisitions. It's also going to provide liquidity for SAIC employees to easily sell their shares whenever they desire at a market price. In the past, the price on SAIC shares was set quarterly. Most recently priced at $41.80, shares have risen dramatically in the past decade from about $5. For the past year, shares have risen by 12 percent, above the average for the Standard & Poor's 500 Index gain of about 10 percent. John Messner, principal of Messner & Smith Investment Management in Downtown, said the shift from employee ownership to a public company would create obvious challenges associated with a much higher degree of transparency required of public firms, but his initial reaction was positive. "This is a tremendously well-run, well-connected company, and they enjoy a wonderful reputation," Messner said. "One thing the company has always done is take care of its employees, and everyone who works there is worth a lot of money." According to the company's securities filing, the total transaction is expected to raise about $1.72 billion in new capital, making it the largest IPO this year and larger than last year's Google stock offering that resulted in the California Internet search engine firm raising some $1.6 billion. Huntsman Corp., a Salt Lake City chemical company, raised about $1.4 billion in the largest stock offering so far this year, according to IPOhome.com, an online research firm. SAIC's capital offering involves a conversion of each current share of its common stock to two shares of newly issued preferred stock. Holders of SAIC class B stock would receive 40 shares of new preferred stock for each class B stock. Each of the new preferred shares can be converted to one share of new common stock, so essentially the company is conducting a two-for-one stock split. SAIC said it plans to use the proceeds from the stock offering to pay a special dividend to current shareholders equal to a range between $8 to $10 for each share of its common stock. Ahern, who left SAIC in the 1990s, said the new management team apparently decided going public was the best option, though it was one that founder Beyster adamantly opposed while he led the company since its inception. "Obviously, with the new management, they've changed gears, but whether this is good or bad, only history will tell," he said. From saic at vision.moundalexis.com Sun Sep 4 15:46:04 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Sun, 4 Sep 2005 11:46:04 -0400 (EDT) Subject: [saic] SAIC To Actually Go Public? Message-ID: <20050904114427.A673-100000@vision.moundalexis.com> 2 September 2005 ; Techdirt SAIC To Actually Go Public? http://www.techdirt.com/articles/20050902/0216231_F.shtml --- from the didn't-see-that-coming dept. If you're at all familiar with the history of SAIC, the huge, but tremendously secretive, government contracting firm that is famous for being "employee owned," it seems quite surprising to hear that the company is actually going to go public, in an attempt to raise nearly $2 billion. For years, employees could buy and sell stock from the company, but the price of the stock was determined regularly not by the public markets, but by an auditor who would value the company. As employees left, most were required to sell back their shares. It was a system that worked, as the company grew -- but this year, the company's 80-year-old founder, J. Robert Beyster, finally stepped down. It appears that the new folks in charge have decided to make a big shift in strategies by going public. Perhaps they realized they wouldn't be able to pull off another Network Solutions deal, where they bought the company for a few million, kept control while the company had full monopoly control over internet domains, and then spun it off for a few billion just before life got more difficult for the firm. It will definitely be interesting to see how the firm adjusts to having outside shareholders. They used to claim that part of their competitive advantage was that they weren't distracted by the whims of outside shareholders. Update: Thanks to an SAIC employee who posted a comment below explaining some of the rationale... which was basically that SAIC was propping up the stock itself by buying all the available shares, since employees weren't buying enough. Apparently, that was becoming way too expensive. [threaded comments at URL] From saic at vision.moundalexis.com Sun Sep 4 15:49:17 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Sun, 4 Sep 2005 11:49:17 -0400 (EDT) Subject: [saic] Employees will maintain control of SAIC Message-ID: <20050904114812.M673-100000@vision.moundalexis.com> 4 September 2005 ; San Diego Union-Tribune Employees will maintain control of SAIC http://www.signonsandiego.com/news/business/20050904-9999-1b4saic.html --- Firm going public, but no big change expected By Penni Crabtree UNION-TRIBUNE STAFF WRITER September 4, 2005 With the announcement last week of a proposed $1.7 billion initial public offering, SAIC begins a cautious transformation from one of the nation's largest private, employee-owned firms into a public company. Yet the move doesn't mark a profound sea change for the San Diego government contractor, experts agree. SAIC's fervent creed of employee ownership, which helped it grow into a Fortune 500 company with more than $7 billion in revenue last year, remains intact. As a public company, SAIC will have more employee control than most of the estimated 11,500 U.S. companies, private and public, whose employees hold an equity stake through a stock-purchase plan. Even after the IPO, SAIC's 42,500 employees will continue to own 80 percent to 90 percent of the company's outstanding stock, notes Ray Smilor, executive director of the Beyster Institute, a nonprofit that promotes employee ownership. Employee shareholders also will retain most of the power because their shares would carry voting rights equivalent to 10 votes of the nonemployees' shares. "All growing organizations evolve over time," said Smilor, whose institute was created by SAIC founder J. Robert Beyster. "The key for SAIC will be to continue to adhere to its employee ownership heritage by ensuring that its employees have a meaningful stake in the company and by maintaining its entrepreneurial culture." Experts agree that SAIC's future performance depends more on the company preserving its strategy of empowering employees and offering them incentives than how much of a stake employees own. At Southwest Airlines, employees own less than 15 percent of the company's stock through a profit-sharing plan . yet it is the most profitable air carrier in the United States, some experts note. In contrast, United Airlines, which handed over half the company to its workers in 1994 to win labor concessions, filed for bankruptcy in 2002, the victim in part of a long-standing adversarial relationship between management and employees. "What makes some companies with employee-ownership plans do very well and some not? It has a lot to do with the way companies treat employees," said Doug Kruse, an economist at Rutgers University's School of Management and Labor Relations. "You can't just call an employee an owner and expect them to respond positively. You have to do something to make them feel like an owner. "United Airlines illustrates that employee ownership is not a magic elixir," Kruse added. "It takes a lot of finesse to do it right, finesse that SAIC seems to have." SAIC honed its employee-ownership strategy under the hand of Beyster, a nuclear physicist who founded the company in 1969. From the beginning, Beyster offered ownership in the business to the scientists who joined him, and over the years SAIC devised various retirement plans, stock incentives and option grants to encourage employees to buy in. Beyster retired as SAIC's chairman last year. "To me, SAIC's legacy is that they really perfected that system of employee ownership and, through the institute, enabled other companies to adopt, if not the exact process, at least the philosophy," said Alex DeNoble, professor of management and entrepreneurship at San Diego State University. "When you think of SAIC, you think employee-owned company," DeNoble said. "SAIC has had a ripple effect around the country." One of the more novel aspects of SAIC was the development of its own mini-stock market, an internal trading system that allowed the company's employees to buy and sell their private stock. Yet it is that internal trading system that was at the root of SAIC's decision to go public. Over the past five years, SAIC has used more than $2.5 billion of cash to balance stock trades on its internal market, a cash commitment that put a damper on SAIC's long-range strategy of making acquisitions. Julie Meier Wright, president and chief executive of the San Diego Regional Economic Development Corp., said SAIC's move is part of a natural evolution. "I'm on the board of a privately held, employee-owned company, and I see the value of that, especially for a young company seeking to grow," Wright said. "But like economies, companies grow and mature and are challenged to go to the next level. "When you look at what SAIC is proposing to do, they are trying to retain the best of what they've always been, which is their culture of employee ownership," she said. "At the same time, they will be publicly traded, which will provide the liquidity for stock trading and standing in the marketplace." Kruse said SAIC's shift from a private to a public company isn't likely to change the corporate culture or prove traumatic for its employees. "I wouldn't expect it to have a bad effect, as long as employees continue to be treated the way they have been," Kruse said. "Going public is a sign of expansion for a company, and that can provide more of a feeling of progress and optimism among employees." And then there is the very real benefit of potentially significant financial gain for SAIC's employee shareholders. The primary purpose of the IPO is not to raise capital, but to use the proceeds to pay a special dividend to the current stockholders. "The stories are legendary in Silicon Valley and places like Microsoft, when successful companies go public," Kruse said. "I expect a number of employees will do quite well financially. There are going to be some very happy employees." One former SAIC executive, who said he keeps in contact with former colleagues, said the SAIC employees tend to be divided into camps of the wary or the euphoric. Those in the wary camp worry about the ups and downs of an open stock market, and of the potential tax consequences they personally face because of the IPO. Under the old in-house stock trading system, their stock was comparatively sheltered, said Martin Fricke, an SAIC retiree who still owns shares in the company. The other camp believes that the proposed IPO will prove a financial windfall as outside investors jump on the SAIC bandwagon. "I don't think either one of those perspectives is accurate," Fricke said. "But we are all still pretty much in the dark about how this will play out." From saic at vision.moundalexis.com Tue Sep 6 12:38:46 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Tue, 6 Sep 2005 08:38:46 -0400 (EDT) Subject: [saic] Secretive SAIC Goes Public Message-ID: <20050906083629.M673-100000@vision.moundalexis.com> 6 September 2005 ; Business Week Secretive SAIC Goes Public http://www.businessweek.com/bwdaily/dnflash/sep2005/nf2005096_4717_db016.htm --- NEWS ANALYSIS By Ronald Grover The federal contractor that works on many hush-hush military and security projects has filed for an IPO. The big winners: Its workers What's the reward for working for a supersecret federal contractor? Plenty, if you happen to be employed by San Diego-based Science Applications International Corp. SAIC, which generated a healthy chunk of its nearly $7.2 billion in revenues last year from work for the Pentagon and Homeland Security Dept., filed for an initial public offering on Sept. 1. The big winners? The more than 42,000 employees -- nearly half of them with top-level security clearance -- who are shareholders. They will share as much as $1.8 billion in special dividends when the company goes public, as well as continue to own as much as 90% of the newly created company. STAFF BENEFITS. Few companies are as secretive as SAIC, which has assiduously shunned public attention since it was started in 1969 as a consulting firm by one-time Los Alamos National Lab physicist J. Robert Beyster. Under Beyster, SAIC has grown into one of the country's largest employee-owned companies. Workers, who developed tiny robots to fly unmanned spy planes and radiation-sniffing scanners to inspect cargo containers at U.S. ports, own shares in the company that are traded by an internal brokerage it calls Bull, Inc. As of Apr. 30, according to the IPO filing, employees and retirees own 174.8 million shares of the company's common stock and 216,593 shares of its supervoting B shares, which values the staff stake in company at $9 billion, according to internal trades in June. The outfit hasn't disclosed how much it plans to raise. The IPO is planned for early next year, following a vote by existing employee shareholders on a merger of the old company into a newly created public company, to be called SAIC Inc. A SAIC spokesman wouldn't comment further. Employees will now get special dividends of $8 to $10 per share for their common shares and $160 to $200 for their B shares. In addition, they will also swap those shares for stock in the newly created company. INSIDERS ON TOP. The reason for the big payout? The company says it has paid $2.5 billion of its own cash to redeem employee-owned stock over the last five years and would rather be using its own cash to "fund organic growth," including acquisitions. So, it's tapping the stock market to offer its workers the hefty payout. "An IPO will preserve cash flows to be used to implement our vision and strategy," SAIC Chairman and CEO Kenneth C. Dahlberg wrote to employees, as well as to "offer SAIC shareholders greater liquidity for their shares should they desire to diversify their holdings." Still, SAIC isn't eager to turn the company over to outsiders. As part of its IPO, it will swap each of its common shares for two shares in the new company and each preferred share into 40 common shares, a move that will give current shareholders "80% to 90% of the [company's] outstanding capital stock and possess substantially all of the voting power." TRACKING TROOP DEPLOYMENT. SAIC's IPO would be welcomed by rating agencies, such as Standard and Poor's. S&P has a negative outlook on the company's bonds due to the use of its own cash flow for a "more aggressive posture toward growth," according to analyst Phillip Schrank, who wrote that an IPO would eliminate the need to "divert part of its cash flow to provide liquidity to its current employee shareholders." Over time, Schrank figures, the "more effective deployment of its cash flow" could allow him to upgrade the outlook from negative to stable. True to its cloak-and-dagger past, SAIC's public documents don't reveal much about what the company does beyond the basics of its $6.2 billion in revenue -- or 86% of its overall business -- it received from federal contracts last year. Not surprising, its revenue have spiked since September 11 and the Bush Administration's war on terrorism, with revenue swelling from $4.8 billion in 2003 to $7.2 billion in 2005. For its most recent year, ended Jan. 31, 2005, the company recorded net income of $409 million. Among the contracts SAIC lists in the public documents is a $3 billion deal, in which it has partnered with Boeing to create a 19-system network that will help the Army keep track of troop and equipment deployment throughout the world. There's mention of a $450 million contract to build a high-speed network to link 100 U.S. military bases, posts, and stations worldwide. SAIC also discloses that it helped develop the software for a hand-held unmanned plane called Dragon Eye that gave U.S. Marines in Iraq infrared surveillance videos. PUBLIC AIRING. Even in the world of spy satellites and security monitors, SAIC has to fight to get paid for its supersecret work. The company is currently locked in battle with the Greek government over a 10-year, $305 million contract it was awarded to create a communications system and command center for that country's military to maintain security for the 2004 Athens Olympics and afterwards. SAIC says it has been paid $151 million of that amount but has recorded losses of $54 million. The Greek government has disputed "various technical, legal, and contractual issues," says SAIC and hasn't made its payments after accepting the system. If the two sides can't resolve their differences in arbitration, the IPO filing notes, it "could have a material adverse affect on the company's consolidated financial position, results of operations, and cash flow." That's quite a public airing for a company that for decades has kept to its cloistered San Diego campus. But in coming weeks, SAIC may have to reveal more about how it helps spies and boosts America's armed forces in the war against terrorism. Imagine the road show: Analysts may have to get security clearance, and the guys in the front row may be double agents. From saic at vision.moundalexis.com Wed Sep 7 01:56:22 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Tue, 6 Sep 2005 21:56:22 -0400 (EDT) Subject: [saic] SAIC Awarded Union Pacific Railroad Contract to Provide Automated Gate System Message-ID: <20050906215612.I673-100000@vision.moundalexis.com> 6 September 2005 ; SAIC SAIC Awarded Union Pacific Railroad Contract to Provide Automated Gate System http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/09-06-2005/0004100803&EDATE= --- SAN DIEGO and MCLEAN, Va., Sept. 6 /PRNewswire/ -- Science Applications International Corporation's (SAIC) Security and Transportation Technology Business Unit announced today that it has been awarded a contract by Union Pacific Railroad (UP) to supply and install one of its integrated intermodal solutions, an automated gate system, to enhance productivity and security at UP's intermodal terminal in Salt Lake City, Utah. SAIC has installed similar systems at other UP facilities. SAIC's integrated intermodal solutions streamline the processing of equipment and personnel at ports, rail yards and other intermodal facilities. Combining optical character recognition (OCR), biometrics and other technologies, the gate system in Salt Lake City will enable UP to automatically identify and process containers, trucks, chassis and drivers at the entry and exit gates. UP will use the data from the system for traffic routing, security, record keeping and other functions. "This project is a continuation of our strong relationship with UP in support of its intermodal operations," said Alex Preston, general manager of SAIC's Security and Transportation Technology Business Unit. "We worked closely with UP to provide an innovative and cost-effective gate system for the new Dallas terminal. Our expertise in systems integration and experience at other intermodal facilities helped us define a system tailored to the needs of this terminal." At the gates, OCR portals will read equipment numbers and capture images of containers for online damage inspection. In the gate lanes, kiosks will perform driver transactions, using ultrasonic fingerprint scanning to identify drivers. SAIC's central server will integrate the information for each truck and send it to the terminal operating system in near-real time. From saic at vision.moundalexis.com Tue Sep 13 12:23:02 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Tue, 13 Sep 2005 08:23:02 -0400 (EDT) Subject: [saic] Mergers and aquisitions Message-ID: <20050913082254.V673-100000@vision.moundalexis.com> 12 September 2005 ; Washington Technology Mergers and aquisitions http://www.washingtontechnology.com/news/20_18/news/26949-1.html --- SAIC plots course toward an IPO Merger and acquisition experts are hailing Science Applications International Corp.'s decision to shed its employee-ownership model and conduct an initial public offering in 2006. The move will give the company necessary cash for future acquisitions, experts said. "It will make the company more competitive in the whole consolidation of the government information technology arena," said William Farmer with investment bank Jefferies Quarterdeck in Washington. Proceeds from the so-far unpriced IPO will be used to pay a dividend to SAIC's stockholders. The company is going the IPO route in part because of the rising cost of its employee-ownership structure. "Over the past five years, we have used more than $2.5 billion of cash to balance our stock system," said SAIC Chairman and CEO Kenneth Dahlberg in a letter to employees. On Oct. 7, SAIC's board of directors will set the stock price for a limited order trade cycle. Timing is good for an IPO, because industry valuations are at a relative high, said Larry Davis of merger and acquisitions advisory firm Aronson Capital Partners LLC of Rockville, Md. "It's basically a reward-and-reload type of transaction," said Bob Kipps, with Los Angeles investment banking firm Houlihan Lokey Howard & Zukin. "They're rewarding existing shareholders with a special dividend, and reloading for future growth opportunities." After the IPO, the company's shareholders will retain 80 percent to 90 percent of SAIC's capital stock and control all voting power, Dahlberg said in a video address to employees Sept. 2. SAIC has about 42,400 workers and annual revenue of about $7.2 billion. The company ranks No. 3 on Washington Technology's 2005 Top 100 list, which measures federal contracting revenue. SAIC also announced it is buying engineering and professional services provider Geo-Centers Inc. of Newton, Mass. Financial terms of the deal, which is expected to close this month, were not disclosed. As part of the deal, SAIC also will acquire Geo-Centers subsidiaries EAI Corp. and FOCIS Associates Inc. Geo-Centers provides research and development for chemical and biological weapons detection, infrastructure assessment and protection, life science research, rapid response equipment and support, and sensor systems and integration. From saic at vision.moundalexis.com Tue Sep 13 23:32:00 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Tue, 13 Sep 2005 19:32:00 -0400 (EDT) Subject: [saic] SAIC Announces Revenue and Earnings for the Second Quarter of Fiscal 2006 Message-ID: <20050913193059.M673-100000@vision.moundalexis.com> 13 September 2005 ; SAIC SAIC Announces Revenue and Earnings for the Second Quarter of Fiscal 2006 http://www.saic.com/news/2005/sep/13.html --- (SAN DIEGO) - Science Applications International Corporation (SAIC) today announced that it achieved second quarter revenues of $1.95 billion, which represents a growth rate of 10 percent over revenues of $1.77 billion for the second quarter of the previous fiscal year. "This was a solid quarter of performance for our company," said Ken Dahlberg, SAIC chairman and chief executive officer. "Our employee-owners continue to provide outstanding service to our government and commercial customers." SAIC.s operating income for the second quarter was $144 million, compared to $114 million during the same period last year. Operating income growth was primarily due to revenue growth and the release of $10 million in accrued litigation expenses no longer required due to favorable legal developments. Non-operating expenses decreased a net $19 million for the second quarter compared to the same period of the prior year, primarily due to an increase in interest income. Income from continuing operations for the second quarter was $85 million, compared to $52 million for the same period of the prior year, primarily reflecting the increases in operating income and interest income. Net income for the second quarter, including $12 million from discontinued operations, was $97 million, compared to $81 million for the same period of the prior year. From saic at vision.moundalexis.com Wed Sep 14 12:49:47 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Wed, 14 Sep 2005 08:49:47 -0400 (EDT) Subject: [saic] Company's CFO hails 'solid quarter' Message-ID: <20050914084846.W673-100000@vision.moundalexis.com> 14 September 2005 ; San Diego Union-Tribune Company's CFO hails 'solid quarter' http://www.signonsandiego.com/news/business/20050914-9999-1b14saic.html --- By Mike Freeman UNION-TRIBUNE STAFF WRITER SAIC posted higher revenue and operating income in its second quarter as the employee-owned defense contractor marches toward becoming a publicly traded company. The San Diego engineering and research giant, officially named Science Applications International Corp., posted revenue of $1.95 billion, up 10 percent from a year earlier. Operating income for the quarter through July 31 grew 26 percent to $144 million. "It was a solid quarter," chief financial officer Tom Darcy said. "Our revenue grew 10 percent, so we generated a fair amount of the operating income increase from pure revenue growth." SAIC's bottom line also benefited from a couple of other factors, Darcy said. The company had more cash and short-term investments, which paid higher returns because of interest-rate hikes. As a result, it booked $24 million in interest income for the quarter, compared with $9 million for the same period last year. Moreover, the company recorded $10 million in income that it had previously set aside for a possible legal settlement. The pending class-action case was brought by a former employee claiming to be owned overtime and vacation pay. Favorable rulings in related cases gave SAIC confidence that the reserve was no longer required, Darcy said. Without those two gains, SAIC's operating income would have been $119 million for the quarter, up 4 percent from a year earlier. On Sept. 1, SAIC filed with the U.S. Securities and Exchange Commission for a $1.7 billion initial public offering, which will end 36 years of employee ownership. The much-anticipated IPO, which could occur as early as January, is part of a major retooling of SAIC aimed at shoring up its position in the competitive defense contractor market. Work for the government now makes up 94 percent of SAIC's sales. The company said it intends to grow by acquiring rivals in the industry, but its huge cash hoard has been hamstrung by its internal stock-trading system. The company maintains millions in a reserve to buy back shares each quarter if more of its 43,600 employees want to sell their shares than want to buy . which has been the case in recent years. SAIC spent more than $500 million in the previous fiscal year buying back shares. As a public company, SAIC no longer would need the stockpile of cash for share buybacks, freeing it to make acquisitions. In addition, its publicly traded stock could be used as currency to acquire other defense contractors, although this could prove tricky because it would dilute the percentage of shares owned by employees. SAIC doesn't plan to pocket the proceeds from its public offering. Instead, it will give its existing employee stockholders a dividend estimated between $8 and $10 share. The number of shares to be offered and the pricing of the shares have yet to be determined. SAIC operates its own mini-stock market, an internal trading system that allows employees to buy and sell their private stock. The value of SAIC's stock is set each quarter by the board of directors, based on a formula that weighs a variety of factors. Trading is restricted, meaning employees can place buy or sell orders only for a few days every three months. Darcy said SAIC will open its stock-trading window for employees one last time in mid-October. The company will suspend the usual December stock trade for workers as it moves closer to its planned IPO. From saic at vision.moundalexis.com Thu Sep 15 13:18:52 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 15 Sep 2005 09:18:52 -0400 (EDT) Subject: [saic] Nanomaterials laboratory tries to remove obstacles Message-ID: <20050915091743.W673-100000@vision.moundalexis.com> September 2005 ; Small Times Magazine Nanomaterials laboratory tries to remove obstacles http://www.smalltimes.com/document_display.cfm?document_id=9961 --- By Candace Stuart from the September 2005 issue of Small Times magazine [photo] Caption: Barry Neun, a research assistant in the Nanomaterials Characterization Laboratory in Maryland, prepares vials to evaluate mechanisms for nanoparticle toxicity in liver cells. Image courtesy of Nanomaterials Characterization Laboratory. Scott McNeil had no problem equipping the facility when he took the reins of the Nanomaterials Characterization Laboratory last year. The National Cancer Institute selected McNeil and his company, SAIC-Frederick, to oversee the lab and its operations. The NCI's Alliance for Nanotechnology in Cancer added the lab to its five-year initiative to provide support for companies and researchers using nanomaterials in cancer treatments and diagnostics. The lab's base at SAIC-Frederick in Maryland gave McNeil access to the extensive resources of its parent, SAIC, or Science Applica-tions International Corp., a high-tech research and engineering company with $7.2 billion in revenues. But he found assembling a staff of qualified scientists and engineers to be another matter. "The hardest thing to do was get people who knew the field and had experience with nanotechnology," McNeil said. After a year, he has an 11-person team that includes a physical scientist, an immunologist, a toxicologist and several technicians. He expects to build on that in the next 12 months. Understanding how nanomaterials interact with healthy and diseased cells is critical for getting nanotechnology-based products to patients. The nanomaterials will have to be proven safe and effective. But few industrial or academic labs are competent to tackle the diversity of nanomaterials plus the dynamics of cancer. To do that, the NCI has brought in the Food and Drug Administration and the National Institute of Standards and Technology as partners. NIST will help characterize nanomaterials such as dendrimers and quantum dots. The FDA will help determine how and when various nanomaterials might be used for treatments and diagnostics. Working together, they hope to develop guidelines and standards for the industry and avoid regulatory barriers. "If we standardize, we can save 10 years," said Mauro Ferrari, an architect of the alliance who envisioned the lab during the planning phase. He said the lab will help determine which nanotechnologies have the best prospects for commercialization. "Being rigorous in selecting which nanotechnologies will help get them into the service of the suffering population." Equity researcher Juan Sanchez, a former doctor and nano and biotech expert at Punk Ziegel and Co., said the creation of the lab and inclusion of the federal agencies would streamline the regulatory process. "We need to have a reference," Sanchez said. "That will be very, very useful. I think that it is key that they had the brains to think through the complexity." Nanobiotech companies also welcomed the assistance and support that the lab might provide. But they listed reservations as well. They said they were concerned that the lab might not have the depth of knowledge they've gained working with certain nanomaterials. "You lose control when you let someone do the testing," said J. Donald Payne, president of Nanospectra Biosciences. Nanospectra is developing a cancer detection and treatment plat-form based on gold nanoshells. "The biggest challenge anyone in the business has is loss of control and time." The possible imposition of standards also concerned some veteran nanotechnologists. Stephen Barry, president of Alnis BioSciences, pointed out the methods for diagnosing or treating cancer depend on the type and stage of cancer. Alnis makes hydrogel nanoparticles with metal cores for imaging and destroying tumors. For effective use, the size of the nanoparticle or other physical characteristics should be tailored to cellular features. General standards might compromise that specificity. "There is no way the NCI can tell me this is the size the nanoparticle should be," Barry said. "There is no one prize molecule." McNeil said his lab recognizes the subtleties, and already has brought SAIC's many tools into service to characterize the materials. It now offers an online application for nanotechnologists, and will be accepting proposals every quarter. From saic at vision.moundalexis.com Thu Sep 15 22:34:58 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 15 Sep 2005 18:34:58 -0400 (EDT) Subject: [saic] CONTRACTS from the United States Department of Defense Message-ID: <20050915183400.I673-100000@vision.moundalexis.com> CONTRACTS from the United States Department of Defense No. 941-05 FOR RELEASE AT Sep 15, 2005 NAVY Science Applications International Corp., San Diego, Calif., is being awarded a $29,868,225 indefinite-delivery/indefinite-quantity contract with cost-plus-fixed-fee pricing arrangements for surveillance systems engineering, software development, and test and evaluation services in support of the Joint and National Systems Division of Space and Naval Warfare Systems Center, San Diego. The contract is one of four contracts awarded: all awardees will compete for task orders during the ordering period. The contract has a five-year ordering period with no options. Work will be performed in San Diego, Calif., and is expected to be completed by September 2010. Contract funds will not expire at the end of the current fiscal year. This contract was competitively procured with an unrestricted solicitation via the SPAWAR e-Commerce Central website. Eight offers were received. The contract is one of two being awarded in the second of two possible award phases for the solicitation (N66001-05-R-5001). Two contracts were previously awarded during the first award phase of the solicitation_. _ Space and Naval Warfare Systems Center, San Diego, Calif., is the contracting activity (N66001-05-D-5041). From saic at vision.moundalexis.com Fri Sep 16 12:00:32 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 16 Sep 2005 08:00:32 -0400 (EDT) Subject: [saic] SAIC And Meridian Environmental Create Road Condition Information System Message-ID: <20050916080023.V673-100000@vision.moundalexis.com> 15 September 2005 ; PR Newswire SAIC And Meridian Environmental Create Road Condition Information System http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/09-15-2005/0004108259 --- SAN DIEGO and MCLEAN, Va., Sept. 15 /PRNewswire/ -- Science Applications International Corporation (SAIC) and Meridian Environmental Technology, Inc., have teamed up to create a system that delivers integrated information on road, weather and traffic conditions to maintenance and traffic operations managers. Developed in response to the growing need for proactive road weather management, the system provides decision support and works to integrate information and workflow across agency boundaries. Professionals from different cities, counties or states can use the system together to create an accurate and seamless picture of road conditions in their area. The technology behind this product is designed to provide users with the integration of data necessary to make decisions on immediate travel problems as well as long-term maintenance management issues. The joint efforts of both companies have lead to the development of the system. Meridian Environmental Technology has brought its expertise in the management and integration of road-related data systems to the project, while SAIC has contributed system integration experience and resources to the development of the product. "This program brings the technical strengths of both SAIC and Meridian to bear on the critical information services required by highway operation and maintenance agencies," said Carl Bjerkaas, SAIC vice president for operations of the Command, Control, Communications, Computers and Information Technology Business Unit. "As transportation agencies at all levels of government strive to make more informed decisions, they need to have the ability to integrate data and information from multiple sources. Our system provides a framework for bringing all required data and information into one location for those decisions makers," said Leon Osborne, president of Meridian Environmental Technology, Inc. About Meridian Environmental Technology, Inc. Meridian Environmental Technology, Inc. is focused on bringing leading-edge technology solutions to surface transportation, agriculture, emergency management and other industries nationwide. Meridian's technologies are designed to provide the most cost effective and efficient approach to the processing, analysis, forecasting, application and dissemination of high-end weather and transportation information, allowing Meridian to develop and deliver products that both enhance productivity and improve the quality of everyday life. About SAIC SAIC is the largest employee-owned research and engineering company in the United States, with annual revenues of $7.2 billion and more than 43,000 employees in over 150 cities worldwide. SAIC engineers and scientists solve complex technical problems in national security, homeland security, energy, the environment, space, telecommunications, health care, and logistics. SAIC: FROM SCIENCE TO SOLUTIONS(TM). From saic at vision.moundalexis.com Fri Sep 16 23:29:25 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 16 Sep 2005 19:29:25 -0400 (EDT) Subject: [saic] SAIC Names Amy Alving Chief Technology Officer of the Transformation, Training and Logistics Group Message-ID: <20050916192851.F673-100000@vision.moundalexis.com> 16 September 2005 ; SAIC SAIC Names Amy Alving Chief Technology Officer of the Transformation, Training and Logistics Group http://www.saic.com/news/2005/sep/16.html --- (SAN DIEGO and MCLEAN, VA) - Science Applications International Corporation (SAIC) announced today that Dr. Amy Alving has joined the company as the Transformation, Training and Logistics Group.s chief technology officer (CTO) and vice president for technology. Alving will collaborate with Bob Collet, the group.s chief engineer, and Don Foley, SAIC chief engineer and technology officer, to strengthen the group and company.s technical readiness reviews, independent research and development, as well as scientist and engineer career development. Alving comes to SAIC with a diverse background in government and academia, with 15 years of accomplishments in the areas of technology and national security. Most recently she served as the director of the Special Projects Office at the Defense Advanced Research Projects Agency, where she was responsible for strategic planning, operations, finances, security and program development and execution. Alving also was a White House fellow serving at the Department of Commerce in 1997-1998. Prior to that, she was an assistant and associate professor of aerospace engineering at the University of Minnesota. Alving taught graduate and undergraduate students in mechanics, fluids, and experimental methods, served as a thesis advisor to graduate students and conducted independent, basic research. Alving graduated from Princeton University in 1988 with a Ph.D. in mechanical and aerospace engineering. From saic at vision.moundalexis.com Thu Sep 22 13:11:28 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 22 Sep 2005 09:11:28 -0400 (EDT) Subject: [saic] SAIC Intelligence Group Names Scientist as Chief Technology Officer Message-ID: <20050922090922.V673-100000@vision.moundalexis.com> 23 September 2005 ; Shepard UV Online SAIC Intelligence Group Names Scientist as Chief Technology Officer http://www.shephard.co.uk/UVOnline/Default.aspx?Action=-187126550&ID=b042dc3c-3bad-482f-870f-11f0df10271e --- (SAN DIEGO and MCLEAN, VA) -- Science Applications International Corporation (SAIC) has announced that Andrew W. Palowitch has joined the company's Intelligence Group as senior vice president and chief technology officer. The Intelligence Group provides leading-edge technology services primarily for the U.S. defense, intelligence and homeland security communities in intelligence collection, processing, dissemination, collaboration and implementation. The core service offerings of SAIC's Intelligence Group include supporting intelligence and operations centers, surveillance and reconnaissance through satellite technologies and unmanned aerial vehicle operations centers and enhanced radar and sensors on weapon systems. "In his role, Andy delivers key experience as a scientist, a leader in the intelligence community, and an executive who has led successful high-tech companies," said Lawrence Prior, president for SAIC's Intelligence Group. "His expertise builds SAIC's science and technology strengths as we work to grow the Intelligence Group, both organically and through acquisitions, to increase our capabilities and service offerings and help our customers fight the global war on terrorism." Palowitch began his career as a systems engineer, serving later as a program and business development manager. In 1992, he joined SAIC in San Diego as a senior scientist and program manager, where he played a strategic role in the acquisition of Sachse Engineering Associates. He also served as chief executive officer and co-chairman of the board for Energy Compression Research Corporation based in San Diego and, later, Dynamics Technology Inc., in Torrance, Calif. In 2002, Palowitch joined the Central Intelligence Agency, where he served as director of the Director of Central Intelligence (DCI) Systems Engineering Center and director of the Systems Engineering and Analysis Office. Palowitch received his bachelor's degree in mechanical engineering from the U.S. Naval Academy, and master of science and doctoral degrees in bio-optics from the University of California at San Diego. He also has attended the Executive MBA program at Stanford University in Palo Alto, Calif, and Senior Executives in National and International Security at Harvard University in Boston. As chief technology officer for SAIC's Intelligence Group, Palowitch will work out of the company's McLean, Va., location. From saic at vision.moundalexis.com Fri Sep 23 02:45:07 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 22 Sep 2005 22:45:07 -0400 (EDT) Subject: [saic] Oberon Associates Receives SAIC Small Business Subcontractor of the Year Award Message-ID: <20050922224413.U673-100000@vision.moundalexis.com> 22 September 2005 ; Business Wire Oberon Associates Receives SAIC Small Business Subcontractor of the Year Award http://www.tmcnet.com/usubmit/2005/Sep/1185683.htm --- MANASSAS, Va. --(Business Wire)-- Sept. 22, 2005 -- Oberon Associates, Inc. announced today that it has received the Science Applications International Corporation (SAIC) 2005 Small Business Subcontractor of the Year Award. Arnold Punaro, SAIC Executive Vice President and General Manager of Washington Area Operations presented the award to Jodi Johnson, Chief Executive Officer of Oberon Associates, Inc. at an awards ceremony recently hosted by SAIC in Vienna, Virginia. This award is presented annually to an SAIC small business associate. The award is based on the small business' efforts to support and win new work for SAIC, and enhance contract performance and customer satisfaction. "Being selected from among all the many fine subcontractors that support SAIC is an accomplishment and honor," said Jodi Johnson, Oberon Chief Executive Officer. "We've just completed our third year of operation with $15.2M in revenue, and we attribute much of our success and rapid growth to our excellent relationship with multiple business units at SAIC. Everyone at Oberon shares in this award and we look forward to a continued strong and prosperous relationship with SAIC." SAIC was one of Oberon's first customers, and remains a valued company that we work with today. Oberon works closely with SAIC on a number of contracts to include Development and Fielding of the Biometrics Analytical Toolset which is deployed to Iraq and Afghanistan and providing operational, tactical and telecommunications services on the DISA Defense Information Systems Network (DISN) Global Solutions Contract. About Oberon Associates, Inc. Founded by David L. Young and Jodi L. Johnson, Oberon Associates, Inc., based in Manassas, VA., is a woman owned, service-disabled veteran owned, engineering services small business dedicated to providing responsive, quality Information Technology (IT) services to government and commercial clients at a competitive price. Oberon's IT services expertise includes: Biometrics, Operational Test Authority, Communications Engineering, Special Studies and Analyses, Systems Integration and Web Development, Systems Development, Knowledge Management and Computer-Based Training and Distance Learning. On the web at www.oberonassociates.com. From saic at vision.moundalexis.com Sat Sep 24 14:00:50 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Sat, 24 Sep 2005 10:00:50 -0400 (EDT) Subject: [saic] TSA Launches Pilot Project to Track Hazmat Trucks Message-ID: <20050924095926.R673-100000@vision.moundalexis.com> 23 September 2005 ; PR Newswire TSA Launches Pilot Project to Track Hazmat Trucks http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/09-23-2005/0004114061 --- WASHINGTON, Sept. 23 /PRNewswire/ -- The Transportation Security Administration (TSA) announced the Hazmat Truck Security Pilot this week with the award of a contract to General Dynamics Advanced Information Systems of Buffalo, N.Y. for $3,157,744. This is the second award related to the truck security pilot. In July 2005, TSA awarded a contract to SAIC of McLean, Va., for $1,434,588. SAIC will evaluate truck tracking solutions and monitor the development of a prototype truck tracking center designed to enhance security for the transportation of hazardous materials. Under the agreement, General Dynamics Advanced Information Systems will develop and demonstrate the prototype truck tracking center and the associated non-proprietary universal interface that will allow the collection of alert and tracking information from commercially available tracking systems. In the first phase of the pilot, TSA will evaluate a minimum of three technically different, commercially available solutions against criteria related to tracking capability throughout the United States. Later phases of the pilot program will involve creating and demonstrating a prototype centralized truck tracking center to provide a single point of contact for analyzing alerts or incidents and coordinating responses to potential threats. "We are eager to begin this important study to determine how to enhance security on our nation's roads," said Jim Blair, TSA's Acting Chief Operating Officer. "Evaluating available technologies will help us determine the best way to mitigate the threat of terrorists using Hazmat-carrying trucks, and then develop the capability to quickly coordinate the response to an incident or threat." The Hazmat Truck Security Pilot Program will increase domain awareness related to the transportation of hazardous materials and provide a capability for coordinated, agile responses to terrorist threats. For more information, please visit the TSA Web site at http://www.TSA.gov. From saic at vision.moundalexis.com Thu Sep 29 12:28:20 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Thu, 29 Sep 2005 08:28:20 -0400 (EDT) Subject: [saic] Integrity-178B achieves US security evaluation Message-ID: <20050929082605.S673-100000@vision.moundalexis.com> 29 September 2005 ; ferret.com.au Integrity-178B achieves US security evaluation http://www.ferret.com.au/articles/f6/0c0371f6.asp --- THE US Government's National Information Assurance Partnership (NIAP), a collaboration between the National Institute of Standards and Technology (NIST) and the National Security Agency (NSA), has formally accepted the security evaluation plan for Green Hills Software's Integrity-178B operating system. As a result, Integrity-178B is now listed on the official register of products in evaluation at http://niap.nist.gov/cc-scheme/in_evaluation.html#i. This is a significant milestone toward the most stringent certification ever undertaken by an operating system. The security evaluation of Integrity-178B began in April 2005, when Green Hills Software selected Science Applications International Corporation (SAIC), a NIAP approved Common Criteria Testing Lab (CCTL), to perform the evaluation. Since then, in parallel with the software evaluation, Green Hills Software, SAIC and NIAP have finalised the evaluation work plan and Green Hills Software has prepared the documentation required by NIAP. NIAP management formally accepted the plan on August 12. "To prepare for this next stage in the evaluation process, SAIC has had a chance to assess some of the certification evidence, artifacts and related processes that Green Hills Software has used as the basis for their DO-178B safety certifications," said assistant vice president and division manager at the SAIC Common Criteria Testing Laboratory, Julie Taylor. "We've worked with Green Hills Software to produce the Security Target and other documents that we have presented to NIAP. Green Hills has made all of its deliveries on schedule." Integrity-178B is undergoing the most stringent security evaluation undertaken by an operating system under the International Common Criteria for Information Technology Security Evaluation standard (ISO 15408). Integrity-178B is being evaluated for conformance to the Separation Kernel Protection Profile (SKPP), the most demanding Protection Profile currently defined. The evaluation is being done at Evaluation Assurance Level 6 augmented (EAL6+). On the seven-level EAL scale, no operating system has previously been certified beyond EAL5+. "Green Hills Software is leading the charge to more secure computing," said founder and chief executive officer of Green Hills Software, Dan O'Dowd. "While Integrity-178B is progressing toward an EAL6+ certification, no other operating system listed on the NIAP Products in Evaluation register is aiming beyond EAL4+. "In addition, Integrity-178B is being evaluated to the stringent Separation Kernel Protection Profile - most other operating system certifications have been to the significantly more lenient Controlled Access Protection Profile (CAPP)." From saic at vision.moundalexis.com Fri Sep 30 12:35:06 2005 From: saic at vision.moundalexis.com (Daily SAIC News) Date: Fri, 30 Sep 2005 08:35:06 -0400 (EDT) Subject: [saic] SAIC Ready to Go Public Message-ID: <20050930083215.F673-100000@vision.moundalexis.com> 30 September 2005 ; Black Enterprise SAIC Ready to Go Public http://www.blackenterprise.com/yb/ybopen.asp?section=ybbf&story_id=82780076 --- Federal Computer Week By Moore, John Employee-owned firm plans 2006 stock issue Science Applications International Corp.'s history and management rigor will ease its transition from an employee-owned firm to a public company, according to industry observers who have watched the longtime contractor operate in the federal market. SAIC plans to emerge as a publicly traded company early next year. On Sept. 1, officials filed the necessary paperwork with the securities and Exchange Commission to clear the way for an initial public offering (IPO). SAIC plans to raise as much as $1.7 billion through the IPO, according to its registration statement. The company has yet to disclose the number of shares to be offered and their price. "We need a change in our capital structure," said Ken Dahlberg, SAIC's president and chief executive officer, in a video address. He said the proceeds of the offering will enable the company to pay a special dividend to current shareholders, fund growth and provide the means to pursue acquisitions. Raising capital from the public market will also ease internal demands for cash, Dahlberg said. SAIC has spent $2.5 billion in recent years to repurchase shares from private shareholders. "We should be using our cash on hand and cash flows from operations to fund our organic growth as well as strategic acquisitions," Dahlberg wrote in a recent letter to employees and other shareholders. The move to the public arena, with its quarter-to-quarter investor expectations, will present a new experience for the relatively quiet company. But it is prepared for the pending shift. In addition, employees will continue to hold most of the company's stock. SAIC has long prided itself on being one of the nation's largest employee-owned companies. "I'm sure [the IPO] will bring a change to the culture, but SAIC is very performance-driven today," said Larry Alien, executive vice president of the Coalition for Government Procurement. SAIC is not a neophyte when it comes to financial accountability. Alien said the company has had to open its books for Defense Department auditors and, in that respect, may be better prepared for public status than the typical private company. Ray Bjorklund, senior vice president and chief knowledge officer at Federal Sources Inc., said SAIC has already been exposed to the workings of the public market as an employee-owned company. It files quarterly financial statements with the sec and reports annually on its employee stock-purchase plan. Preserving its heritage To preserve its tradition of employee ownership, the company will create a separate class of preferred stock for preIPO shareholders. Dahlberg said employees will own 80 percent to 90 percent of the company's outstanding capital stock and will control "substantially all of the voting power." According to a UBS Investment Research report, current SAIC shareholders will have 10 votes per share, while public shareholders will get only one vote per share. That decision shows the company's intent to gain an influx of capital from outside investors while not turning its back on tradition, Bjorklund said. "They are certainly very sensitive to what might happen to their employeeowned culture," he said. Shares of publicly available SAIC common stock will represent 10 percent to 20 percent of the company's outstanding shares. Institutional investors, such as banks or government pensions plans, will likely play a strong ownership role in the company's common stock. Such investors "are increasingly interested in these kinds of companies," Bjorklund said. "SAIC may see an IPO as one mechanism that will work well to capitalize on that interest level from institutional investors." Alien said investors should consider the government's stability when it evaluates companies such as SAIC. The federal government accounts for 86 percent of SAIC's revenue, according to its registration statement. "The federal government market may not be [viewed] by the financial markets of New York as particularly glamorous, but it is certainly reliable, particularly for well-established firms such as SAIC," Allen said. "The federal government always pays its bills." Broader effects are possible Bjorklund said he doesn't expect an avalanche of federal contractor IPOs to follow SAIC's offering. Bjorklund and Alien said the pool of companies that could make such a move is fairly small. But the income that results from SAIC's IPO could stimulate the federal mergers and acquisitions market, observers say. "They haven't been shy about acquisitions even as an employee- owned company," said Robert Guerra, a partner at Guerra, Kiviat, Flyzik and Associates. He said the additional funding could fuel large acquisitions at SAIC. Other observers believe SAIC's public expansion could also extend to the integrator's partners. Michael Beckley, vice president of product strategy at Appian, said the IPO is great news for partners and SAIC employees and customers. Appian, which specializes in business process management products and services, is one of SAIC's partners. "SAIC markets, sells and supports the products of software partners like Appian, so we all grow together," Beckley said. Science Applications International Corp. --- Founded: 1969. Revenue: $7.2 billion for the fiscal year that ended Jan. 31. Growth rate: 23 percent increase compared with fiscal 2004's $5.8 billion. Employees: 43,000. Key government markets: National security, homeland security, health care, telecommunications, energy and space. Contract vehicles: Applications 'N' Support for Widely Diverse End-User Requirements, Chief Information Officer Solutions and Partners 2 Innovations, Information Technology Omnibus Procurement, Millennia, Seat Management Phase II, Treasury Information Processing Support Services II and others.