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SAIC Qualifies for MDA Contract but Has Tough Road Ahead

by: Matthew Potter
September 8, 2011

Category: Boeing, Business Line, Companies, Contract Additions, Contract Awards, Department of Defense, development program, Events, Federal Budget Process, IT, logistics, MDA, SAIC, Services, SETA, U.S. Army | RSS 2.0

The Missile Defense Agency (MDA) announced that SAIC (SAIC) was one of the companies who qualified for a recent Indefinite Delivery / Indefinite Quantity (ID/IQ) science and technical service support contract. This is a five year contract and the Agency expects to award close to $300 million in tasks under it.

By qualifying it gives the right to SAIC to bid on any tasks issued under the contract against the other four companies. As with all ID/IQ contracts the government does not guarantee that any work will be awarded and that all qualifiers will receive it. Depending on the task and its requirements, though, one of the companies is probably more qualified then the others and has a better chance of winning it.

This type of work has been SAIC’s bread-and-butter for years. It is one of the largest defense contractors in terms of annual contract awards. In 2010 it was ranked fifth with over $5 billion in awards by Washington Technology. It has also branched out teaming with Boeing (BA) on the lead of the Army’s formerly new vehicle program now cancelled Future Combat System (FCS).

It also teamed with Boeing on the Army’s replacement program, the Ground Combat Vehicle (GCV), but was not awarded a contract. The two companies have since protested that decision. If the protest is upheld and a contract is awarded to them that would potentially be billions worth of business in developing, building and supporting the new armored vehicle.

In the last quarter SAIC saw a decline of about six percent in revenues and called the results “disappointing”. The company blamed the lack of new contracts as well as the overall situation with the defense industry at this time. Cuts to the defense budget may seriously affect the traditional business areas of SAIC.

Like all other defense contractors they are looking at new and different markets such as health care to provide offsets to these potential cuts. SAIC is supporting non-traditional energy production which has potential in the future as the world turns away from coal and oil based energy sources.

This also may be a blip as the company does win some new work and contracts. Overall though it should be expected that as the market declines with cuts in spending and the return of troops from Afghanistan and Iraq that more quarters like this may be in the future. The defense industry may be flat and have to become more creative. As such stock prices and valuations also may be flat or decline.

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