Minuteman Ventures Co-sponsors Nov. 16 Panel Session on Trends in Growth and Liquidity Capital

Industry consolidation among federal government contractors, already an established trend, promises to continue for the foreseeable future, due in large part to the expanding array of options for growth and liquidity capital. Private equity groups (PEGs) have been investing in government contractors for several years; recently, federal contractors have begun to use special purpose acquisition companies (SPACs) and reverse mergers as well.

What do these developments mean for federal contractors looking to acquire, sell their company, raise capital, or achieve greater liquidity for their shares?

On November 16, the Professional Services Council (PSC) is sponsoring an event addressing government sector investing and M&A at the Tyson Ritz Hotel in McLean, Va. Minuteman Ventures LLC and law firm Holland & Knight LLP are co- sponsors. The focus of the event will be on SPACs, PEGs and Reverse Mergers (more on them below).

An expert panel will offer insights and perspectives on the state of the market:

Peter Schulte, a founder and Managing Partner of CM Equity Partners, a PEG that invests in government services companies, and President of Federal Services Acquisition Corp., New York, NY, a SPAC that has registered with the SEC for an IPO

Tom McMillen, Chairman of Fortress America Acquisition Corp. (OTC BB:FAAC.OB), Arlington, VA, a SPAC focused on homeland security that completed its IPO in July 2005

Terry Collins, Chairman, CEO and President of ArgonST (NASD:STST), Fairfax, VA, a publicly traded firm that went public via reverse merger with Sensytech in September 2004

William J. Mutryn, a partner in the Washington, DC office of law firm Holland & Knight who co-manages the firm's national M&A practice

Opening remarks will be provided by Alan Chvotkin, Senior Vice President and Counsel, Professional Services Council. PSC is the nation's leading organization dedicated to the interests of companies that provide professional services to federal government clients.

Moderating the event will be Chuck Chappell, Director, Washington Operations, Minuteman Ventures LLC.

Far from being the sole province of Wall Street sophisticates, the event — and the topic in general — also has relevance to the following:

• Smaller and mid-tier firms contemplating liquidity as well as growth requirements
• Larger strategic acquirers seeking an edge as an acquirer
• Passive shareholders in private firms seeking liquidity or looking for ways to drive value in their firm beyond what otherwise appears viable

First, some definitions.

Private Equity Groups (PEGs) raise capital from institutions and qualified individuals to invest in companies, either buying the entirety of the business or taking a minority share. As often as not they leave certain key executives in place, purchasing some of their shares while providing stock options in the newly created company to drive increases in future valuation for themselves and the entity as a whole. PEG fund managers are usually active members of their portfolio company boards and drive corporate strategy. Typically these funds will sell the company within five years of investment or take the entity public. Some PEGs, like American Capital Strategies (NASD:ACAS), are themselves public.

Special Purpose Acquisition Corporations (SPACs) are 'blank-check' companies that raise capital in the public market. Their charter calls for acquisition of companies in certain sectors or with specific characteristics. Once the platform company is acquired, it becomes a public entity, with its current management or newly installed executives managing the operations. The persons who raised the fund would more likely serve as company directors and handle corporate functions related to SEC compliance and Wall Street communication.

Reverse Mergers — This describes the act of a private company merging into a public company, either an active, operating one or a corporate 'shell' that has no operations though retains a public listing. The merging companies may raise capital in conjunction with the merger but not necessarily so.

What's New about PEGs in Government Contracting?

PEGs have invested in the sector for some time, having applied their uncanny ability honed in other sectors to buy government contractors at lower prices and sell or take them public at higher ones.

There appears no sign of let-up in PEG interest in the sector. Why is that?

Serial entrepreneurs are now more common in federal contracting. This has two effects — more PEGs funds have started as a result of founders who sold their firms and want to reinvest. Further, executives who have sold their companies are looking to ride high again in another platform, and will use PEG funding to leverage their own funds to do so.

PEG confidence in the sector still seems strong, even through various IPO cycles. PEGs need a receptive public offering market as one option to monetize their investment in portfolio companies. The IPO market for government contractor IPOs stood tall in 2002, with PEG-backed firms such as Veridian and Anteon going public, but has softened since. Even so, PEG investment has continued apace with investments in this sector.

From July 1, 2004 through June 30, 2005 PEGs accounted for 13 M&A transactions (out of 84, or 15%) in the sector, either directly investing in firms or investing through their portfolio companies. Now, as we sit in the fall of 2005. at least three firms plan to go public — SAIC, NCI Information and DynCorp (the latter held by PEG Veritas Capital), and a fourth, QinetiQ, the UK firm that has become an active acquirer of US firms, planning a London-based IPO.

A rising tide lifts (the interest of all) PEG boats. Other PEG funds, noticing the success of those invested in government contractors, have entered the sector, with the intent of investment.

Sector dynamics favor industry growth. PEGs continue to be attracted to a market that is highly fragmented where funding is certain to continue (some 30% of the federal workforce will be eligible for retirement in 2006, thus promoting further outsourcing), and the market is slowing (requiring acquisition to grow market share)

Are SPACs legitimate investment vehicles in the federal sector?

Investors ponied up over $40 million for Fortress America shares this summer. With its shared trading upon the IPO, the company is now searching for its lead acquisition. A highly motivated buyer, the Company seeks sellers with dual use applications (government and commercial). Fortress America focuses on firms that support disaster and attack mitigation, including Planning, Prevention, Response and Recovery.

What makes SPACs noteworthy, including Fortress America, is the requirement to acquire another firm within 18 months of the IPO with a market value of at least 80% of the then net assets of the company. If no deal is struck, then the company will have to return the raised capital to its investors.

Good news for selling companies that want a motivated buyer. The hitch is that the buyer will probably have to accept some largely illiquid stock from Fortress America as part of its consideration.

For the right seller, they immediately become a public company and benefit by having access to the capital markets to grow and the opportunity for improved upside on the portion of consideration they took in stock.

FSAC, now trying to raise over $100 million in the same manner, would operate with same time fuse — acquire within 18 months or give the money back.

Clearly SPACs have caught on nationally in a variety of industries. From January 1, 2005 through June 30, 2005, thirty SPACs filed IPO registration statements with the SEC, compared with only fourteen such filings during all of 2004.

Reverse Merger: Coming Trend?

The merger of private Argon into a smaller public company, Sensytech, in September 2004, perhaps heralds the increased use of this mechanism in the federal sector.

Rather than initiate the IPO process, Argon saved itself time, capital and management stress by immediately becoming public upon the merger.

While now enduring the weight of SEC regulations, Argon is able to leverage the public markets for capital and take advantage of Sensystech's investor following and knowledge of public company rule compliance, all the while realizing the benefits of the merger.

For companies who are not yet ready to sell, and feel they can step up quickly to public company status, the reverse merger may be a vehicle to try.

For a brochure and registration form for this event, click here.

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Dr. William Ribich, President and CEO of Foster-Miller, Inc. (a subsidiary of QinetiQ)

Life has been a blur of late for Foster-Miller, Inc. President and CEO Bill Ribich. M&A can do that to you.

A privately held company since its founding in 1956 by three MIT graduates, Mass.-based Foster-Miller grew over the years on the strength of its technology innovation, becoming particularly adept in developing mission-critical DoD applications. The company became the 'kingpin' in use of the U.S. government's Small Business Innovative Research (SBIR) program, which has handed out $20 billion in grants and contracts to smart technology ideas to companies with fewer than 500 employees.

Over time Foster-Miller attracted suitors but never bit. Than came QinetiQ, the burgeoning UK firm with passion for invention and an even wider breadth in technology and scientific products and solutions. Foster-Miller decided to sell to QinetiQ late in 2004, netting $163 million.

Ribich remains as President and CEO of Foster-Miller, which has now became one of three legs of the QinetiQ drive to penetrate North American defense markets. (QinetiQ also bought Westar Aerospace and Defense last year and this year acquired Apogen Technologies.)

The impact of the QinetiQ deal on Foster-Miller showed up quickly. Foster-Miller announced August 1 it was acquiring Virginia-based $44.6 million Planning Systems, Inc. (PSI), whose technology developments include multi-level security networks, gunshot location, precision military air drop, data mining, on-the-move landmine and IED detection, precision vibration control, and speech-capable PDAs.

Minuteman Ventures LLC President Paul Serotkin caught up with Ribich recently.

PS: What distinguished QinetiQ as an acquirer?

BR: The cultural fit and the opportunities jumped out at us. While immersed in defense markets, Foster-Miller also has a sizable commercial practice, as did QinetiQ. Seldom had we found a company with experience in both markets, nor with the collection of disparate and advanced technologies that we had. It was relatively easy for both parties to relate to each other.

The opportunities beyond what we could have achieved on our own are already apparent. They bring additional technical capabilities, extraordinary IP (intellectual property) and superior legal support that Foster-Miller can use. It would have taken us years internally to create the same opportunities for ourselves, and then with only great cost and risk.

This interview was published in a recent issue of Defense Mergers & Acquisition (DM&A). For the full text, click here.

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FGR offers analysis of a recent M&A transaction involving government services contractors. The analysis is written by Stuart McCutchan, president and CEO of InfoBase Publishers, Inc. © and editor of the Defense Mergers & Acquisitions, a premier source for information on defense/aerospace M&A. Opinions expressed below are those of InfoBase. All rights reserved. For more on InfoBase Publishers' services, contact Bill Burton (410-820-6821, wkburton@infobasepub.com ).

DRS Technologies, Inc. (NYSE: DRS) signed a definitive agreement to acquire Engineered Support Systems, Inc. (NASDAQ: EASI).

St. Louis, Mo.-based Engineered Support Systems, is a supplier of integrated military electronics, support equipment and technical services focused on advanced sustainment and logistics support solutions for all branches of the U.S. armed services, major prime defense contractors, certain international militaries, homeland security forces and selected government and intelligence agencies. ESSI also produces specialized equipment and systems for commercial and industrial applications. Operating through two business segments - Support Systems and Support Services - ESSI is comprised of 14 subsidiaries and employs 3,600 people. Primary areas of expertise include engineering, logistics and training; advanced technology; asset protection systems; telecommunications and information technology; integrated logistics; systems integration; heavy and light military support equipment; power generation equipment and defense electronics systems.

DRS Technologies' chairman, president and CEO Mark S. Newman commented, "The acquisition of Engineered Support Systems will create a strong, diverse company, adding a significant business base in technical and logistics support services, integrated military electronics and support equipment with broad access to a variety of government funding accounts, including procurement and operations and maintenance (O&M). Engineered Support Systems is uniquely focused on sustainment of military forces and respected as a rapid- response solutions provider. The combination of the two companies will firmly establish DRS Technologies as a leading provider of defense electronics products and services with a run rate in excess of $2.5 billion in annual revenues and a major role in armed forces modernization, personnel mobility and O&M support. An important milestone in the growth of our company, this acquisition will strengthen our strategic position and expand our program participation and platform applications with all of the military services, while providing new opportunities for growth in intelligence and homeland security markets."

Engineered Support Systems vice chairman and CEO Gerald A. Potthoff stated: "This is another exciting chapter for ESSI, taking our company to the next level and delivering excellent value to our stockholders. DRS Technologies is a highly- regarded presence in defense technology, and with ESSI will become a sizable, diversified industry competitor, strategically positioned for exciting growth opportunities. We believe the combination will benefit customers, business associates, investors and employees. This transaction undoubtedly will bolster the combined company's ability to accomplish its mission to support the military's near-term force modernization and emerging transformation initiatives."

DRS Technologies said the acquisition offers opportunities to leverage synergies and to accomplish several objectives. It is expected to:

• Enhance DRS's market leadership position, adding to its critical mass and extensive array of products and significantly expanding the company's logistics support and services business;
• Complement the company's customer base, strengthening positions with the U.S. Army, Air Force and Navy, intelligence agencies, prime contractors and international military forces;
• Increase access to government funding budgeted within the procurement and O&M accounts;
• Increase content on military programs, including those related to power generation, conversion, distribution and power management; electro-optical and infrared (EO/IR) technology; vehicle diagnostics and automated test equipment; and radar systems;
• Enhance technology capabilities in intelligence through satellite communications (SATCOM)/wireless services and systems integration;
• Broaden DRS's homeland security capabilities;
• Diversify the company's program base so that no single product or program accounts for more than 3 percent of annual revenues and the ten largest programs account for approximately 20 percent; and
• Generate earnings accretion and strong free cash flow.

TERMS

On Sept. 22, 2005 DRS announced it had signed a definitive agreement to acquire all of the outstanding stock of Engineered Support Systems, Inc. for $43.00 per share through a combination of cash and DRS common stock.

Each share of ESSI common stock will be converted into the right to receive a combination of $30.10 in cash and a portion of a share of DRS common stock valued at $12.90, provided that the average closing price of DRS's common stock prior to the closing of the transaction is between $46.80 and $57.20 The exchange ratio will increase or decrease in proportion to the average closing price of DRS's common stock. A collar provides that the exchange ratio will not exceed 0.2756 of a share nor be less than 0.2255 of a share of DRS common stock.

The cash portion of the acquisition, together with the debt of ESSI to be refinanced, will aggregate approximately $1.49 billion at closing. Total consideration for the acquisition, including an estimated $88.3 million of ESSI's debt to be refinanced at closing, is approximately $1.97 billion.

DRS expects to finance the cash portion of the acquisition by utilizing existing excess cash on hand and through a combination of bank borrowings and the issuance of debt securities.

The acquisition is expected to be accretive for DRS in its first full fiscal year of operation with DRS ending March 31, 2007, contributing approximately $0.20 to earnings per share and approximately $1.23 billion to revenues.

Upon completion of the acquisition, ESSI will become DRS's third operating group, focused on support and services.

DRS Technologies executive vice president and CFO Richard A. Schneider stated: "We have constructed an offer that balances prudent financing with our objective to deliver earnings accretion and top-line growth. This approach is consistent with our experience on the acquisition of Integrated Defense Technologies in 2003, whereby we delivered on our commitment to deleverage net debt to earnings before income taxes, depreciation and amortization (EBITDA) from 4.0 to 2.9 in two years and achieve meaningful earnings accretion and growth."

The transaction is expected to close before the end of DRS's fiscal 2006 and is subject to customary regulatory approvals and other closing conditions, including approval by DRS's and ESSI's stockholders at respective special stockholder meetings.

Bear, Stearns & Co. Inc. is serving as financial advisor to DRS on the transaction and has provided committed financing necessary for DRS to consummate the acquisition and for ongoing working capital needs. Merrill Lynch & Co., Inc. also is serving as financial advisor to DRS for the purpose of rendering a fairness opinion. Lehman Brothers Inc. is serving as financial advisor to ESSI on the transaction.

ANALYSIS

In one sense this deal is a stretch for DRS Technologies. The company, which had $1.3 billion in revenues for the year ending on March 31, is buying a company which is fully 67 percent of its size. That puts this deal far out in front of the November 2003 buy of Integrated Defense Technologies, a $304 million per year company which was 45 percent the size of the DRS at that time.

In terms of market capitalization the extent of DRS's reach is even more breath-taking: ESSI has a market cap of $1.4 billion, roughly equal to DRS's own.

The deal is expensive*, but a couple of comparisons with the IDT deal might perhaps soothe the jangled nerves of DRS investors (the deal triggered a 5% drop in the value of DRS stock the afternoon the deal was announced). The IDT deal, like this one, was paid for with a mixture of cash and stock. In terms of price to net income, both deals cost about the same (25 times for IDT, 26 times for ESSI). Running the price against expected EPS for 2006 reduces the multiple to 18.4 — less than that paid for either United Defense or Titan earlier this year. Bottom line: This deal looks like nothing so much as a larger version of the IDT deal. If so, DRS shareholders should take heart: the company's share price has nearly doubled since the IDT deal closed (from $26 to $48 on Sept. 21, the day before the ESSI deal was announced).

That rise was grounded in steadily improving performance. EBITDA was $181.2 million in the company's 2006 fiscal year, a healthy 13.8% of revenues. That compares with 12.1% in the 2004 fiscal year. We're not sure we're totally buying the line from CFO Richard A. Schneider about this deal (that net debt to EBITDA has gone from 4.0 to 2.9 in two years). The company's long-term debt to EBITDA provides a virtual mirror image of this trend — increasing from 2.7 in FY04 to 4.0 in FY06. In a climate of increasing interest rates, debt-fueled growth is not without risks. (Standard & Poor's and Moody's have both said they may cut DRS's credit ratings because of the debt being taken on in this deal.) Add to that Wall Street's perpetual jitters about the sustainability of military spending, and you're well on the way to understanding the marketplace's doubts about whether DRS can pull another rabbit from its hat.

While the company may be in the position of proving all over again that it can pull off the big deal financially, its ability to make the deal work from an operational perspective isn't in question. ESSI adds a services dimension DRS didn't have before, giving the company some exposure to the operations and maintenance (O&M) appropriation — which, at $150 billion, accounts for just as much of the Pentagon's spending as does procurement. DRS chairman and CEO Mark S. Newman states the case succinctly: "One of the weakest links we've had in our business is on the service side. Anytime the military deploys, ESSI is there with generators, shelters and setting up satellite communications."

DRS says that ESSI will become a third operating segment of the company, focused on support and services. That's fine as far as it goes — the company doesn't now have a services oriented segment. But we don't expect that structure to hold up very well in the mid- to long term. First, the obvious: the gallant strategic efforts of ESSI's leadership notwithstanding, the company continues to derive something like half of its revenues from hardware. That should go down just fine with DRS, of course: it's a hardware company by birth and by preference. DRS hasn't done nearly as much to bridge into the touchy-feely stuff as has ESSI.

There's a lot in the hardware side of ESSI that should have DRS' divisional chiefs drooling. First, the company's formidable capabilities in power generation, conversion, distribution and power management. This is a very hot growth niche, and one which DRS knows quite a bit about. We don't expect for it to take long for ESSI's businesses in this area to wander over to the Power Systems Business of DRS' C4I Group. Being a part of a larger entity, where it will be able to call on greater resources, can only help the Deployable Power Generation and Distribution System project, which has been experiencing schedule slippages.

We likewise suspect that the subsidiary Systems & Electronics, Inc. (SEI) — the 800-pound gorilla in ESSI's Support Systems segment — will likely find a happy home within the Reconnaissance, Surveillance & Target Acquisition (RSTA) business of DRS's Surveillance and Reconnaissance Group. The RSTA business, with its strong focus on the U.S. Army as a customer, is a natural home for SEI.

With SEI and the power businesses gone, the disposition of the remaining businesses within ESSI's Support Systems segment becomes pretty much a matter of academic interest. These being hardware businesses, and DRS being DRS, we suspect that they will continue to operate in place with a minimum of disruption. We do suspect that these businesses — Engineered Air Systems, Engineered Coil, Keco Industries, and Engineeered Environments — will also find homes within DRS' existing segments.

This will leave only one of ESSI's two segments — Support Services — from which to stand up DRS' new services sector. That business had $287 million in revenues in the year ending Oct. 31, 2004, accounting for just 32.5% of ESSI's overall revenues. But that's nearly a year ago, and ESSI has been busy adding to its services business since: for the most quarter (ending July 31), services accounting for nearly 44% of the company's revenues. So services is nearly a $500 million business — and for a company like DRS, that's all you need to build on.

The company's debt situation may limit its ability to make the kind of bolt-on deals it would like. If so, we could potentially see DRS move to adopt the strategy recently adopted by another up-and-coming defense equipment supplier — Cobham plc (LSE: COB.L). Cobham has recently adopted a policy of selective divestitures to keep its profitability high and its debt low. The company has agreed to sell its $210 million/ year Fluid and Air division and now its Countermeasures business is on the block as well, drawing cheers from financial markets. Likewise, if DRS is serious about increasing its weighting in services, one sure route there is to take a hard look at its hardware businesses, decide which are core, and monetize the others.

That route would be sure to energize Gerald Potthoff's management team, most of whom are staying on with the new regime.

* Although ESSI shareholders may not see it that. DRS's $43/share offer may represent a 29% premium to the closing value of ESSI shares on Sept. 1, but ESSI shares touched a high of $42.51 as recently as February 8.

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FGR presents briefs on selected technology services contracts awarded by the U.S. government to federal contractors during the last two months. The briefs are compiled by InfoBase Publishers, Inc.©, a leading provider of competitive intelligence for the worldwide defense/aerospace industry. All rights reserved. For more on InfoBase Publishers' services, contact Bill Burton (410-820-6821), wkburton@infobasepub.com or click infobasepub.com.

ACA NRCC Names Four for Doctrine Training and Support Services at Fort Knox

On August 11, 2005, the U.S. Army Contracting Agency, Northern Region Contracting Center (ACA NRCC) (Ft. Eustis, VA) awarded four parallel, five-year, $97 million, firm-fixed- price, IDIQ contracts to provide doctrine training and support services for the Mounted Forces, U.S. Army Armor Center (USAARMC)(Fort Knox, KY).

The recipients were:

— Camber Corp. (Huntsville, AL) (W912SU-05-D-0004).

— Northrop Grumman Mission Systems - Defense Mission Systems (DMS) (McLean, VA) (W912SU-05-D-0006).

— CACI, Inc. - Federal (Arlington, VA) (W912SU-05-D -0003).

— Dynamics Research Corp. (DRC) (Andover, MA), which said in a statement the company opened a new office in Radcliff, KY, to support the effort (W912SU-05-D-0005).

Under the multiple-award program, these companies now will compete for task orders to provide training and research development products for mounted forces. USAARMC will serve as the user representative in the development of training methodologies and products, concepts, doctrine, organization requirements, and material requirements for each functional area. The executive agent for this effort is the Directorate of Training and Doctrine Development (DTDD) (Fort Knox, KY). Specifically, work would update armor-proponent training products, programs, and strategies in support of the mounted force, and could directly impact mounted combat systems, reconnaissance and security vehicles, command and control vehicles and armed robotic vehicles.

The contract was competitively procured through solicitation W912SU-05-R-0002, which was issued on May 28, 2005, and called for full & open competition. One award was reserved for small businesses only (NAICS 541990; $6 million). Proposals were due on June 19, 2005.

AFFTC Chooses Several Companies for Advanced Vehicle System Modeling & Simulation (AVSMS)

The U.S. Air Force Flight Test Center (AFFTC) (Edwards AFB, CA) awarded several parallel, three-year, $24 million, IDIQ contracts for the Advanced Vehicle System Modeling And Simulation (AVSMS) program.

The recipients were:

— Astrox Corp., Inc. (College Park, MD) (FA9300-05-D -0003)

— TechnoSoft, Inc. (Cincinnati, OH) (FA9300-05-D-0004)

— Earth Space Applications, Inc. (San Diego, CA) (FA9300-05-D-0005)

— Aero Thermo Technology, Inc. (AT2) (Huntsville, AL) (FA9300-05-D-0006)

— Faulkner Consulting, Inc. (Cameron Park, CA) (FA9300-05-D-0007)

— M4 Engineering, Inc. (Signal Hill, CA) (FA9300-05-D -0008)

— Combustion Research & Flow Technology, Inc. (Pipersville, PA) (FA9300-05-D-0009)

— Works Engineering, Inc. (Atlanta, GA) (FA9300-05-D -0011)

— [company name not known] (FA9300-05-D-0012).

— [company name not known] (FA9300-05-D-0013).

Under the multiple award program, these companies now will support the Air Force Research Laboratory, Propulsion Directorate, AFRL/PR West (Edwards AFB, CA) by providing research and development (R&D) in five research areas:

— Model Development, which covers weights and sizing models, structural design models, rcs and mechanical flight control models, propulsion performance models, trajectory models, aerodynamic models, aero-heating models, operations models and cost models.

— Software Integration, which covers adaptive modeling language (AML), conceptual design environment, optimization.

— Applications and Assessments, which covers launch and ballistic missile applications and assessments, in-space vehicle applications assessment.

— Electric Propulsion (sub-research areas to be determined at a later date).

— Advanced Propulsion, which covers software architecture development, fluid and plasma dynamics modeling, multi-phase and material modeling, nuclear physics and engineering models and concept analysis, evaluation, and comparison).

This work will be complete by September 2008. The Air Force can issue delivery orders totaling up to the maximum amount indicated above, although actual requirements may necessitate less. At this time, no funds have been obligated. The contracts were competitively procured through broad agency announcement (BAA) 05-01-PKTB, which was issued in March 2005 and called for competition limited to small businesses only(NAICS 541710, 541330, and 541511).

JMAR Competitively Selected for Phase I SBIR Grant by U.S. Army for BriteLight Laser Application

JMAR Technologies, Inc. (San Diego, CA) announced that they have been competitively selected for the award of a Phase I SBIR Grant from the U.S. Army to support research leading to the development of a compact laser system capable of real- time spectrochemical hazard analysis in the field.

This new detection approach is based on JMAR's proven BriteLight technology and offers an improved method of detecting hazardous materials from a safe, remote location. JMAR says taking advantage of BriteLight's unique combination of excellent spatial beam quality and high pulse energy, this new laser will be specially designed for adjustable, dual-pulse mode operation to support laser-induced breakdown spectroscopy (LIBS). LIBS techniques are well suited to field analysis as only the laser beam must reach the sample, allowing remote monitoring of hazardous materials or materials situated in difficult to reach locations. With minimal modification, JMAR's diode-pumped, BriteLight laser will provide the performance, weight and cost advantages needed for a field portable LIBS system.

The SBIR program was developed to stimulate technological innovation in small businesses to meet federal research and development needs. It also fosters commercialization of innovations derived through SBIR support. Phase I of the program is intended to support feasibility studies and proof of concept. Duration of Phase I is typically 6 months and offers up to $100,000 in funding. Following successful completion of the Phase I contract, the Company intends to pursue a Phase II SBIR contract to further advance this new application.

JMAR's BriteLight Modular Solid State Laser System provides a unique combination of high brightness, short pulse duration, and exceptional beam quality in a modular, compact design. The product also offers research scientists and manufacturing engineers a versatile laser source that can be used for a multitude of applications, including spectrochemical analysis, nanotech scale fabrication, microscopy and soft X-ray source generation.

"We are pleased to have this opportunity to support the U.S. Army by working to adapt our modular BriteLight laser to handle the task of remote, non-contact detection of hazardous materials," commented Ronald A. Walrod, President and CEO of JMAR. "This new use of our core laser technology may lead to multiple exciting applications.

NASA MSFC Chooses Digital Fusion for Acquisition & Business Support Services (ABSS)

The NASA Marshall Space Flight Center (MSFC) (Huntsville, AL) awarded Digital Fusion Solutions, Inc. (Huntsville, AL) a five- year, $48.8 million, firm-fixed-price, IDIQ contract for Acquisition & Business Support Services (ABSS).

Under the contract, the company will perform a range of operational and administrative support for the Office of the Chief Financial Officer, the Office of Procurement, and other Offices and Directorates at NASA MSFC. Business services includes program management, order management and control, budget integration and financial analysis, support to various business systems, assessing and developing business processes, and developing business models and plans to assist MSFC strategies. Acquisition support includes administrative and data processing services acquisition policy services, price and cost analysis support, procurement systems services, special studies and acquisition management services.

Digital Fusion is the prime contractor and does not anticipate using any subcontractors on the contract.

The contract contains a two-week phase-in (which began on September 15, 2005), a one-year base and four one-year options that, if exercised, could increase its total cumulative value to $48.8 million and extend the period of performance through September 30, 2010. It has a minimum order quantity value of $986,000.

The contract was competitively procured through a solicitation that called for competition limited to small businesses only.

The procurement is considered a follow-on effort that consolidates several previously existing acquisition and business support services contracts.

"We are delighted and deeply grateful to be selected through the competitive procurement process to support NASA MSFC in one of MSFC's critical business roles," said Frank Libutti, chairman and interim CEO. Gary Ryan, president and chief operating officer added "Our goal is to provide service exceeding customer expectations while demonstrating our commitment to safety, NASA Family, excellence and integrity. This win demonstrates Digital Fusion's deep commitment to the competitive process and solidifies our position as a professional and IT service provider within the competitive market place."

NASA Taps ASRC for Career Development Contract

The NASA Goddard Space Flight Center (Greenbelt, MD) awarded ASRC Management Services (ASRCMS) (Anchorage, AK) a five-year, $49 million contract to provide Career Development and Knowledge Sharing services for agency engineers and program and project managers.

Under the contract, the company will provide support services through formal classroom, e-learning, and cutting-edge knowledge sharing forums, activities and publications. ASRCMS will provide these services for the NASA Chief Engineer's Integrated Learning and Development Program (ILDP), charged with supporting the development of individual engineers, project managers, project teams and intact NASA projects and programs at every level of NASA and across all its Centers.

Furthermore, ASRCMS will provide expertise in areas such as risk management, cost containment, schedule maintenance, and high-performance team development to ensure best practices and mission success. In addition, ASRCMS will benchmark and promulgate best and emerging engineering and project management practices across the government, industry, academia, and the private sector.

ASRCMS's only subcontractor is DTI Associates, Inc. (Arlington, VA). The contract contains a one-year base and four one-year options that, if exercised, could increase its total cumulative value to $49 million and extend the period of performance through August 2010 (estimate). The procurement is considered a follow-on that combines several existing NASA engineering and management programs (i.e., the NASA Academy of Program & Project Leadership and NASA Engineering Training) to form the Integrated Learning and Development Program. NOTE: ASRC Management Services is an 8(a) Alaskan Native Corporation and a subsidiary of ASRC Federal Holding Co., an Arctic Slope Regional Corp. company.

NAVFAC Funds Kira for FY06 BOS at NAS Jacksonville

The U.S. Naval Facilities Engineering Command, Engineering Field Activity Southeast (Jacksonville, FL) awarded Kira, Inc. (Miami, FL) a $10 million modification to a previously awarded firm-fixed price, IDIQ (N69272-03-D-1010) for base operating support (BOS) at Naval Air Station (NAS) Jacksonville, FL.

The modification exercises an option for support from October 1, 2005, through September 2006 (FY06). Award of this option increases the total cumulative value to $20.6 milion. Contract funds will expire at the end of the current fiscal year. The basic contract was a HUBZone Small Business Set-Aside and competitively procured via the NAVFAC e-solicitation website with five proposals received, and award made on December 5, 2003.

Navy FISC Picks MultimaxArray to Support NSSG's Facilities and Equipment Maintenance System

The U.S. Navy Fleet Industrial Supply Center Norfolk, Philadelphia Detachment (FISC) (Philadelphia, PA) awarded MultimaxArray FEM (Largo, MD) a five-year, $36.7 million, cost- plus-fixed-fee, IDIQ contract (N00140-05-D-0057) for information technology (IT) services in support of the Naval Systems Support Group (NSSG) (Norfolk Naval Shipyard, VA).

Under the contract, which has an estimated level of effort (LOE) of 110,800 labor-hours per year, the company will support the Facilities and Equipment Maintenance (FEM) system throughout DoD and Civil Works Districts of the Army Corps of Engineers. MultimaxArray FEM will be responsible for the development, implementation, maintenance, training, configuration management, and help desk support of the FEM applications.

The contract contains a one-year base (worth $6.9 million) and four one-year options that, if exercised, could increase its total cumulative value to $36.7 million and extend the period of performance through September 2010.

The contract was competitively procured through solicitation (N00140-05-R-0035), which was issued on March 22, 2005, and called for full & open competition (NAICS 541511). Proposals were due on May 4, 2005. A total of six offers were received. NOTE: MultimaxArray is a joint venture of Multimax, Inc. (Largo, MD) and Array Information Technology, Inc. (Greenbelt, MD). The joint venture was organized by Multimax under the Small Business Administration's Mentor-Protege Program for companies. Multimax is acting as the mentor, and AIT (which is participating in the SBA's 8(a) Business Development Program) as the protege.

Navy SPAWAR SSC-C Makes M.C. Dean Contractor for "Phone Home" Satellite Network

U.S. Naval SPAWAR Systems Center Charleston (SSC-C) (Charleston, SC) awarded M.C. Dean, Inc. (Chantilly, VA) a two-year, $18.5 million, firm-fixed-price, IDIQ contract (N65236-05-D-5157) for a second-generation, satellite-based, Internet broadband service and Voice Over Internet Protocol (VoIP) network in support of deployed military personnel.

Under the contract, the company will provide Morale, Welfare, and Recreation (MWR) satellite IP services, IP voice, video, and data services via multiple Very Small Aperture Terminal (VSAT) satellite networks to non-Global Information Grid (GIG) operations in the European Command, Central Command Areas of Responsibility. Satellite services will be required for approximately 200 Internet facilities in Iraq and the Balkans that allow military personnel to make telephone calls, access the Internet, and use e-mail. The work will be performed in Iraq (75%) and the Balkans and other locations (25%).

The contract contains a one-year base (worth $7 million) and one one-year option that, if exercised, could increase its total cumulative value to $18.5 million and extend the period of performance through August 2007. Contract funds will not expire at the end of the current fiscal year.

The contract was competitively procured through solicitation N65236-05-R-0518, which was advertised on December 8, 2004, and called for full & open competition (NAICS 517410). A total of 10 offers were received.

Navy SPAWAR SSC-C Selects Modulant Solutions for IT Services

The U.S. Naval SPAWAR Systems Center Charleston (SSC-C) (Charleston, SC) awarded Modulant Solutions, Inc. (Charleston, SC) a five-year, $47.6 million, cost-plus-fixed-fee, IDIQ contract (N65236-05-D-6851) for information technology (IT) services.

Under the contract, the company will provide ship and shore architecture development, new standards engineering, prototype installation, application development, data interoperability, system design, systems management and maintenance; data collection, analysis, and other management implementation efforts in support of Task Force Web, Navy Tool for Interoperability Risk Assessment, Open Systems Interconnection layer testing, Navy Network Engineering, Data Translation, Data Mediation, Data Mapping, and many other current and future projects as required by SSC-C. The work will be performed in Charleston, SC (70%) and at other government activities (30%).

Modulant's subcontractors are Eagan, McAllister Associates, Inc. (EMA) (Lexington Park, MD), and four small and disadvantaged businesses. The contract contains a one-year base (worth $10.4 million) and four one-year options that, if exercised, could increase its total cumulative value to $47.6 million and extend the period of performance through September 2010. Contract funds in the amount of $50,000 (minimum guarantee) will not expire at the end of the fiscal year.

The contract was competitively procured through solicitation N65236-03-R-0332, which was issued on January 16, 2004, and called for competition limited to small businesses only (NAICS 541330). Proposals were due on March 1, 2004. A total of five offers were received.

NAWC-TSD Names Five to Develop GRTS Trainers

The U.S. Naval Air Warfare Center - Training Systems Div. (NAWC-TSD) (Orlando, FL) awarded five parallel, $9 million, five-year, IDIQ contracts, worth $45 million collectively, to perform software application development related to the Generic Reconfigurable Training System (GRTS).

The recipients were:

— RDR Inc. (Centreville, VA) (N61339-05-D-0029), which will perform its work in Pensacola, FL; Orlando, FL, and Centerville, VA.

— Northrop Grumman Mission Systems - Defense Mission Systems (DMS) (McLean, VA) (N61339-05-D-0027), which will perform its work in Middletown, RI.

— CACI, Inc. - Federal (Arlington, VA) (N61339-05-D -0030), which will perform its work in Fairborn, OH and Orlando, FL. CACI's role includes a focus on GRTS support for shipboard intelligent tutoring systems, an innovative type of training that provides individualized instruction via a "virtual" tutor. The company will also support PC-based training systems and damage control systems for hull, mechanical, and electrical systems.

— BMH Associates, Inc. (Norfolk, VA) (N61339-05-D -0031), which will perform its work in Norfolk, VA, and Orlando, FL.

— Manufacturing Engineering Systems, Inc. (Beltsville, MD) (N61339-05-D-0028), which will perform its work in Beltsville, MD.

Under the multiple-award program, these companies now will compete task orders to develop PC-based GTRS trainers and modeling and simulation (M&S) support for GRTS that provide computer-aided intelligent training systems and training on damage control systems for the Navy. The Navy's GRTS program enables training modules to be created and adapted for specific purposes quickly and efficiently. With their innovative simulation components, GRTS provides training and practice techniques that allow users to become proficient in applications even without hands-on experience.

The contract was competitively procured through solicitation N61339-05-R-0023, which was advertised in January 2005 and called for full & open competition. Some awards were reserved for small businesses only (NAICS 541330; $23 million). A total of nine offers were received.

NAWCAD Taps AeroVironment for UAV Development, Demonstration and Production

The U.S. Naval Air Warfare Center-Aircraft Div. (NAWCAD) (Lakehurst, NJ) awarded AeroVironment, Inc. (Monrovia, CA) a not-to-exceed $9.6 million Phase III Small Business Innovative Research (SBIR) Program contract (N68335-05-C-0356) for Topic N87-190 entitled "Unmanned Aerial Vehicle (UAV) Development, Demonstration, and Production."

The objective of the topic is to bring a family of advanced UAVs to initial production. For Intelligence, Surveillance and Reconnaissance (ISR) mission, new vehicles concepts, as well as existing production UAVs, will be explored with the goal of rapid deployment for field trials. This effort will include research and development, UAV procurement, field trials, and user training. Work will be performed in Simi Valley, CA, and is expected to be completed in February 2011. Contract funds will not expire at the end of the current fiscal year.

This contract was competitively procured using SBIR Program Solicitation under Topic N87-190, with four offers received.

NAWCAD Taps Organizational Strategies for Advanced Training Technology Delivery System

The U.S. Naval Air Warfare Center-Aircraft Div. (NAWCAD) (Lakehurst, NJ) awarded Organizational Strategies, Inc. (Arlington, VA) a not-to-exceed $25 million Phase III Small Business Innovative Research (SBIR) program contract (N68335-05-D-0010) for Topic N98-057 entitled "Advanced Training Technology Delivery System."

Under the contract, the company will provide services and materials for engineering tasks including research and development (R&D), prototype development and fabrication, demonstration/validation, product development services, product application studies and modeling, fabrication/ production of hardware, software design, software development and fabrication, retrofitting developed products into existing air and sea-based platforms and in-service engineering pertaining to advanced training systems integration technology.

Work will be performed in Patuxent River, MD (50%) and Atlanta, Ga. (50%), and is expected to be completed in September 2010. Contract funds will not expire at the end of the current fiscal year.

This contract was competitively procured through SBIR program solicitation (N98-057). A total of 15 offers received.

NAWCAD Taps Phoenix Science & Technology for R&D

The U.S. Naval Air Warfare Center-Aircraft Div. (NAWCAD) (Lakehurst, NJ) awarded Phoenix Science & Technology, Inc. (Chelmsford, MA) a not-to-exceed $15 million Phase III Small Business Innovative Research (SBIR) program contract (N68335-05-D-0016) for Topic N95-005 entitled "Surface Discharge Low Frequency Acoustic Source," Topic N02-153 entitled "High-Efficiency Plasma Sparkers for New Applications," and Topic N03-188 entitled "High Source Level Plasma Sparkers Driven by High-Energy Density Capacitors for Navy Applications."

Phoenix is making the pulse light products for ultraviolet water treatment and for paint stripping of naval vessels. The pulsed acoustic devices are used in submarine countermeasures, and other applications. Under the contract, the company will provide services and materials for engineering tasks including research and development, prototype development and fabrication, demonstration/validation, product development services, product application studies and modeling, fabrication/ production of hardware, software design, software development and fabrication, retrofitting developed products into existing air and sea-based platforms and in-service engineering pertaining to sparker acoustic technology, including subcomponents, integration and testing, as well as the Sensor for Environmental Assessment system.

Work will be performed in Chelmsford, MA and is expected to be completed in August 2010. Contract funds will not expire at the end of the current fiscal year. This contract was competitively procured using a SBIR program solicitation under Topic N95-005 with two offers received, Topic N02-153 with four offers received, and Topic N03-188 with eight offers received.

NUWC Names Two to Support Submarine Non- Propulsion Electronics

The U.S. Naval Undersea Warfare Center Div. Newport (NUWC) (Newport, RI) awarded two parallel, five-year, cost-plus-fixed- fee, IDIQ contracts, worth $86.7 million collectively, to support submarine non-propulsion electronic systems (NPES).

The recipients were:

— Gryphon Technologies, LC (Riverdale, MD), which was awarded a $44.7 million contract (N66604-05-D-007A).

— Engineering Services Network, Inc. (ESN) (Arlington, VA), which was awarded a $42 million contract (N66604-05-D -007B).

Under the multiple-award program, these two companies now will compete for 706,800 labor-hours in task orders to provide NPES program engineering, lifecycle and in-service support, including upkeep/update of submarine combat systems software. Other NPES systems supported under this program include acoustic, mavigation, communication, and weapon- launch programs. Work will be performed in Newport, RI.

The work is expected to be completed by September 2010. Contract funds will not expire at the end of the current fiscal year. The contract was competitively procured through solicitation N66604-05-R-0070, which was advertised in January 2005 and called for competition limited to 8(a) companies only (NAICS 541330). A total of five offers were received.

The procurement is considered a follow-on effort. The incumbent was Raytheon Technical Services Co. LLC, Depot Operations (RTSC DO) (Virginia Beach, VA), which performed the work previously under a five-year, $38.4 million contract (N66604-99-D-0683) awarded in November 1998. RTSC's subcontractors with significant workshare included Systems Engineering Associates Corp. (SEA CORP) (Middletown, RI) and URS Corp., EG&G Div., ETS - Defense Systems & Services (Gaithersburg, MD).

SPAWAR HQ Taps InnovaSystems for Support of Navy's Readiness Reporting Systems

The U.S. Space and Naval Warfare Systems Command, Headquarters (SPAWAR HQ) (San Diego, CA) awarded InnovaSystems International (El Cajon, CA) a five-year, $47.5 million, cost-plus-fixed-fee, IDIQ contract (N66001-05-D-5012) to support the Navy's Readiness Reporting Systems.

Under the contract, which has an estimated level of effort (LOE) of 203,000 labor-hours per year, the company will provide setup, installation, testing, training, software engineering, software integration, and maintenance of the Navy's Readiness Reporting Systems. The requirements include program management support, system re-engineering, definition, system design, integration, test, system support and life cycle maintenance of Type Commanders Readiness Management System (TRMS), Navy Training Information Management System (NTIMS), Innovative Readiness Reporting Initiative (IRRI) and Defense Readiness Reporting System - Navy (DRRS-N) software.

The requirements also include life cycle maintenance services for modernization of TRMS Ashore and Afloat software applications for compliance with DoD and Navy standard Information Technology (IT) policies including DoD Defense Information Infrastructure Common Operating Environment (DII/COE), mobile code, Information Control and Task Force Web (TFW). Requirements also include re-engineering and integrating modules and methodologies to access and manage DoD and Navy readiness assessment capabilities for TRMS Ashore, TRMS Unit Level programs, TRMS IRRI and TRMS Aviation Data Warehouse. Work will be performed in San Diego, CA. The contract contains a one-year base (worth $8.8 million) and four one-year options that, if exercised, could increase its total cumulative value to $47.5 million and extend the period of performance through August 2010. Contract funds will not expire at the end of the current fiscal year.

The contract was competitively procured through solicitation N66001-05-R-5012 which was advertised on November 24, 2004, and limited competition to small businesses only (NAICS 541511). A total of three offers were received.

USAF WR-ALC Inks CDO Technologies for Technical Data Support Services (TDSS)

The U.S. Air Force Warner Robins Air Logistics Center (WR-ALC) (Robins AFB, GA) awarded CDO Technologies, Inc. (Dayton, OH) an eight-year, $96 million, firm-fixed-price, time-and- materials, and cost-reimbursable contract (FA8501-05-D-0002) for Technical Data Support Services (TDSS).

Under the contract, the company will sustain technical data for WR-ALC's Combat Sustainment Wing, some areas of the Aircraft Sustainment Wing, and technical order (TO) libraries in the Maintenance Wing. Specifically, CDO Technologies will provide TO sustainment support and engineering data sustainment support. Technical order sustainment includes editorial development, technical order management, distribution, technical content management and technical library support. Currently, WR-ALC manages 59,000 basic TOs comprising an estimated 8 million pages of various sizes and 12 million engineering data images.

The contract contains a five-year base and one three-year option that, if exercised, could increase its total cumulative value to $96 million and extend the period of performance through September 2013. At this time, $1,129,000 has been obligated. The contract was competitively procured through solicitation FA8501-04-R-0013, which was issued in May 2005 and called for competition limited to 8(a) companies only (NAICS 511130; 500 employees). A total of 11 offers were received. The procurement is considered a follow-on effort. The incumbent was Technical & Management Services Corp. (TAMSCO) (Calverton, MD), which had performed Technical Order Editorial and System Services (TOESS) under a five-year, $75 million contract (F09603-99-D-0382) awarded in October 1999.

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Closing/ announcement date	Buyer	Seller	Purchase Price	Seller Revenue
October 17, 2005	Anteon	Milestone Group	$31.5m	$21m
October 16, 2005	CACI International	National Security Research	N/D	$17m
October 14, 2005	SRA International	Spectrum Solutions Group	N/D	$15m
October 11, 2005	ICF Consulting	Caliber Associates	N/D	$40m
October 10, 2005	SAIC	IMAPS	N/D	$5m
October 4, 2005	SYS Technologies	Web Technologies	N/D	$2.5m
October 4, 2005	Linc Group	BMAR & Associates	N/D	900 employees
September 30, 2005	McNeil Technologies	ViStar	N/D	N/D
September 30, 2005	McNeil Technologies	ZKD, Inc. (certain contracts)	N/D	N/D
September 22, 2005	DRS Technologies	Engineered Support Systems	$1.97bn	$1.012bn
September 19, 2005	Compudyne	Xanalys Corporation	N/D	$3m
September 8, 2005	Lockheed Martin	Coherent Technologies	N/D	$35m
September 7, 2005	AECOM	ENSR International	N/D	$200m
September 2, 2005	Applied Research Associates	Klein Associates	N/D	$5m
September 1, 2005	L-3 Communications	Joseph Sheairs Associates	N/D	$20 million
August 23, 2005	SAIC	GEO-CENTERS	N/D	$107m
August 22, 2005	Raytheon	UTD, Inc.	N/D	$25m
August 18, 2005	Veritas	MZM, Inc.	N/D	420 employees
August 16, 2005	Lockheed Martin	INSYS Group Ltd.	N/D	480 employees

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Minuteman Ventures recently was engaged to sell a federal contacting company providing application development and IT services to a national intelligence agency. Interested parties should call Chuck Chappell at 703-963-3150… Mark your calendars for November 16 in McLean, Va. for the Minuteman Ventures co-sponsored event, "Government Contractors: How Emerging Financing Options Fuel Consolidation." For more, click here.

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Minuteman Ventures LLC advises company owners on the sale of their businesses, and assists corporate and private equity buyers in strategic acquisitions and divestitures. Our team consists of experienced entrepreneurs and business executives who founded or operated companies and corporate divisions.

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

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