...CEO. "We hired these two people for their leadership skills," says Yarossi. "Our first conversations were about leadership, not the federal market."
Similarly, contractor BE&K Inc., Birmingham, decided to shore up sagging industrial construction markets by starting a federal unit and hiring retired Rear Adm. David J. Nash as president. "Weve done some [federal] work in the past, but we felt it was necessary to consolidate and get a critical mass," says BE&K Chairman Michael Goodrich. "The market is big and counter-recessionary to our more traditional markets, industrial and buildings."
Almost as soon as Nash took the job, the country asked him to lead emergency reconstruction in Iraq. But Nashs year-long absence likely has enhanced his reputation and BE&Ks networking.
Nash still is operating under federal "anti-lobbying" rules that bar dealings with DOD, but he already is targeting other agencies such as the Energy Dept. and NASA. He says BE&Ks design-build expertise will be valuable to federal project managers. "We want to see if were competitive in this marketplace," says Nash.
McCaffreys restrictions on dealing with former peers are long over, but "I dont intend to be a lobbyist," he insists. He says federal work is not for the faint of heart,
beset by unknown risks, congressional scrutiny and contract protests. "It can be Byzantine," says McCaffrey. "When theres a problem, they just add another layer of restrictions." He views his role as less door-opening, and more supportive. "I understand we have to make money, but government people also want their programs to work," says McCaffrey.
But not all ex-government rainmakers work out. One Midwest engineering firm CEO says the ex-Corps colonel he hired "went to meetings and tried to take charge. He never left his rank behind."
|New Digs. Base housing will expand, opening the door for private firms.|
But federal sector veterans are hardly standing around waiting for the newcomers to steal market share. "It doesnt surprise me that people are getting into it," says Ken Smith, senior vice president of business development for Fluor Corp.s government group. "But there are barriers to entry. It takes commitment." Fluor has seen its federal contract backlog, primarily for DOE, DOD and the Federal Emergency Management Agency, grow significantly. Federal revenue was $1.7 billion through third quarter 2004, up from $952 million in 2002.
IAP Worldwide Services, Irmo, S.C., a $250-million-a-year DOD logistics contractor, wants to capitalize on the federal outsourcing boom by buying a unit of Johnson Controls that does similar work, says David Myers, IAP chairman and ex-president of Fluors industrial unit. He says a stock purchase will close this month, creating a $1-billion-a-year entity.
"For military bases, theres a significant move to outsource everything other than combat," says Myers. Last month, Al Neffgen, former COO of Kellogg Brown & Roots government unit, was named IAPs CEO. The board includes Dan Quayle and retired Air Force Maj. Gen. Gene Lupia.
Toronto-based AMEC is positioning for more DOE and DOD environmental work in the U.S., particularly related to the next round of military base closings, which will be unveiled by May. "Looking at the past four rounds, you can anticipate a 20 to 30% increase in environmental work," says Paul Parker, director of the Air Force Center for Environmental Excellence in Texas.
But one source says this list could include as many bases as were in all previous rounds. "There will be a big increase in project cleanups and more use of fixed-price remediation," says Paul Pettit, senior vice president of AMEC Americas new federal programs unit. Signaling its intent to be close to clients, AMEC Americas now has its U.S. headquarters in Washington, D.C.
Federal market players also are closely watching the new Dept. of Homeland Security as it settles down from its mammoth reorganization. The American Association of Engineering Societies says it will cost $1.7 trillion over five years "to effectively secure threats to the public."
HNTBs Yarossi expects DHS to beef up grants for vulnerability studies and bridge and airport hardening. "We wondered if this market was a flash in the pan, but we decided the U.S. will learn to live with far greater attention to security," says PBSJs Homan. Ambrose Schwallie, president of Washington Groups defense unit, hopes to take its security technology to protect nuclear weapons "and use it for critical DOD infrastructure."
McCaffrey and others also want to inject more design into the growing U.S. embassy and consulate construction market around the world. "We dont think they need to look like concrete fortresses," he says.
Sandy Cuttino, a veteran of military work who was just named president of federal programs for Earth Tech, Long Beach, Calif., says shes "pretty passionate" about the federal sector. Cuttino says federal officials "are sophisticated purchasers, and we like working with a sophisticated buyer. We can perform well and attract and retain staff. They are a relationship customer."