Making the List

Federal buying is a whole different world than it was 15 years ago.

What does it take to be one of the Top 200 federal contractors that we feature in this issue of Government Executive? Well, for starters, you'd better bring to the table almost $150 million a year in prime federal contracts. And if you want to ante up with the big dogs at the top of the list, you must be absolutely relentless in pursuing a whole lot more in the way of contract dollars.

How much more? Well, think of it this way: If all of the $4.5 billion worth of coffee that Starbucks Corp. sold in the United States in the past year was purchased by federal agencies, that would barely be enough to put the company in the Top 10 contractors. And even if the folks at Starbucks managed to accomplish this feat, they'd have to sell an additional $20 billion worth of lattes and Frappuccinos to even get close to the amount of money that top-ranked contractor Lockheed Martin Corp. takes in from Uncle Sam.

That's a lot different from 15 years ago, when we published our first Top 200 issue. Back then, a contractor could win a spot on the list with less than $70 million in awards. In our August 1990 issue, a little company called Federal Express was the last firm to make the Top 200, with $66 million in contracts. This time around, FedEx Corp. weighs in with nearly $1 billion in prime awards-and that isn't even enough to put the company in the Top 30.

In fiscal 1989-the year on which our first Top 200 rankings were based-companies, especially huge defense contractors, were reeling from the wind down of President Reagan's massive defense buildup. The government made $164 billion in purchases under prime contracts valued at more than $25,000 in 1989, 4 percent less than the previous year.

And the worst was yet to come, as the effects of the peace dividend continued to kick in. "All I know is that the trend is not my friend," said Bear Stearns analyst Steve Binder in 1990.

Fast-forward 15 years, and the trend-in some ways at least-is decidedly more friendly. First, the federal contracting pie is growing, not shrinking. In fiscal 2004, agency purchases under prime contracts stood at nearly $330 billion, a dramatically higher figure than the previous year. Not all the increase represents actual new spending. Last year, the General Services Administration implemented a new system for agencies to report their purchases, and it is presumably capturing more and better information about what agencies actually buy.

But it's also clear that spending is in fact up across the government. One reason, of course, is we're in the midst of a multifront war on terror and an ongoing effort to boost domestic security. Suddenly, the Army, which traditionally has lagged its sister services in prime contract spending, is top dog, with $74 billion in purchases in fiscal 2004, fully $20 billion more than the previous year. The "war dividend" also is having a clear and recognizable effect on the list of the government's top contractors. Names that were completely foreign to our list a few years ago have suddenly appeared on the charts.

Often, the companies are literally foreign. For example, Kuwait National Petroleum Co.,which weighs in this year with more than $200 million in federal purchases, stands out for fairly obvious reasons. U.K.-based Hesco Bastion Ltd. also had defense contracts worth more than $200 million in fiscal 2004. The company produces the Concertainer, which it describes as "a prefabricated, multicellular system, made of galvanized steel weldmesh and lined with nonwoven polypropylene geotextile." In simple terms, that means a temporary fortified wall used to protect military forces against truck bombs and other threats.

One would hope and pray that the Defense Department's high demand for such a product won't last forever. When the need for such pure war-related goods decreases, Pentagon officials will have some tough decisions to make about whether they can afford the whole range of expensive weapons systems their contractors are pushing as keys to winning the next war. That could mean that the contracting world is in for yet another turn.