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[ISN] Tech Contractors Cite Rising Demand



http://www.washingtonpost.com/wp-dyn/articles/A32622-2002Dec9.html

By Renae Merle
Washington Post Staff Writer
Tuesday, December 10, 2002; Page E01 

For more than a year, the region's technology contractors have been
waiting in vain for the big boost in technology spending that was
supposed to come from the government's new focus on homeland security.  
Could the early stages of the boom be arriving?

Yesterday, California-based Computer Sciences Corp., with 8,000 local
employees, announced that it would be hiring 400 employees, mostly in
the D.C. area, to satisfy an increase in demand for information
technology security. "Since mid-summer, there has been a noticeable
upturn in demand for information security-related services among our
clients in the U.S. government and commercial sectors," said Joe
Stafford, vice president of CSC's Global Information Security
Services.

Meanwhile, Northrop Grumman Corp.'s information technology division
plans to hire 400 to 500 employees in the next month and 4,000 next
year. Fairfax-based STG Inc., which provides technology and
engineering services, said it will add 700 jobs over the next three
years.

In September a subsidiary of computer reseller Micro Warehouse Inc.  
opened offices in Ashburn, adding 40 employees to help it focus on
government clients. The company will be adding 100 workers to that
office over the next six months, officials said.

"Any kind of hiring is good news right now," said Stephen S. Fuller, a
public policy professor and regional economist with George Mason
University. "This is just indicative of the strength of the local
economy."

The increase in government spending expected after the Sept. 11, 2001,
attacks has been slow to materialize despite President Bush's budget
proposal, which called for spending on IT security to reach $4.2
billion in fiscal 2003, compared with $2.7 billion this year. Overall,
information technology spending would reach $52.4 billion, up from
$47.8 billion, under the budget proposal.

The delay in approving the next year's budget and the Office of
Management and Budget's cautious approach to spending has translated
into a disappointing year for many contractors, industry officials
said.

"People were looking for the windfall after 9/11 for this kind of
activity, and it hasn't showed up to the degree that has been
expected," Fuller said. But now some are beginning to report an
increase in business, exemplified by CSC's hiring announcement. "It
was slower to emerge but will last longer than had been anticipated,"  
he added.

Lagging spending from the private sector makes the anticipated public
spending even more welcome. CSC's revenue in the commercial sector
declined 8 percent during its second quarter, which ended in
September, down to $959 million from more than $1 billion during the
year-earlier period. In August, the firm asked 66,000 employees to
volunteer to take extended leaves of absence -- for at least six
months -- at 20 percent of their pay. Only a "relatively small portion
of them did," according to a company spokesman.

In addition, the firm reduced its workforce by 1,000 employees during
the past year through attrition and layoffs, the spokesman said.

But government work can be troubling, too. Earlier this year, CSC
quibbled with San Diego County over its progress on a seven-year, $644
million contract to provide all of the county's computer and telephone
services. The country declared CSC in default after it didn't reach
several contractual milestones and withheld a payment until a
settlement was reached. "Since then things have been on track," a
county spokesman said.

Still, government contracting reflects the company's fastest growth
sector. Revenue from government agencies increased 17 percent during
the second quarter, to $772 million.

And that doesn't include more than $200 million in contracts the
company's Enforcement, Security and Intelligence unit won during the
past three months, much of it with the intelligence community. Many of
the new hires will work on those contracts and will need security
clearances, a company spokesman said.



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