Science Applications International Corp.

Last edited by crocodyl on May 23, 2008 - 10:52am

Company Snapshot:

Founded in 1969, Science Applications International Corp. (SAIC) is a major intelligence, military, aerospace, engineering and systems contractor. It is involved in defense/military (DoD), intelligence community, and homeland security contracting, as well as selected commercial markets.

As a March 2007 Vanity Fair article published by the investigative journalist duo Bartlett and Steele put it SAIC "sells human beings who have a particular expertise—expertise about weapons, about homeland security, about surveillance, about computer systems, about "information dominance" and "information warfare." ... What everyone agrees on is this: No Washington contractor pursues government money with more ingenuity and perseverance than SAIC. ... No contractor seems to exploit conflicts of interest in Washington with more zeal. And no contractor cloaks its operations in greater secrecy. SAIC almost never touts its activities in public, preferring to stay well below the radar."

Ownership status:

Publicly traded

Number of employees worldwide:

44,000

Chief executive officer:

Kenneth Dahlberg

Website:

http://www.saic.com

Corporate accountability

Environment and product safety:

In 1991, SAIC was charged with falsifying data submitted to the EPA on soil samples from toxic waste dumps, for which it ended up paying $ 1.3 million in fines and restitution.

Political influence:

According to investigative journalists Bartlett and Steele, "everyone agrees [that] no Washington contractor pursues government money with more ingenuity and perseverance than SAIC. No contractor seems to exploit conflicts of interest in Washington with more zeal."

"SAIC's relative anonymity has allowed large numbers of its executives to circulate freely between the company and the dozen or so government agencies it cares about," Bartlett and Steele report.

The company has many friends in Washington, including secretary of defense Robert M. Gates, a former member of SAIC's board of directors.

William B. Black, Jr. (retired from NSA in 1997 to join SAIC and returned to NSA in 2000. Black managed the Trailblazer contract that was abandoned after $1 billion was spent.

Donald Foley, a current SAIC director, is a former top official with the Defense Advanced Research Projects Agency (DARPA), the group responsible for developing new military technology.

Mark Boster, a former deputy assistant attorney general, joined SAIC in 1999. Boster paid $30,000 to settle charges he violated federal ethics rules by calling Justice on behalf of the company just three months after he switched sides.

SAIC personnel were instrumental in pressing the case that weapons of mass destruction existed in Iraq under Saddam Hussein, and that war was the only way to get rid of them. When no weapons of mass destruction were found, SAIC personnel staffed the commission set up to investigate how American intelligence could have been so disastrously wrong, including Gordon Oehler, the commission's deputy director for review a 25-year CIA veteran, Jeffrey R. Cooper, vice president and chief science officer for one of SAIC's sub-units and Samuel Visner, a SAIC vice president for corporate development who had also passed through the revolving door and back to the NSA.

David Kay, who later chaired the Iraq Survey Group (which showed that Hussein didn't possess WMD, thereby proving that the war was launched under false pretenses), is also an SAIC shareholder and former director of SAIC's Center for Counterterrorism Technology and Analysis.

In 1998, Kay testified before a Senate committee that Saddam Hussein "remains in power with weapons of mass destruction" and that "military action is needed."

Another SAIC stockholder and board member Wayne Downing, was used as a military analyst in the build-up to the war in Iraq. SAIC also hired Iraqi exiles including Khidhir Hamza, a member of the Iraqi Reconstruction and Development Council, once perceived as a conduit for Iraqi exiles living in the U.S. who would be called upon to serve in the newly established government. (Operating under a $33 million contract, SAIC organized the Iraqi exiles and reported to Douglas Feith, then undersecretary of defense for policy and a key assistant to Donald Rumsfeld Feith's deputy, Christopher "Ryan" Henry is a former SAIC senior vice president, according to Bartlett and Steele.

Another SAIC "subject-matter expert" was Shaha Riza, whose relationship to Paul Wolfowitz was one of the reasons for his downfall as President of the World Bank.

During the Iraq war SAIC was awarded a $ 15 million no-bid contract (which later grew to $82 million) to establish a "free and independent indigenous media network" in Iraq. According to Bartlett and Steele, "with SAIC's cooperation, the network quickly devolved into a mouthpiece for the Pentagon -- "a little Voice of America."

In addition to having many friends in high places, SAIC also pays lobbyists from FBA Inc. and Harris, Wiltshire & Grannis. In 2004, its lobbying expenditures topped $1.5 million.

The company's PAC, SAIC Inc., has spent hundreds of thousands so far in the 2008 election cycle.

Contracting: Incompetence and other Costly Errors

In 1995, SAIC was charged with defrauding the government over its efforts to design a flat panel display screen for fighter jets. The government alleged that SAIC received millions of dollars but never produced a fully operational model and misled the government about the status of their progress. According to media reports, in December 1995, SAIC settled with the government and paid a fine of $2.5 million.

In 1998 that SAIC paid $1,124,850 to settle a case of "Voluntary Disclosure Cost/Labor Mischarging."

On May 10, 1995, the Department of Justice announced that SAIC was among three government contractors that would pay a total of $230,000 to settle alleged False Claims Act violations in which they allegedly failed to properly test electrical cables installed at a U.S. Treasury facility under construction in Fort Worth, Texas, that prints money… SAIC was the prime contractor on the project. Its share of the settlement was $125,000.

A 2006 GAO report (GAO-06-698T) reported (p. 13) that SAIC billed the FBI twice for the same invoice as a subcontractor for the Trilogy project.

In their March 2007 article, Bartlett and Steele reported that several of SAIC's biggest projects have turned out to be colossal failures," including a $280 million contract to build a NSA communications intercept computer system called Trailblazer. "Four years and more than a billion dollars later, the effort has been abandoned. ... Happily for SAIC, it will get the chance for a comeback ... [t]he company has been awarded the contract for a revised Trailblazer program called ExecuteLocus. The contract is worth $361 million."

Another failed effort involved a $124 million contract to upgrade the FBI's computer Virtual Case File (VCF) system. The FBI pulled the plug on the system in 2005, after concluding that it would not work. VCF was written off "by a global publication for technology professionals as "the most highly publicized software failure in history." The draft Senate appropriations bill for the Justice Department directed the Department and FBI to use "all means necessary" to recover the funds spent on the project.

In testimony to Congress, then-FBI Director Mueller said an independent verification and validation review was conducted by Aerospace Corporation, which "could "find no assurance" that the requirements were satisfied, nor that the architecture, Concept of Operations, and requirements were correct and complete."

SAIC officials explain that the scope of the project changed over time. In addition, there were too few FBI technicians compared with the number of SAIC contractors. As a result, the FBI could not keep up with communicating the ever-expanding requirements for VCF to SAIC developers.

FBI data czar Zalmai Azmi blamed SAIC for planning what he thought was an overly ambitious, all-at-once transition from the old "legacy" Automated Case Support system (ACS) to the new VCF system, and blamed SAIC for "fast-tracking" the project to such an extent that it created "silos" of information that could not interconnect. SAIC has said it was the FBI's desire to fast-track the project that contributed to VCF's collapse.

SAIC security engineer Matthew Patton, posted an email on the InfoSec News mailing list (www.infosecnews.org) in response to a Senator's public statements about the deplorable state of the nation's information technology infrastructure. Patton's post was interpreted by FBI and SAIC management as an attempt to "blow the whistle" on what he saw as crippling mismanagement of a national security-critical project. He was removed from the project and eventually left SAIC.

SAIC failed to deliver a highly touted security system for the 2004 Athens Olympics, causing the Greek government to refuse final payment. A newspaper in Athens described the system as "operationally useless."

History

Science Applications International Corporation was created in February 1969 in La Jolla California by John Robert Beyster, former head of the accelerator-physics department at General Atomic Corporation. Within a year, the company opened up an office in Washington, DC, where it would bring in most of its revenues from government contracts. As Beyster saw it, the job of SAIC's employees was to "sell your high-tech ideas and blue-chip expertise to the army, navy, air force, CIA, NSA, Atomic Energy Commission and any other government agency to money to spend."

To help the company open these doors, Beyster "aggressively packed his company with former generals, admirals, diplomats, spies, and Cabinet officers of every kind," using an internal stock ownership program as an incentive.

Financial information

Stock ticker symbol:

SAI

Total revenue:

7.8 billion

Fiscal year:

2007

Net Income:

391 million

Fiscal year:

2007

Major lines of business/segments:

Government segment: Defense, Intelligence, Homeland Security, Logistics and Systems Engineering and Integration, Research & Development.

Commercial segment: Technology-driven consulting, "outsourcing services" and other work in selected commercial markets, often based on expertise developed in serving governmental customers. For a list of SAIC companies see its web site.

Link to annual report:

http://www.secinfo.com/$/SEC/Registrant.asp?CIK=1336920

Additional descriptive data

Link to full list of subsidiaries:

http://www.secinfo.com/d14D5a.u2dTy.d.htm#1stPage

Investor website:

http://investors.saic.com/phoenix.zhtml?c=193857&p=irol-IRHome

Specialized Information

Major units/subsidiaries/affiliates:

For a list of SAIC companies go here.

More detailed description of business strategy:

SAIC conducted an IPO on October 13, 2006.