By Robert J. Terry for Washington Business Journal
A South Florida technology company is making a push into the federal contracting market, eyeing a possible acquisition to expedite its development plan. UDT, or UDT, a $275 million company based in Doral, Florida, develops and services IT systems for commercial customers, school systems and higher education institutions, health care providers and state and local government agencies. It touts its fast growth pace, about 16 percent annually, doing work in highly regulated industries on such things as cybersecurity, tech modernization, cloud migration, data center upgrades and professional services.
Jeff Engle, UDT Vice President and General Manager for Federal, thinks the time may be right given the push for IT modernization by the Trump administration, the passage of the Modernizing Government Technology (MGT) Act (and the working IT capital funds the law creates, where agencies can place savings from other modernization projects and use for future needs) and a cybersecurity executive order signed last May by the president. At the same time, Engle spent months trying to convince the company’s founders not to enter the federal market.
“I essentially drew them the picture of all the barriers to entry and said, this is what it’s going to take if you really want to do it,” said Engle, a veteran of the U.S. Army Special Operations Command who did stints with Metabiota Inc., a San Francisco analytics company with a D.C. office, and Virginia Beach, Virginia-based defense contractor ADS. “You can’t go the traditional route where you’re building things one and two at a time. There’s really no inexpensive way to build a federal business once you’re already a large business. So I actually spent nine months telling them all the reasons not to do it before they asked me to join full time and build it for them.”
To that end, Engle has focused on taking what UDT was already doing and align the targeting within federal, positioning the company in front of agencies such as Veterans Affairs, Health and Human Services, Treasury and Commerce — agencies focused on cybersecurity, cyber risk management and the cloud. Its obtained a GSA schedule and is forging joint ventures with a protege firm to get on larger vehicles being developed or recommitted under set-aside requirements.
Given its revenue base, and to realize a worthwhile return on investment, UDT will need to compete in the full-and-open arena when not doing joint ventures. That’s just one barrier to entry, Engle concedes. There’s also name recognition and track record — past performance on large and complex commercial jobs doesn’t always translate to government. “The proposal process, the capture, the internal governance, the project management expertise, the way you hire people — all of those things are different,” Engle said. “It’s not as simple as just doing it and then finding the work. It legitimately has to be built, from an infrastructure perspective, and there has to be the necessary firewalls to protect the existing company and the way they did business from the way the government is going to require them to do business.”
Matt McKelvey, who’s worked with commercial companies trying to enter the federal market, underscores the importance of the administrative lift for a company like UDT.
“Companies need to realize there is simply more infrastructure cost in a federal contractor,” McKelvey, president of the McKelvey Group, a Gaithersburg financial consulting firm, told me via email. “There are more accounting, contractual, human resources, legal, and IT requirements. And the [Federal Acquisition Regulation System] requires companies to operate via self-certification with these things from day one. Where commercial companies get caught is failing to operate this way and then an audit comes up. Can be a costly wake-up call.”
Trump’s election slowed UDT’s plan down a bit because procurement officers put the brakes on some programs, but Engle is hitting many of the notes — cloud, cyber, modernization — that are music to agencies’ ears.
Buying a company could accelerate the company’s market entry especially if it can find a small business with full and open contracts. But UDT is also shopping in a seller’s market, as private equity interest and other trends have pushed M&A dealmaking to a pretty torrid clip.
