Mitre spinoff targets broader client base

Mitre Corp. has spun off a new company called Mitretek Systems Inc., which will seek information systems engineering projects among agencies outside its primary client base in the Defense Department and the Federal Aviation Administration.

The creation of Mitretek, announced earlier this month, reflects DOD's new policy of limiting Federally Funded Research and Development Centers (FFRDC) to what it defines as the "core workload" (see story, page 8).

The new company will operate on a not-for-profit basis but will not be an FFRDC. Mitretek will focus on opportunities that fall outside DOD's definition of noncore work, said Barry Horowitz, president and chief executive of Mitretek, McLean, Va. Mitretek will not compete for contracts against commercial companies. The company will negotiate sole-source contracts with agencies as Mitre has done.

Mitretek, operating outside constraints placed on DOD FFRDCs, will be able to diversify its business, Horowitz said. This diversification will make it easier to attract and maintain the talent the company's client base requires, he noted.

"We will not be able to sustain the quality of capabilities for the government without further diversification," Horowitz said.

Mitretek Plans Own Subsidiary

In another diversification push, Mitretek plans to spin off its own subsidiary to pursue similar work in the private sector, which will help support Mitretek's operations.

$70M Backlog

Mitretek, which will operate independently of Mitre, inherits a $70 million contract backlog and 750 employees, primarily in the Washington, D.C., area.

Like the parent corporation, Mitretek will provide government agencies with systems planning, design and engineering assistance on high-technology projects. Agencies have often hired Mitre to develop proof-of-concept systems, testing out new technology or new applications of emerging technologies.

For example, the FBI has employed Mitre to help develop the concept for the Automated Fingerprint Identification System. That project now falls under Mitretek, which is also involved with information technology projects at the General Services Administration, the U.S. Postal Service and the Department of Veterans Affairs.

Horowitz does not expect Mitretek to grow much beyond its current size, but the company likely will move into some new areas. For instance, the company is interested in the role IT will play in the health care industry, he said.

Mitretek's subsidiary—expected to emerge by the end of the year—will also take the company into some new areas. The subsidiary will be to private-sector organizations what Mitretek is to government agencies and will operate under the same kind of strict policies to ensure it does not create any conflicts of interest for Mitretek, the company said.

Industry Skepticism

Some industry vendors view Mitre—and now Mitretek—with a certain amount of skepticism. At times, it has appeared that Mitre has received sole-source contracts for work that a systems integrator might easily have done, vendors have contended. DOD and other agencies have defended these not-for-profit organizations as providing a necessary "objective" perspective on IT proj-ects.

This function "continues to be vital to our national interest," said Paul Kaminski, undersecretary of Defense for acquisition and technology, in announcing DOD's new policy earlier this month.

Some vendors, however, question whether this function is necessary outside DOD and the FAA. As for DOD and the FAA, "the government clearly should have an unbiased, objective arm to help them," said Ken Johnson, a senior vice president at Cordant Inc.

But mainstream government agencies do not require the same objectivity and specialized resources, so Mitretek does not offer that much of an edge over a traditional systems integrator, Johnson said.