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Small Business and Government Contracting

Thank you, Louise for your kind introduction. I would also like begin by thanking our event sponsor: Bill Lecos, the Board of Directors, and the fine staff of the Fairfax Chamber of Commerce. Thanks also go to our hosts, Ft. Belvoir. I am very happy to be here today. I've always enjoyed visiting Ft. Belvoir. And this Officers' Club is a lovely site for today's luncheon. I remember being here in 1993 for the U.S. Army's celebration of the SBIS Mega contract award to IBM. (SBIS: Sustaining Base Information Systems; a system for personnel and public works kinds of requirements around the world.) CACI was a software subcontractor for budget and financial systems and it was a defining moment for us! It was our first big "program of record" contract award. I also started with CACI when it was a small business – I believe I was employee number 33 – and have always respected the small business world. In fact, my parents were small business proprietors – a carpet and flooring business in Oklahoma City. I remember how much hard work and dedication it took to keep their business running. I'm sure many of you can relate to them.

Ft. Belvoir is also home to over 90 organizations, including the Mission and Installation Contracting Command, Directorate of Contracting. So today's event is at the right place!

A 1998 CNN news article said, "Whatever you're selling, chances are Uncle Sam is buying." The U.S. government is the world's largest buyer of goods and services, tallying up some $425B in military and civilian purchases a year. And 23% of those purchases are targeted to small businesses. That's nearly $98B! While the numbers suggest that's still true, the current economic environment has made even Uncle Sam more cautious with his money. So make sure you're selling something he needs!

The importance of small business in government contracting is indisputable. You supply specialized products and services, often providing unique, leading edge technologies and innovations for your government clients. Small businesses are also agile and dynamic, positioned to take quick advantage of opportunities and develop relationships with larger contractors – like CACI! At long last, we do consider ourselves a large company!

So, I hope you will find it more helpful if I veer a little from the topic given in your programs. Instead of talking about the importance of small business, I want to talk today about what should be important to small businesses in government contracting. Because small businesses are created… not just to survive, but to thrive – maybe even growing into a really "big" business some day.

Today, CACI is truly a "big" business. Today, we are a $2.5 billion company with over 12,400 employees in over 100 offices worldwide. But remember – we were once small too. So small, in fact, that our first office was a California park bench and a phone booth. You don't get much smaller than this, either!

So how did we get from that bench to where we are today? Hard work? Definitely. A little luck? On occasion, sure. But many successful – and unsuccessful – companies can make the same claims.

If I have learned one thing in my nearly four decades of government contracting, it is this: No company can thrive, no small business can grow into a big business, without a solid, ethical and accountable corporate culture. In today's world, you will simply not succeed. And by this, I mean to continue to grow and be respected.

If there are any doubts about this, I ask, where are Enron and WorldCom now? What would the former employees, shareholders, creditors, and clients of Lehman Brothers or Bear Sterns tell us? I believe they would tell you the same thing I tell you now – your corporate culture counts! It is vitally important!

This is even more important in government contracting. I have always believed that there is a higher standard for us than for ordinary commercial enterprises. We have an obligation to act in the best interests of the American tax payer, which – let's not forget – includes each one of us. We also know that the missions and projects of government clients are different in nature and often have a far greater impact.

As a 2007 New York Times article pointed out: "Contractors still build ships and satellites, but they also collect income taxes and work up agency budgets, fly pilotless spy aircraft and take the minutes at policy meetings on the war. They sit next to federal employees at nearly every agency; far more people work under contracts than are directly employed by the government."

So, small businesses have BIG responsibilities. And to succeed in meeting those responsibilities, every business must establish their culture early on. And there's no better way for me to illustrate my point than by telling you a little about CACI. Because it has been our culture that has taken us from that park bench, through many successes and challenges, to become who we are today.

CACI was founded in 1962 by Herb Karr and Harry Markowitz, who helped develop SIMSCRIPT, the world's first simulation programming language. (We still sell a modern version of it today.) Karr and Markowitz, convinced of the many opportunities for SIMSCRIPT, decided to start their own company. With nothing more than an idea, that phone booth and park bench, they created their new company called the California Analysis Center, Inc.

In 1963, CACI was awarded its first contract… to research and simulate Navy inventory control operations… for the grand sum of $17,330. Talk about small business! Even in 1963 that was a small size contract!

By the late 1970s CACI had hit its stride, moved to Washington and grew to become a multi-million dollar company with offices in the U.S. and Europe.

Our technical expertise grew in the 1980s. But Congress passed the Competition in Contracting Act (CICA) in 1984, which required government agencies to compete most contracts. So we had to change considerably how we marketed our offerings.

In the '90s we recognized the shift from individual software applications to networks and enterprise-wide projects – the "network world". The result was that a different federal government emerged; one which created more contract opportunities yet serious competition for CACI.

Over the years, we have watched the trends and the changes. And we have identified the most promising technologies and markets. We have made 42 successful acquisitions in 16 years to augment our capabilities. Today, CACI is a top tier IT contractor. I guess you might say we are a small business success story! I'd like to think so, anyway.

Over the past 47 years CACI has grown based on a strong corporate culture and a steadfast commitment to "doing the right thing." Throughout all of the changes in our industry, we have always relied on our culture to tell us how to respond. In fact, we believe CACI's culture is our road map for success!

Why is culture so important? Because, culture defines shared values, goals and behavior. It sustains focus both on what to do and how to do it. It's about

• how you will conduct yourself representing your company,
• how bold you will choose to be in seizing new opportunities,
• how you will tackle challenges,
• and it's about how you will lead your teams to achieve their best, for your company and for your government clients.

The strength of our company's culture and leadership are what make CACI stand out in the marketplace. Today, most companies operate on a level playing field. Best practices, processes, and technologies, are also available to all of our competitors. True competitive advantages are rare and unique. Ours has always been our culture. What's your competitive advantage? It's never too early to stand out!

CACI's culture is manifested in our foundation documents, which portray what it means to be part of our company. For example, integrity, honesty, fairness and respect are given the same importance as quality client service, shareholder value, and career opportunities at CACI. These principles are expanded upon in a three-book pack called The CACI Way. Every employee gets a copy of these documents when they start at CACI. What do you give your new employees?

Part of CACI's culture is a long-standing ethics and compliance program. It has been publicly and formally documented since the mid-1980's when I became CEO. CACI was one of the first IT contractors to establish standards of ethics and business conduct. And our ethics and compliance program was firmly in place some ten years before the FAR required contractors to do so this past year.

Our "Standards of Ethics" policies were also crafted with our unique role as a government contractor in mind. In fact, one section of CACI's standards specifically says: "As a government contractor, we have a special obligation to the U.S. government, and to the general public, to ensure that we administer our contracts and deliver our products and services in a manner that fully satisfies both our legal obligations and our own high standards of integrity and quality.

Contracting with the U.S. government imposes requirements not traditionally associated with purely commercial business transactions. We are committed to compliance with the letter and spirit of the laws and regulations governing U.S. government contracting." What standards do you have for your small business?

As small business leaders, you direct how you want to conduct your business. As leaders, you must also

• Align your culture and your strategy,
• Clearly communicate your culture,
• Establish accountability,
• Set an example, and
• Reward those employees who have best represented your values in their achievements.

CACI's culture provides a shared sense of business ethics that enhances value, reduces risk, promotes respect and makes it easier for our people at the front to do their jobs. Doing the right thing is just good business!

The importance of our culture became evident in 2004 with Abu Ghraib when "who were are" and "everything we had accomplished" was field tested. In April 2004 CACI was thrust into the international spotlight when an illegally leaked army report cast "suspicion" on one of our employees for being "either directly or indirectly responsible" for the mistreatment of detainees at Abu Ghraib prison. At the same time, pictures from that dismal prison depicting the abuses were shown on national television and overnight tarnished anyone associated with Abu Ghraib – including CACI.

What ensued was a "feeding frenzy" rarely seen by any company in recent decades. The media twisted the unsupported allegations into a guilty verdict without regard for the facts or the truth. We faced nine wide-ranging government investigations and scrutiny by shareholders. Abu Ghraib also made CACI a target for misplaced anger and politically-driven criticism. It put our company's dedicated employees, our shareholders' investments, the vital work we performed for our valued military and government clients, and our excellent reputation – even our future – at risk.

From our culture documents, the first of our Ten Business Values states: "Place integrity and honesty above all else." So, we quickly acknowledged the allegations, but we would not comment on anything that wasn't fact. We also made it very clear that we would not condone or tolerate illegal or inappropriate behavior by any employee engaged on any CACI business. Period! If someone was shown to have broken the law, we would respond accordingly to "do the right thing."

We also had an obligation to inform our clients, employees and our investors about what was happening. So getting the facts – as best as we could – and "setting the record straight" was paramount. We developed a hypercrisis management strategy that addressed the various challenges and stakeholders.

We first reached out to our employees and clients to reassure them that we were on the case. Moreover, CACI employees needed to be equipped with the facts so they could brief our clients as needed.

We also assigned key CACI executives to talk individually to some 100 clients with major contracts. It was also important to reach out to our Army clients in Iraq so we could get the facts from the people familiar with the Abu Ghraib events.

CACI launched an aggressive response campaign to push back against the errors and misinformation in the media. We put out many news releases and held conference calls with employees, managers, and investors. We set up an FAQ section on our website. And we sent clarifications to all the reporters who were getting their facts wrong.

CACI was included in nine probing government investigations in all, and we fully cooperated with each one. CACI had absolutely nothing whatsoever to hide and we were as eager as the government to get to the truth. We also tasked our outside legal counsel with conducting a vigorous internal investigation. And we kept our Board of Directors fully informed.

Nearly five years later, not one current or former CACI employee has ever been charged by the U.S. government with any wrongdoing. None of the government investigations and proceedings has found CACI or any of its employees culpable in any way.

As for the business side, we lost one small contract in the UK. Our stock price fell some at first, but soon rebounded. We continued with our strategic and technology initiatives and have become twice the size we were in 2004. In April 2008 CACI published a book about our experiences. It's entitled Our Good Name, A Company's Fight to Defend its Honor and Get the Truth Told About Abu Ghraib. Using evidence from official investigations, sworn testimony, and other thoroughly vetted facts, we detailed and documented every challenge and proved how the allegations made against us were simply not true.

CACI's long-standing corporate culture provided the moral compass that guided us through this crisis. Our commitment to providing quality service to our clients… with honesty, accountability and reliability – and remembering our clients' trust in us – were always at the core of our decisions. And these values were the ones CACI had established when we were a small business! Just like many of you here today!

As small business leaders, you may have started out, more or less, with a park bench and a phone booth. But to get to where you want to be, especially in government contracting, you need to have solid values and a strong culture to get you there.

"Best of luck in every way!"

Thank you!