Northrop Moving Out Of SETA By Selling TASC

(MoneyWatch)  In August word came out that Northrop Grumman (NOC) was looking to sell their SETA contracting arm, TASC. Science, Engineering, Technical and Analytical contractors provide direct support to military acquisition offices. They perform regular duties in all areas not requiring direct government action.

They are the contractors that are hated and loved within the government. They provide key services and multipliers for the work force in managing acquisition programs. Over the last twenty years there numbers have increased greatly. President Obama and his new administration made two major reforms that significantly affected SETA contractors. First a plan to begin converting contractor slots to government workers was announced and has begun. Secondly there has been greater focus on Organizational Conflicts of Interest (OCI). This is where a company may have been involved in awarding work to itself through advising the government on contract evaluation and awards.

The new law passed this year governing OCI not only makes it applicable to Prime Contractors but also to their sub-contractors and any other company they are doing business with. This means that even a distant, tenuous relationship will require further reviews and perhaps a situation where Northrop cannot bid on a major contract. Another worse case is that this relationship is found after award and the start of work. This may lead not only to the loss of the contract but to penalties that would cost the company even more.

Nortrop Grumman grew concerned that the OCI provisions were preventing them from bidding on contracts that TASC might be involved in evaluating or managing. This has what led them to explore selling the business. In the Nineties due to the evolution of defense contracting many of the large companies purchased SETA type businesses. They provided a new revenue stream that made up for the falling off of new development and production programs.

Northrop now has finally found a buyer for TASC. They will sell the unit of over 5,000 employees to a private investment group. The unit also significantly contributed to Northrop's revenue with over $1.6 billion last year. Losing this unit was probably not an easy decision for the company to make but if the feeling was it was going to cost them large programs in the future they had to do it.