GovernmentExecutive.com

bfriel@govexec.com, amaxwell@govexec.com

1. Lockheed Martin

ize does matter. That's the message the Justice and Defense Departments sent to the defense industry earlier this year when Attorney General Janet Reno and Defense Secretary William Cohen took on the Godzilla of government contractors, Lockheed Martin. Complaining of vertical integration in certain sectors, Reno and Cohen breathed antitrust fire at Lockheed Martin's attempt to swallow Northrop Grumman whole. In July, Reno and Cohen triumphed. Lockheed dropped its bid for Northrop in the face of a costly and drawn-out court battle.

Though the government managed to shut down Lockheed's merger plans, the mega-corporation continues to gobble up federal contracts. In 1997, Lockheed won more than two-thirds of its competitive bids, consuming $18.4 billion in federal funds. If Government Executive's 46 Top 200 Federal Contractors categories were Academy Awards, Lockheed would go home with no fewer than 15 Oscars.

This year Lockheed also wanted to take home the deed for the $1.6 billion-a-year U.S. Enrichment Corp., the federally owned company that enriches uranium. Lockheed made a bid in the largest federal privatization effort in a decade, but the government rejected it, instead settling on an initial public offering for USEC.

Lockheed also set its sights on the risky IRS PRIME tax systems modernization contract. As lead systems integrator, Lockheed would work with EDS, Arthur Andersen, Intuit and several other companies to take on the 15-year modernization project. Lockheed is competing with Computer Sciences Corp. for what the IRS has dubbed "the single largest systems integration undertaking in the world, eclipsing in breadth and depth any previous efforts of either the private or public sector." Lockheed goes into the battle for the contract fresh from a November award from the Federal Aviation Administration to help modernize the air traffic control system - a project that may be worth $1 billion over 10 years.

In another gutsy move, Lockheed decided early this year to build the first group of F-22 fighters for the Air Force under a firm fixed-price contract. That means the company will have to suck up any cost overruns the program incurs. Lockheed would roll out the first eight fighters in 1999 and 2000 - at a cost of $2 billion. Congressional critics are alarmed by the 17-year-old program's high costs and several schedule delays, but military officials say the program must go on. The 339 F-22s the Pentagon plans to purchase have a total estimated cost of $62 billion. Lockheed expects to reach peak production of 36 planes a year in 2004. Despite Lockheed's attempt to assuage concerns that the project will come in within budget, DoD and the Senate Armed Services Committee are keeping a wary eye on the massive program.

Lockheed's work on the Theater High-Altitude Area Defense anti-missile program also has watchdogs' eyes on it. In May a test shot of a missile interceptor failed to hit its target, the fifth consecutive miss in the $15 billion program. Despite the setback, the administration and Congress remain committed to the anti-missile system.

Lockheed's missile business took another blow in April when the Pentagon selected Boeing to be the lead system integrator for the national missile defense program, a contract worth up to $10 billion.

But Lockheed bested Boeing for another missile contract award, the $2 billion Joint Air-to-Surface Standoff Missiles. Lockheed will build at least 2,400 of the cruise missiles over 10 years.

Lockheed, the Energy Department's largest contractor, is butting heads with DOE over cleanup of the infamous Pit 9 radioactive waste site in Idaho Falls, Idaho. The two sides are now in court over the toxic mess, blaming each other for the project being $200 million over budget and more than two years behind schedule.

Foreign and domestic orders for the C-130 transport aircraft and the F-16 fighter kept Lockheed's coffers brimming in 1997. In addition, the Air Force awarded Lockheed a development contract for the Evolved Expendable Launch Vehicle and Lockheed continued development of its version of the Joint Strike Fighter. The company is also competing for the Navy's New Arsenal Ship contract.

Lockheed spent much of its energy last year trying to carve out efficiencies in its aircraft operations, as it aims to reduce annual costs by $2.6 billion. Lockheed has declared 1998 the "year of lean." So far, its efforts are paying off. Parts of the C-130 that used to take 65 days to make are now made in under three minutes. Lockheed officials said in the company's 1997 annual report they could have cut costs another $1 billion if the Northrop merger had succeeded.

2. Boeing

It was dubbed the sale of the century. Everyone knew the merger of Boeing and McDonnell Douglas, announced in late 1996, would create a behemoth aerospace company. Experts met the union with optimism: It was, after all, the 10th largest merger in American history. Boeing's purchase of Rockwell's aerospace and defense businesses shortly after the McDonnell Douglas merger only solidified its position as a mega-contractor.

But would the new company fly?

Yes, but as the year closed, Boeing was in for a rocky landing. The company recorded a net loss of $178 million in 1997 - its first annual loss in 50 years. It was a year of poor financial performance, CEO Philip M. Condit acknowledged in Boeing's 1997 annual report. "Almost 13 months after the acquisition was announced, and about seven months since the deal closed, Boeing is suffering from indigestion," The Wall Street Journal reported in May.

Boeing was having trouble delivering on the promises of the mega-merger: boosting its profits while dramatically lowering costs.

Contributing to the loss were some larger-than-expected costs in 1997, including

$1.4 billion to phase out some former McDonnell Douglas production lines and $1.6 billion to straighten out production bottlenecks, parts shortages and problems of inexperienced workers in the company's plants.

The newly expanded company, which at one point in 1997 had a $106 million backlog of orders, stumbled in the last year, so much that rumors of a senior management shake-up ran rampant on Wall Street.

Management tried to allay investors' fears by promising resolution of the company's problems by mid-1998. The challenge: coordinating 233,000 people in 27 states and getting them to agree to reshape a company into a unified entity.

"I think 1998 is a year of execution," Condit told the Seattle Times. "Last year was in a lot of ways a year of acquisition. Not just acquisition as in buying Rockwell and merging with McDonnell Douglas, but acquisition of a lot of orders."

Boeing's next big test and possible saving grace is the $200 billion Joint Strike Fighter competition. Boeing is vying with Lockheed Martin to build the fighter, which is to be used by all three flying branches of the armed forces.

The stakes are enormous. The Pentagon is slated to place an initial order for 3,000 airplanes, and future sales, including purchases by American allies, put the 30-year value of the contract at close to $1 trillion. Boeing and Lockheed currently have four-year $660 million "concept demonstration" contracts. Each will build two prototypes of the fighter.

In April, Boeing successfully completed a comprehensive series of performance and affordability reviews with Joint Strike Fighter program officials. "These were highly successful reviews that allowed Boeing to showcase many of the military best practices we're building on to produce the world's next generation strike fighter," Boeing Vice President and JSF Program Manager Frank Statkus said. "We were able to demonstrate to our customer that the Boeing JSF program is healthy, on time and on budget."

Boeing feels it has an edge on Lockheed Martin in the JSF competition because of its vast experience on the commercial side.

Maj. Gen. Leslie Kenne, who heads the Pentagon's JSF office, has said she wants close interaction between the Pentagon and its suppliers so that trade-offs of cost vs. performance can be dealt with early in the process. She also wants thorough testing of all key components before production begins, and she is asking for more online computer systems to cut down on paperwork and take advantage of paperless design.

That's exactly how Boeing designed and built the 777 and the latest versions of its 737s, Statkus said. "This is certainly one area where we have an advantage over our competitors."

Until Boeing hears the news on the JSF, the company will be occupied with completing the first phase of the International Space Station, scheduled for launch into orbit this summer, and launching the Delta III rocket designed for hauling commercial satellites into orbit.

In addition, Boeing continues its joint venture with Lockheed Martin called United Space Alliance, which operates the space shuttle program for NASA. USA will be taking over Pratt and Whitney's contract with NASA to recover and service space shuttle booster rockets. Boeing has also agreed to hire as many as 400 workers who were fired from USA because of a slowdown in scheduled space shuttle flights.

Boeing is also working under a $1.6 billion, three-year contract to develop a ground-based national shield against ballistic missiles. Under the contract, Boeing will be responsible for design, development, testing and integration of components for the missile defense system.

3. Raytheon

Through mergers and acquisitions in the last year, Raytheon has reshaped itself. While the company had about $12 billion in revenues in 1996, it would have had sales of more than $20 billion in 1997 if revenues from newly acquired units were figured in.

"Raytheon is a very different company today than last year," company chairman Denis Picard told stockholders in May at the company's first annual meeting since the July 1997 acquisition of Texas Instrument's defense business and the December 1997 merger with Hughes Defense.

Despite record financial results in 1997, Raytheon felt the effects of shelling out money it didn't necessarily have handy. In fact, the company reported that last year's acquisitions are expected to induce a debt of about $11 billion.

So, in late January, Raytheon announced plans to cut 8 percent of its workforce, or 9,700 jobs, and shut 20 defense facilities, in an attempt to consolidate and reorganize. Raytheon also agreed to sell its Amana appliances unit and related customer accounts for a combined $750 million.

"The first priority is the consolidation of the businesses we have acquired," Raytheon Vice President Michele Heid told reporters.

The consolidation, she said, would lead to big paybacks in terms of earnings and revenue. It did. Raytheon reported record earnings in the first quarter of this year of $214.9 million, on record sales of $4.6 billion. For the first quarter of 1997, earnings were $183.4 million on sales of $2.9 billion.

"They're in Scene 1 of a play that should hopefully have a very good ending," a J.P. Morgan Securities, Inc. defense analyst told Bloomberg News.

The action in that play continued earlier this year, when Raytheon announced that the Army had upheld a $512 million contract for the company to construct and operate a chemical weapons destruction facility in Pine Bluff, Ark. The contract was originally awarded to Raytheon last July, but a division of EG&G Corp. filed a protest and the Army suspended the contract last August. After a review by the General Accounting Office, the contract stayed with Raytheon.

In March, Raytheon received two Army contracts totaling $110.6 million for work on the Patriot Air Defense System, a surface-to-air system to defend against tactical ballistic missiles. Under terms of a $62.6 million contract, the company will continue to provide engineering services, quality assurance, system testing, program management and logistics in support of Patriot inventories through January 1999. In a separate $48 million contract, Raytheon will provide the U.S. Army six Patriot Radar Enhancement Phase III kits and six Classification, Discrimination and Identification Phase III kits in support of the Patriot's Advance Capability 3 (PAC-3) system upgrade.

Other major recent Raytheon contracts include a U.S. Navy agreement worth $41.5 million to construct 57,000 sonobuoys, sensors launched into the ocean to detect the noise of submerged submarines and enable aircraft to track them.

4. Northrup Grumman

In the great dance of federal contracting, Northrop Grumman certainly has no shortage of potential partners. First, Lockheed Martin launched a high-profile bid for the company. Then Germany's Daimler-Benz Aerospace, whose parent company is already going through the mega-merger motions with Chrysler, laid its gaze on Northrop Grumman as the United States successfully blocked Lockheed Martin's effort on antitrust grounds.

In May, Daimler-Benz Aerospace chairman Manfred Bischoff told The Wall Street Journal that he had discussed a possible European bid for Northrop Grumman with British Aerospace and Britain's General Electric Company. Observers note that a foreign bid for a company that works on highly sensitive military systems would give federal regulators as much pause as the Lockheed proposal.

But at least the possibility of another bid gives Northrop Grumman an additional option since the government spoiled the Lockheed/Northrop Grumman wedding.

What makes Northrop Grumman so attractive to its suitors is its sumptuous electronics business. Electronics are becoming increasingly key to Pentagon programs, and Northrop Grumman's electronics programs include flight-control systems, radar, fire-control systems, avionics, space-borne sensing, submarine propulsion and power generation. More than half of Northrop's sales are from military electronics, and over the next five years the company expects electronics to grow to two-thirds of its business.

One of the corporation's most impressive products is the Joint Surveillance Target Attack Radar System. Joint STARS aircraft can track enemy movements from high altitudes with its powerful radar, providing real-time data in any weather to the military. Thirteen JSTARS planes are now in the Air Force's hands. The Pentagon wasn't planning on buying any more, because NATO was going to purchase six aircraft. But NATO has since decided against the purchases, so Congress is deciding whether to fill in the gap. In the meantime, the Air Force is planning to upgrade the current aircraft to make the radar more accurate. Development of an advanced version of the system could bring North-rop a $1.3 billion contract award later this year.

Northrop's other cash cow, the B-2 stealth bomber, is running out of milk. The Air Force now has all 21 B-2s it plans to buy. A congressionally appointed review board in May seconded the Air Force's decision to complete the fleet at 21 aircraft, advising the service to spend money enhancing its current fleet of B-2s, not buying any more of the $2 billion planes.

In 1997, Northrop delivered four B-2s. The bomber made its first overseas deployment in early 1998, when two of the birds flew to Guam and dropped some mock bombs. The successful deployment followed news that the B-2's radar-absorbing skin has pocked during several flights. The pocks, probably caused by static electricity, decrease the plane's ability to hide from radar. Repairs to the special coating may cost as much as half a million dollars per plane, Air Force officials estimate.

Even though it's likely no more B-2s will be built, the program will still bring Northrop Grumman $300 million to $400 million a year in maintenance fees over the next decade, analysts predict.

The company also has a steady stream of revenue as a subcontractor to Boeing. Northrop backs up Boeing on the Navy's F/A-18 Hornet strike fighter and the C-17 airlifter.

5. University of California System

During a speech in February, President Clinton noted that Los Alamos National Laboratory, run for the Energy Department by the University of California, "in so many ways is the place that forever changed the 20th century."

In one way in particular: The 43-square mile parcel of New Mexico land on which Los Alamos sits is the birthplace of the atomic bomb.

While Los Alamos has taken on numerous additional projects since that momentous occasion, the lab's primary responsibility is still nuclear in nature.

Along with UC-run Lawrence Livermore National Laboratory in northern California and Lockheed Martin-run Sandia National Laboratory in Albuquerque, N.M., Los Alamos is trying to figure out how to maintain the nation's nuclear capabilities at a time when the United States has pledged to stop testing nuclear weapons (see "," May 1998). The labs have embarked on the ambitious Stockpile Stewardship and Management Program, which will rely heavily on supercomputing simulations to take the place of live tests. One supercomputer IBM is building at Livermore will be able to perform 10 trillion calculations a second when it comes online in a few years.

The stockpile stewardship program also includes a $1.2 billion National Ignition Facility at Livermore, construction of which began this year. The 192-beam laser facility will be used to investigate thermonuclear physics. All told, stockpile stewardship is costing the federal government more than $4 billion a year. Livermore and Los Alamos each have overall budgets totaling about $1 billion.

Nuclear weapons are a controversial subject. So it is no surprise that many are debating the cost of the stewardship program.

"We are spending a little more money to maintain them than we did to build them. That's silly," environmentalist Don Hancock of the Southwest Research and Information Center told States News Service earlier this year. "A lot of that money is not to protect the nuclear stockpile. It is meant to keep people employed at Los Alamos" and other laboratories.

Managers of the labs disagree, arguing that stewardship brings with it complex problems, ranging from environmental concerns to maintaining nuclear design skills among scientists to questions of nuclear weapons' stability over time.

So far, Congress has sided with the labs on the issue.

But the University of California did not avoid conflict with Congress over the past year. In May, the Los Angeles Times reported that congressional investigators were looking into a whistleblower's charges that the university had defrauded the government to the tune of $100 million over more than a decade. The whistleblower said the university paid for graduate students' tuition, but charged the government for research contracts. The university denies the charge.

In addition to overseeing Lawrence Livermore and Los Alamos, UC runs DOE's Lawrence Berkeley National Laboratory in California. The Berkeley lab researches particle physics, life sciences and energy efficiency, among other fields. Berkeley's budget is about $350 million a year.

The Energy Department has worked out a performance-based contract with UC for management of the labs, setting specific standards for administration and operations. Since 1994, the labs report that they have reduced their overhead rates by as much as 25 percent.

Other agencies besides Energy are tapping the labs' technological prowess. For instance, NASA funded a Los Alamos study of a rocket model that could shorten the round-trip traveling time of a manned flight to Mars from three years to one year. The Health Care Financing Administration hired Los Alamos to improve Medicare fraud and abuse detection techniques.

6. United Technologies Corporation

The U.S. defense industry continues to downsize and consolidate in response to pressure on the Pentagon's budget, but United Technologies isn't feeling the heat. At least not yet.

During 1997, the corporation's sales to the U.S. government were $3.3 billion, or 14 percent of total sales, down only slightly from $3.4 billion in 1996 and $3.6 billion in 1995. And United Technologies continues to be active in drumming up new business.

For example, in July 1997, United Technologies signed a five-year $745 million contract to build 108 Hawk helicopters for the Defense Department. Sikorsky will provide 58 UH-60L Black Hawk utility helicopters for the Army, 42 new CH-60 fleet combat support aircraft for the Navy and eight HH-60G Pave Hawk combat search and rescue helicopters for the Air Force.

The company is also continuing to work with Boeing to develop and test the Army's newest helicopter, the RAH-66 Comanche. The intelligence-gathering, light-attack aircraft is slated to replace the Cobra and the Kiowa helicopters during the first decade of the next century.

In May, the Army began flight testing of the first Comanche prototype. The Army hopes to buy more than 1,200 Comanches at $14 million a pop. The problem is that production of the aircraft has been pushed back several times, and now isn't expected to begin until 2004.

Pratt and Whitney, United Technologies' aircraft engine development unit, meanwhile, toiled away on the Joint Strike Fighter engine. During the next 30 years the program is slated to bring $20 billion to the company.

In November 1997, Pratt passed a critical design review of its two derivative F119 propulsion systems for the fighter plane and in February 1998 celebrated the completion of the engine core. The Pentagon hasn't yet decided which defense contractor, Boeing or Lockheed, will build the actual fighter, but either way, United Technologies will be involved, because both companies' prototypes use the Pratt engine.

The Defense Department plans to buy 3,000 engines for the new fighter, which would replace military jets now flying with the Air Force, Marines and Navy. Other countries could buy an additional 1,000 planes.

Pratt also settled a claim with the Navy in 1997, receiving $150 million to cover its costs of developing engines for the F/A-18 jet fighter.

Pratt and Whitney Eagle Services, a division providing maintenance and replacement services to support military engines, received an Air Force contract valued at $453.3 million to overhaul and repair F-15 and F-16 fighter engines. The contract provides for scheduled and unscheduled depot maintenance at Kelly Air Force Base, Texas.

7. Westinghouse Electric

If all goes as planned, Westinghouse Electric Co. will have a new owner by the end of the year, and employees are cheering the prospect. At the end of June, CBS Corp. announced that it would sell the remainder of Westinghouse to a joint venture of Morrison Knudsen Corp. and British Nuclear Fuels for $1.2 billion.

Morrison Knudsen, a Boise, Idaho-based engineering firm, will take a 60 percent stake in the venture and British Nuclear, a state-owned nuclear fuel processor, will own the rest, if the takeover is approved by government regulators. The joint venture will form a holding company, also called Westinghouse Electric Co., that will be based in Monroeville, Pa.

When employees heard the news, they were ecstatic, the Pittsburgh Post-Gazette reported. "At least we aren't dead," one employee said. "Tell CBS, tell Bill Cosby that there is still a Westinghouse."

Given the recent history of the company, that's a pretty surprising development. After Westinghouse bought CBS for $5.4 billion in 1995, it soon became clear the company was more interested in television than nuclear power. At the beginning of fiscal 1997, Westinghouse chairman Michael Jordan unveiled plans to split Westinghouse in two, with CBS and the rest of the company's media operations headquartered in New York as CBS Corp., and the industrial half remaining in Pittsburgh under the Westinghouse banner.

That industrial half includes Westinghouse's Government and Environmental Services Division, which takes in more than $2 billion a year in federal contracts to manage nuclear weapons and waste sites for the Energy Department, design reactors for the Navy's nuclear submarines and run chemical weapons destruction operations for the Army.

However, plans to keep the industrial side intact quickly unraveled. Last fall, Westinghouse sold off huge refrigeration and power generation units, and announced it would sell its other industrial operations in 1998. On Dec. 1, the company officially changed its name to CBS Corp. The new company would "be a pure-play media company," said Jordan.

Morrison Knudsen and BNFL, however, say they plan to build on the Westinghouse name. "This acquisition is a great opportunity for Westinghouse, its customers and its employees," Morrison Knudsen chairman Dennis Washington said in announcing the deal. "Westinghouse, combined with Morrison Knudsen and British Nuclear Fuels, will continue to be a world-class leader in nuclear technology, production and remediation."

The new holding company will manage the Savannah River Site nuclear complex near Aiken, S.C., as well as a 750-employee nuclear fuel plant in Columbia, S.C.

The 1,000-employee Savannah River Site once made plutonium for nuclear bombs, and the Columbia plant makes nuclear fuel for commercial reactors. Westinghouse has managed Savannah River for DOE since 1989. It currently has three years left on a five-year, $6 billion contract to run the facility.

Under Westinghouse, Savannah River is competing with an Energy Department facility in Tennessee for a $2.6 billion contract to produce tritium, a component in nuclear warheads.

Westinghouse also runs DOE's Waste Isolation Pilot Plant, a repository for radioactive waste in New Mexico. And the company manages the cleanup of plutonium and uranium residue at DOE's Rocky Flats site, a former nuclear weapons plant near Denver.

8. General Dynamics

General Dynamics, a company that spent much of the early 1990s selling off several key divisions, has reversed itself and become a player in the acquisitions market.

Last year, General Dynamics tried to buy United Defense, maker of the Bradley Fighting Vehicle for about $1 billion. But even though the company outbid the Carlyle Group, a Washington-based investment bank, the owners of United Defense went with the Carlyle Group because they feared that the Justice Department would raise antitrust concerns. General Dynamics and United Defense were the only major U.S. armored vehicle makers.

Even with that disappointment, the company managed to push through four smaller acquisitions totaling $1.3 billion. Two of the purchases - Defense Systems and Armament Systems, both former operating units of Lockheed Martin - added muscle to Combat Systems, the company's armored vehicle and artillery division. The Army isn't buying many armored vehicles these days, so General Dynamic's tank builders are keeping busy upgrading M1 battle tanks, at a rate of 120 upgrades a year.

GD is also developing the Marine Corps' new 30-ton Advanced Amphibious Assault Vehicle, a redesign of the Corps' current amphibious vehicles, which date from the 1960s and 1970s. In a unique partnership, Marines experienced in amphibious operations are working on-site with General Dynamics developers at a Woodbridge, Va., facility, moving development along more quickly than if revisions had to be shuttled back and forth between Quantico Marine Corps Base and the company's facility.

Partnerships are a common phenomenon in the federal contracting arena, and General Dynamics has shown its willingness to team up with companies it might normally compete with. Take for instance, the unlikely team of General Dynamic's Groton, Conn.-based Electric Boat Division and Virginia's Newport News Shipbuilding. The rival submarine makers, battered by low production rates, are teaming up on design and construction of the Navy's New Attack Submarine in the hopes of securing a stable workload in the coming years. Congress has some concerns that the competition-free partnership will hurt innovation, but company officials say the shipyards need predictable workloads to keep operating.

In the hopes of keeping Electric Boat and its other divisions on the cutting edge of technology, General Dynamics purchased Lucent Technologies' Advanced Technology Systems unit in 1997. That acquisition formed the cornerstone of the General Dynamic's new business segment, Information Systems and Technology, which the company hopes will give it a foot in the door of the commercial networking market.

In shipbuilding, General Dynamic's Bath Iron Works secured a $2.2 billion contract in March to build six Aegis-class destroyers for the Navy. Bath is also working with Lockheed Martin and Litton Industries on development of the DD-21 land attack destroyer, a program that could be worth more than $20 billion early in the next century.

Though partnership with both its customers and its competitors is one of the company's key strategies, it isn't afraid to throw some punches. In February, after a legal battle that dates back to June 1991, the U.S. Federal Claims Court awarded General Dynamics and Boeing $1.8 billion in damages for the government's cancellation of the Navy's A-12 Stealth attack fighter. The government is appealing, but observers say its chances are slim.

9. Litton Industries

After slipping to No. 11 last year, Litton Industries has jumped up two spots to make it back comfortably into the Top 10. The company's overall sales for 1997 were up 16 percent, from $3.6 billion to $4.2 billion. Net income climbed 7 percent, to $162 million up from $151 million in 1996.

Litton Industries officials attribute their success in part to recent acquisitions. Since 1994, Litton has acquired companies with a combined annual revenue of about $1.5 billion.

It all began in February 1996, when Litton purchased PRC Inc. - a supplier of computer systems, primarily to the U.S. government - from Black and Decker Corp. for $425 million.

That acquisition helped boost revenue from Litton's advanced electronics operations to $601.1 million from $357.9 million.

In March 1997, Litton completed the purchase of SAI Technology (SAIT), a division of Science Applications International Corp. specializing in customized mobile-computing equipment and systems for the military. SAIT brought annual sales of about $90 million to the table. Combined with the acquisition of Sperry Marine last year, the SAIT deal made Litton the world's largest producer of marine electronics navigation and guidance systems for both military and commercial customers.

Early this year, Litton spent $432 million to purchase TASC Inc., an information technology services company that does work for federal intelligence agencies and the Defense Department. Litton CEO Michael R. Brown said that by fiscal 1999, the purchase will boost the percentage of Litton's revenues that come from information systems to 35 percent. The TASC purchase makes Litton the fifth largest supplier of information technology to the U.S. intelligence community and of systems-integration services to the federal government.

In addition to the business boost brought on by recent acquisitions, Litton has also recently nailed down some major contracts.

In March, the maritime unit of Litton won a contract worth up to $2.8 billion to build as many as eight new guided-missile destroyers for the Navy. The Navy is expected to order at least six of the Aegis class ships under a contract valued at $2.2 billion, with an option on two more, according to a Litton spokesperson.

Litton and fellow top contractors Lockheed Martin and General Dynamics are jointly seeking a contract to build the Navy's next generation of combat ships. The team hopes to build more than 30 destroyers and cruisers over 15 years beginning in 2001 in a deal that could be worth more than $20 billion.

Litton also continues to work for the National Weather Service and the National Imagery and Mapping Agency, albeit on a smaller scale.

In April, Commerce Secretary William Daley approved the National Weather Service's plan to produce and install an interactive weather computer and communications system that will help provide more accurate weather- and flood-related services. The system, known as the Advanced Weather Interactive Processing System, is being developed by Litton's PRC subsidiary.

Litton also has an $80 million contract to help provide engineering services and technology innovations to NIMA.

10. General Electric

Aircraft engines kept General Electric humming in the upper echelons of the government's major contractors in 1997, even though military contracts accounted for only 19 percent of the company's overall engine sales.

Though civilian companies like American Airlines, Continental, Delta and Northwest are turbocharging the company's engine business, GE edged out United Technologies, parent company of engine maker Pratt and Whitney, for the highest sales in aircraft engines to the Defense Department last year. In fact, engine sales accounted for fully 70 percent of GE's federal contracts in 1997.

Most notably, GE's F414 fighter engine moved into low-rate production in 1997 after seven years in development. The engine will power the Navy's F/A-18E/F Super Hornet. The Navy plans on ordering up to 1,900 engines for the Super Hornet through 2017, making the F414 a key component of GE's future military workload.

General Electric is also keeping its hopes of competing in the lucrative Joint Strike Fighter program alive. After DoD awarded engine production for the JSF to Pratt and Whitney in 1995, Congress instructed DoD to seek out an alternative source for engines to guarantee competition. In 1996, GE started designing the engine. Last year the company and partners Allison and Rolls Royce received a $106 million, four-year contract to continue development.

For future sales, GE is looking beyond U.S. borders. It expects growing international demand for F-15 and F-16 aircraft, most of which are powered by GE's F110 engine. (Fully 85 percent of the Air Force's F-16C/D fleet runs on the F110.) The company is upgrading the F110 to make it more efficient and lower maintenance costs.

In November, GE struck a deal with South Korea to provide F404 engines for the Asian country's new advanced trainer/light combat aircraft. The deal could add up to $1 billion for the company.

Meanwhile, GE's Lynn, Mass., plant is building 36 engines this year for Navy CH-60, Air Force Pave Hawk and Army Black Hawk helicopters. The multiyear contract has a potential value of $200 million.

Last November, GE closed a deal with Lockheed Martin in which GE traded 29 million shares of Lockheed stock for two businesses, its investment in satellite company Globalstar, and $1.6 billion in cash. The deal stems from Lockheed's buyoff of GE's aerospace division earlier in the decade. One of the businesses GE acquired is Lockheed Martin Aerostructures in Middle River, Md., which makes thrust reversers for GE and Pratt and Whitney engines. The deal also gave GE the option to buy a Northrop Grumman facility had Lockheed's acquisition of the company gone through. The Grumman facility produces parts of casings for aircraft engines.