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 Government IT Spotlight Back to the Future Hard-hit IT Recruiters Eye the Federal Market
Washtech.com Staff Writer Tuesday, May 7, 2002; 6:36 PM
Dot-com era technology recruiters got used to a flood of work and fat paychecks. But when the Internet bubble burst, the landscape changed, leaving many headhunters looking for jobs of their own. A number of Washington-area recruiting firms have laid off staff and some have closed. Casualties include Quest Systems of Bethesda and Search Connection, which had offices in McLean and Columbia. While the number of staffing companies in Washington, Northern Virginia and suburban Maryland grew 23 percent between 1997 and 2001 to 423, the number is expected to fall this year, according to the Alexandria-based American Staffing Association. The survivors, particularly those that popped up in the 1990s to serve the burgeoning technology sector, are turning to a familiar mainstay of the Washington economy: government contractors. Often viewed as a static, even passé sector in the late '90s, government contractors are a bright spot in the region's tech economy, thanks to a surge in federal IT spending after the Sept. 11 terrorist attacks. "Where the money bell is ringing, these firms are going to gravitate," says Tom Painter, director of recruiting for Fairfax information technology consulting company AMS. He sees a lot of "elbowing" in the recruiting industry as firms that reclassified themselves as commercial IT recruitment shops during the dot-com boom scramble to enter the government marketplace. Breaking in won't be easy. For starters, there already are incumbent companies that specialize solely in recruiting for government contractors and filling select positions for government agencies. Many big contractors already have in-house recruitment operations. And experts say new recruiters will have a hard time if they are not on a preferred vendor list with government contractors and don't have a track record of placing prime candidates with security clearances. "I think it would be tough for anybody to break into, regardless of size at this point, if you haven't been in it before," says Randy Cochran, managing partner of the Mid-Atlantic region for mega-search firm Heidrick & Struggles International, which has an established government practice. "There hasn't been the windfall we've hoped for," says Paul Villella, CEO of HireStrategy. The two-year-old, privately held Reston company started hiring for government contractors last year. Clients include DynCorp, Northrop Grumman and CACI International. Still, there are upsides to government-related work, such as stability. The thought of working with a big government contractor is comforting "after this year of total chaos," says Mimi Wallace, whose Fairfax recruiting and human resources company, FasTrak Personnel, closed in December. Hiring for government-related work should account for 90 percent of the growth in the industry, says Wallace, who is currently consulting and is also president of the Washington-Area Recruiters Network. But she cautions that switching to government work will be a challenge for recruitment firms since lot of legwork is involved, including nabbing a spot on a government contractor's preferred hiring list. "You really have to have a good set of qualifications," she says. "Unfortunately, there's a lag time," says Robin Mee, president of Mee Derby & Co., a six-person Cabin John company that places recruiters and sales executives at staffing and IT service firms. "You just don't tomorrow say, 'I am going to do business with the government.'" That hasn't stopped firms from trying. Mark Horning, an 18-year recruiting veteran, felt the brunt of the recruiting downturn in March when he got laid off from his managing post at now-defunct Search Connection. He started May 1 as director of the information technology practice in McLean for international search firm Spherion, which logged $2.7 billion in revenue last year. He plans to target government work as a way to boost the firm's IT business, along with any other sector that is hiring, he says. "Now is a great time to build an IT recruiting practice" that includes some government work, Horning says. "There's business out there - it's not huge, but it's there." Horning, who has dabbled in government-related hires before, says recruiting for government contractors largely rests on similar skills used to hire tech-savvy employees during the Internet boom. That transfer of skills will help firms trying to break in, he says. But placement fees with contractors can be up to 40 percent lower than what was common during the heady dot-com days, he warns. Recruiting companies make money in a variety of ways. Some take a 20 to 30 percent cut of an employee's first-year salary, others charge a flat fee, and some are paid a portion of a contract employee's hourly rate. Finding job candidates with security clearances can be another barrier. "That is a different kind of recruiting for most IT recruiting firms and they don't necessarily have those types of people in their database, so it's hard to make that switch," Horning says. Arlington-based CACI has a preferred vendor list, but hires roughly 95 percent of its employees internally, according to Dick Hart, CACI's senior manager for recruiting and staffing. Hart has noticed a spike in calls from recruiters nationwide interested in partnering and tapping the government market. "Most of the firms have not done their homework," Hart says. Many sound like telemarketers since they are trying to woo multiple government contractors. The government recruiting market is so competitive, Hart says, presidents of major national recruiting firms are calling him directly to pitch their firms. Companies are offering bargain pricing to hire for CACI - often taking a 13 percent cut of a first-year salary instead of 20 percent. Donna Diederich, director of employment policy and diversity for TRW Systems in Reston, says the majority of the defense company's recruiting is done internally. "I get calls constantly, so I know it's a very dynamic market," she says. "But I also know it's somewhat flooded. It's very competitive." Staffing firms looking to partner with TRW are better off if they find a niche, such as specializing in finding talent with security clearances, Diederich says. Chris Scalia, co-founder and vice president at Arlington-based Mindseeker, says his company started more than a year ago to make the transition from commercial work to government work. The company's workload has flipped from about 80 percent commercial, to about 80 percent government, Scalia says. It hasn't been easy. The company has declined from 15 employees to six and had to burn a lot of money to float through lean times, Scalia says. The privately held company doesn't disclose its revenue. Mindseeker's sales are down at least 30 percent, but Scalia says having an office close to main contractors has helped drum up work. "Outside of the D.C. area, I'm hearing it's just bad period because they don't have all these government consulting firms," he says. Scalia thinks recruiting companies that are just tapping into government work are too late. Mindseeker placed ads early last year to fill up its database with leads for candidates with security clearances and also spent months making cold calls to system integrators and other contractors like SAIC to get on preferred vendor lists. The red tape associated with doing business with the government has been enough to keep some firms away. The Search Group LLC, of Columbia, which eight Search Connection employees formed, considered targeting government-related recruiting. Instead, the new firm will focus on health care, biotech and other markets, according to partner Susan Riss. Government-related hiring "is such a long cycle and a bureaucratic cycle," Riss says. Search Connection did some government hires in 2001, but didn't turn a profit. "We kind of went down that road last year and just found the return on investment wasn't there." Cynthia L. Webb is a staff writer for Washtech.com. Her e-mail address is cindy.webb@wpni.com.
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Mark Horning, director of the IT practice for search firm Spherion, plans to target government work as a way to boost the firm's IT business.
(Olivier Douliery - Washington Techway)
