TASC, Northrop Grumman's Systems Engineering and Technical Assistance (SETA) business unit, is being sold to KKR and General Atlantic for $1.65 billion. Northrop Grumman's CEO Ronald Sugar said in a statement that the sale “reflects Northrop Grumman's desire to align quickly with the government's new organizational conflict- of-interest standards, while preserving TASC's unique organizational culture.“
The TASC sale will be one of Ronald Sugar's biggest divestitures and may be completed by the end of the year, according to Northrop. Sugar has sold a dozen businesses since 2003. Renny DiPentima, former CEO of SRA, had this to say about TASC’s sale:
“In the past, I have not always seen the OCI issues as my government colleagues have. For example, requiring that contractors who have developed the requirements not be allowed (be OCIed) to bid on design and development always seemed short sighted to me since, as the commercial sector has often concluded, the contractor doing the requirements that have been fully reviewed, approved, and accepted by the customer would have the best understanding of those requirements and how they flow into design and development. However, at the same time, I believe the government is acting correctly when it concludes that contractors who are performing program management, or program oversight, or IV&V (independent validation and verification) not be allowed to do the design and development. In the TASC case, the law requires that the Defense Department not allow integrators to both develop and oversee weapons systems work. I believe that is a correct position for the government to take with respect to OCI. As a result, some large integrators, like Northrop, will have to make choices within their marketbasket of businesses about where these OCI conflicts might exist and how to deal with them. Divestiture is an obvious option.”
The only question now is: who's next? Many major integrators have SETA business units, and, under new organizational conflict of interest standards, it will be increasingly difficult for contractors to advise federal agencies on contracts they compete for.