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Consortium model, expertise increase revenue for SCRA
By Shelia Watson
Contributing Writer
The fiscal year-end numbers for the South Carolina Research Authority are impressive no matter which way you view them.
Bringing in $89.2 million, which is a record for the company and 9% more than its goal, this is the company’s seventh straight year with growth of more than 10%.
CEO Bill Mahoney has a simple explanation for SCRA’s phenomenal financial success.
“We’re experts in the right areas, and we deliver through a consortium model,” Mahoney said.
“We’re fortunate to have the right stuff at the right time,” he said. “Last year we grew by about 15 percent and beat our plan by about 7 percent. A big part of that had to do with several mission-oriented agencies of the federal government that have requirements for things like warfighters to make them more efficient. Those happen to be the market segments we’re involved in.
“It happens that the types of things we do well, such as interoperability, supply-chain management, lowering the cost of weapons and management systems, those are all the things in demand at the Department of Defense, the Department of Energy and the Department of Transportation. There’s a good match between our capabilities and these government industry associations.”
Bob Kiggans, president of SCRA’s federal sector, which brings in the bulk of the revenue, said the SCRA pioneered the collaborative management technique about 20 years ago.
“Today collaboration is the watchword, the benchmark, but we had a head start on it. So when people are looking to pull collaboration together, they come to SCRA,” he said.
Getting on the radar
Kiggans credits Mahoney with putting the organization on the radar.
“Before Bill came on board, we were inwardly focused,” he said. “We had high quality but the inward focus was a hindrance. Now we still have a high quality, but we’re focusing outward as we transition into more of a research-based business.
“Under Bill’s guidance we’ve standardized our processes and contracting methods with a lot more emphasis on cash flow.”
Mahoney said the increased visibility has led to more referrals, hence more potential business, particularly in the state.
“We’re looking for ways to do business with more institutes and, at the same time, we have an obligation to the Industry Partners Act,” said Mahoney. “Our increased profile is due in part to us fulfilling the letter of that law. Those mandates, while putting somewhat of a burden on our cash flow, have also created alliances and tools we’ve never had before.
“There’s a window of opportunity to capitalize on those new relationships and new opportunities presented by the Legislature, not only to restore our cash reserves but to contribute to the economic development.”
Growing the knowledge economy
The organization’s mission goes well beyond securing federal-dollar contracts.
“We’re making a major investment in the knowledge economy,” said Kiggans. “We have a long business cycle; it takes about 12 to 36 months to bring in a business, so we’re allowed to take a longer view.”
Mahoney explained that, because SCRA’s focus is research and development, the organization is in a “pre-commercial” market, which takes pressure off the need to show immediate returns.
“So rather than trying to ‘make the numbers’ every 90 days and figuring out how to satisfy that goal, we can take a longer horizon,” he said.
One of those long horizons is asset management.
“In our traditional business model, we sold off several acres of the land we were originally granted, and the land was developed into research parks,” Mahoney said. “We have 35 acres left, and rather than sell, we decided to jointly develop the land with commercial and education partners. That will give us a higher valuation of the land and a larger return on investment.”
Beyond the physical asset strategies, SCRA is investing in the S.C. LightRail project, which will connect South Carolina to the National LambdaRail supercomputing backbone and provide access to computer centers and national laboratories.
“We’re prepared to lead and invest in that type of digital infrastructure to compete for more federal dollars,” said Mahoney. “This will give us the super high-speed bandwidth that 41 other states already have. Those states use that as a leverage to compete for more research dollars.
“If you look at the federal dollars coming into the state with projects like the Savannah River Site, there’s a total of about $700 million or so. But if we had a network like this, we could easily get to $900 million.”
Mahoney said the supercomputing network would be an asset for hospitals and research facilities.
“We anticipate an improvement in patient care by several percentage points,” he said. “We’re working with hospitals and universities on what the applications capabilities are and what would be the economic return. Then we can go to the federal government armed with those calculations and say ‘Here’s somewhere to put those dollars.’ Which is something other states have already tapped into.”
Favorable financial trend
Plans also are underway for a classified technology facility at Clemson, which is expected to generate 10% to 15% of the organization’s business in the next few years.
Another project in the works is a center at the University of South Carolina that will manage applied research similar to SCRA’s Applied Research and Development Institute at Clemson. Kiggans said the facility at USC will focus initially on alternative energy such as hydrogen fuel and later will work on a sustainable military base initiative.
Benchmarked against 11 similar research institutes, SCRA’s overhead rates are the lowest of the group.
With the federal sector bringing in about $80 million and the state public interest sector, which is mandated by the Legislature, bringing in about $7 million to support state business, Mahoney said he expects the favorable financial trend to continue.
“Historically we’ve been successful at winning about 85 percent of the proposals in the marketplace, and we expect that to continue,” he said. “We have twice as many proposals this year that will make up about four times as much work compared to this time a year ago.”
The goal for the coming year is $95 million. Now a few months into the 2006-2007 fiscal year, Mahoney said SCRA is ahead or on plan in all key indicators.
“There’s an old saying that goes, ‘Do well and thereby do good.’ That is what we’re about,” Mahoney said. “We aren’t here to serve only the economic interests of our shareholders, the way most standard businesses operate. We have a large base of stakeholders who benefit from what we do.
“It’s a bit of an idealistic value system that guides SCRA. We’re helping people with our technology and know-how. Sometimes that’s a 19-year-old kid in the desert in Iraq, and sometimes that’s the 19-year-old in a university program. The key is we’re taking the financial gains and doing something great with them.”
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