By Calvin Biesecker

L-1 Identity Solutions [ID] yesterday said the State Department has awarded it a potential five-year, $107 million contract to produce a new border crossing credential that had originally been won by General Dynamics [GD].

The State Department didn’t return phone calls yesterday seeking comment on why it removed its original $93.3 million contract with GD for the PASS Card services. GD beat L-1, which had been favored, for the award the first time around (Defense Daily, Jan. 15, 2008).

Government Computer News first reported on the breakdown in PASS Card talks between GD and the State Department late last month.

While the original loss to L-1 was seen as a blow, the reversal expands the company’s presence with an important customer and gives it an opportunity to win additional work with the State Department. L-1 produces passports for the State Department and the PASS Card is expected to be the model for the new U.S. Border Crossing Card (BCC) for Mexican visa applicants.

“This is a high-profile project, and a boost in L-1’s efforts to establish a major presence on all U.S. identity solutions programs,” Stanford Group analyst Jeremy Grant wrote in a note to clients yesterday. “While positive, we maintain our cautious view of the revenue and earnings opportunity from this new project. We doubt the $107 million five-year ceiling is ever reached, believing that limited demand for the Passport Card likely limits five-year revenues to $41 million.”

L-1 believes that it will likely produce the BCC cards, which would help make up for any softness in the PASS Card program.

Grant also pointed to L-1’s earnings call last month when company officials said that if they had won, the work wouldn’t have been profitable. Grant believes L-1 has negotiated a higher price than its original offer, which will likely make the PASS Card profitable now.

L-1’s subcontractors include Datacard Group, which will do the laser printing, American Bank Note, which will provide the card stock, RDC Technology, which will provide the radio frequency identification (RFID) used in the card, Identity StrongHold, which provides RFID sleeves to help safeguard against unwanted transmissions from the card, Intermec, which will provide a reader that picks up the facial data on the card, and Transcore, which tested the company’s solution.

The PASS Cards will be for land and sea travel only for U.S. citizens arriving back in the country from Canada, Mexico, the Caribbean and Bermuda. The document meets the requirements of the Western Hemisphere Travel Initiative. The cards will begin to be issued early this summer.

To speed the processing of individuals at the border the new card will have a vicinity RFID chip that will contain a unique identification number that will link the card to stored records about that person in a government database. No personal information will be written into the RFID chip. A digital photo of the person will appear on the card as will certain basic biographical data.