SAIC [SAI] recently said the Greek government has formally accepted a C4I system the company developed for the country in conjunction with the 2004 Summer Olympics in Athens that initially didn’t meet all of the customer’s requirements, leading to contract revisions and additional work that cost the company $124 million in losses.
The contract, which was agreed to in 2003 for $199 million plus another $123 million in support and radio network services for 10 years, called for a C4I system to address the public safety and security needs of the Greek police, fire brigade, coast guard and ambulance service. The vast majority of the losses under the contract occurred by late 2005, around the same time SAIC was in the planning stages of going public. The company’s difficulties on the C4I system led it postpone its initial stock offering (Defense Daily, Dec. 14, Dec. 19, 2005).
With formal acceptance of the security system behind it, SAIC said that any risks of loss are now Greece’s, and the company is entitled to financial consideration as specified in the contract. In its third quarter filing earlier this month with the Securities and Exchange Commission (SEC), SAIC said that it is entitled to a payment of $18 million from the Greek government, $8 million of which the company keeps and the rest going to subcontractors.
However, SAIC warned that its principal subcontractor on the project is under investigation on alleged improper payments to government officials in a number of countries, including Greece. If the allegations prove true, the subcontractor’s ability to continue performing under the contract could be hampered, which could hurt SAIC’s finances, the company said in the SEC filing.