For OSI Systems [OSIS] its recent good news has gotten even better. After securing a six-year, $400 million contact in Mexico to provide screening technology and services for the country’s customs authority, the company says that it has received options on the award that now bring the contract to $900 million.
“It’s a big deal,” Peter Kant, head of Global Government Affairs at OSI’s Rapiscan Systems division, tells TR2.
OSI says that the $900 million is the upper end of the original maximum scope for the program, a value which it hadn’t previously disclosed. The company originally announced the contract in January and said that the minimum value is $400 million (TR2, Feb. 1).
When the contract was first announced analysts lauded it for validating OSI Systems’ strategy of offering turnkey screening services—everything from the scanning equipment to the actual screeners as well as integration—to potential customers. The company already has a similar arrangement with the Puerto Rico Ports Authority thought to be worth $200 million over 10 years.
Moreover, the original $400 million value associated with the Mexico contract was well received by analysts who felt it would further smooth out OSI’s revenue stream, giving it some predictability and locking in growth. The $900 million that is now secured over six-years will further expand the company’s growth expectations while also providing strong revenue streams in the coming years.
The contract is with Mexico’s Servicio de Administracion Tributaria, the country’s tax and customs authority, and includes providing various types of X-Ray screening technology as well as staffing, systems integration, data management, and maintenance at seaports, airports, border crossing and other checkpoints throughout Mexico. The screening that will be done includes inbound and outbound cargo.
The contract options that have been awarded essentially mean that Rapiscan will be providing “a lot more equipment and a lot more services” to more locations in Mexico, Kant says.
Rapiscan Nabs WTC Award
Separately, Rapiscan has received a $15 million contract from the Port Authority of New York and New Jersey to provide cargo and parcel screening solutions for the new World Trade Center (WTC).
The award builds on the company’s experience as a prime contractor for two systems integration contracts, one with Mexico’s Grupo Aeroportuario del Pacifico, an airport operator, and the other for the Army’s Joint Program Executive Office for Chemical and Biological Defense. Under the airport contract, Rapiscan for the first time led a project to construct and install baggage handling systems at 12 airports integrated with the company’s MVXR 5000 high-speed multi-view X-Ray hold baggage screening systems (TR2, Jan. 20, 2010). The experience proved to be difficult as the company suffered cost overruns that impacted its earnings but OSI officials have maintained that the risk was worth it given the lessons learned that they believe can be applied to other projects.
For the Army, Rapiscan is providing a range of its personnel, cargo and vehicle inspection equipment and is serving as a prime contractor and hardware systems integrator (TR2, July 6, Sept. 28, 2011).
For the Port Authority of New York and New Jersey Rapiscan isn’t providing screening services but similar to the Mexican airport and Army Entry Control Point programs is providing program management, construction management and integration of multiple security systems at the WTC, Kant says. In addition to X-Ray screening systems, Rapiscan is building out the “security area” for the WTC main complex to include CCTV cameras, access control and ID systems, he says.
Unlike the Mexican airport contract, the work for the WTC is “heavier on the X-Ray systems side” and it’s not international, which makes it “easier” for Rapiscan, Kant says. He describes it as an “easier integration” than the airport contract.
Kant says the recent wins, building on previous integration and turnkey services solutions, is evidence of Rapiscan living up to its tag line, “One Company—Total Security.” The WTC is coming to Rapiscan not just for the X-Ray technology but to provide a fully integrated entry control point that includes a number of technologies and is “a big part of our strategy going forward,” he says.