Making its first foray into the aviation security product space, Science Applications International Corp. [SAI] has agreed to acquire Reveal Imaging Technologies, a developer and manufacturer of explosive detection systems (EDS) used to screen checked baggage at airports in the United States and internationally.
Terms of the deal, which is expected to close later this month, were not disclosed.
Reveal, which is based in Massachusetts, has a family of EDS products although its main seller is the CT-80 series of reduced size machines. These are typically sold to the Transportation Security Administration (TSA) and international airports and governments for operations in small to medium-size airports. The system, handles relatively low baggage throughputs, can be deployed in airport terminals or inline with baggage handling systems.
Reveal is the leading provider of reduced size EDS, one of three categories of the machines. L-3 Communications [LLL] also offers a TSA-certified reduced size EDS although it doesn’t have a contract with agency for its SX machine. L-3 also provides offerings in the medium and high-speed categories as well, which it sells to TSA.
Morpho Detection, part of the Safran Group, currently offers medium-speed EDS, and is developing reduced size and high-speed systems.
Growing Competition
The competition in the EDS market is intensifying. L-3, OSI Systems’ [OSIS] Rapiscan Systems division, and a small company, SureScan Corp., were each awarded contracts by TSA in the fall of 2008 to develop high-speed EDS based on fixed gantries. Current EDS are based on rotating gantries while the fixed gantry systems will have fewer moving parts, more baggage throughput and potentially lower maintenance costs over their life-cycle (TR2, Oct. 15, 2008).
SureScan says that its system, the x1000, is going through certification testing in the Transportation Security Laboratory. All the companies, whether they are developing the fixed gantry systems or offering their existing EDS, are in the process of upgrading their systems to meet new standards.
TSA was expected to award contracts for the new, higher speed EDS, as well as make new awards for the medium and reduced size machines this December although industry officials believe these awards will be pushed well into 2011.
Reveal has benefited the past few years from Congress directing TSA to fund a specific portion of the agency’s EDS budget for the purchase and installation of reduced size machines in small and medium size airports. While this amount has been around 28 percent the past two years, it appears Congress plans to reduce this to 8 percent.
If so, with TSA having more discretion on how to apportion its EDS budget, and L-3 having an opportunity in FY ’11 to sell its SX reduced size EDS to the agency, the competition for Reveal will grow.
In addition to its CT-80 systems, Reveal also makes another reduced size EDS, the CT-800, and has developed a computed tomography-based scanner for checkpoint applications. Last fall the company also received a potential $3.9 million contract from the Department of Homeland Security Science and Technology Directorate to develop a whole body imaging system based on active millimeter wave and acoustic sensing technology.
L-3 and Rapiscan are currently the only two TSA-certified providers in the U.S. of whole body imaging systems. Other companies such as American Science and Engineering [ASEI], Smiths Detection and Millivision also make the body scanners.
For SAIC, the pending acquisition further bolsters its homeland security offerings–in particular aviation security–which currently are heavily weighted to the seaport and border security offerings. The company’s marquis product is its VACIS family of cargo and vehicle gamma-ray inspection systems that are sold to Customs and Border Protection (CBP) and international customs agencies.
SAIC also makes radiation portal monitors and handheld radioisotope identification devices for CBP and foreign countries for use at land ports of entry and seaports to screen containers for radiological materials.
Earlier this year SAIC acquired Spectrum San Diego, a small firm that developed a relatively low-cost, low-dose, dual-energy vehicle X-Ray system called CarScan that can be set up quickly and allows occupants to remain inside their car while being scanned. The VACIS systems are more expensive and are typically used on larger vehicles and containers and require occupants to exit the vehicle prior to scanning.
While SAIC isn’t a stranger to the airport security environment, it doesn’t’ appear that the company has done much work here. Last year TSA selected it and three other contractors to compete for task orders under the Security Equipment Integration Services (SEIS) program. However, only Raytheon [RTN] has announced any orders under the SEIS award, the latest an $88 million contract to install passenger screening equipment at the nation’s airports (TR2, Oct. 28, 2009 and April 14).
It’s possible that given SAIC’s inclusion on the SEIS contract that it may have to divest itself from this work to avoid Organizational Conflicts of Interest.
For Reveal the deal positions it within an experienced systems integrator. LeeAnn Levesque, general manager for SureScan, tells TR2 that SAIC’s integration expertise combined with its extensive product portfolio could position it well for opportunities overseas, and eventually in the U.S., in airports looking for more integrated solutions across product offerings. There are a lot of potential changes underway as the global aviation system harmonizes although how things end up is still unclear, she says.
In addition to its purchase of Spectrum San Diego, SAIC has made a number of relatively recent acquisitions in the homeland security-related space. The company has made three acquisitions in the cybersecurity space going back to last summer, and earlier this year acquired Science, Engineering and Technology Associates, a developer and integrator of information and sensor technologies that has developed the radar-based CounterBomber system to detect concealed explosives on persons at stand-off ranges.
Last summer SAIC also acquired R.W. Beck Group, Inc., which among other things provides emergency management consulting services, further bolstering its capabilities across the homeland security landscape. SAIC also helps the Coast Guard with its Biometrics at Sea program.
SAIC and more recently the Safran Group, through its acquisition of General Electric‘s [GE] homeland security business, now called Morpho Detection, have been consolidators in the homeland security space. SureScan’s Levesque says that the industry has been anticipating additional consolidation as well as more movement by the traditional defense prime contractors into the homeland security market.
For Reveal, More Resources, Bigger Footprint
For Reveal, becoming part of SAIC opens it to more resources and a larger global footprint given SAIC’s involvement with numerous foreign customs agencies for its port and border security products.
This will provide Reveal more opportunities to “expand and grow,” Michael Ellenbogen, Reveal’s president and CEO, tells TR2. Ellenbogen will be staying on with Reveal when it joints SAIC’s Security and Transportation Technology Business Unit.
A critical feature of EDS systems is there ability to automatically detect threats inside checked baggage. Ellenbogen says that Reveal’s focus on auto-detection, which it is also attempting with its whole body imaging system, will also provide it an opportunity to try to work its know-how into SAIC’s products.
When and where Reveal and SAIC will try to find these technical synergies will be part of discussions going forward, he says.
Morgan Keegan served as Reveal’s financial advisor on the transaction.