How to get rich
in the new Washington

Greg Jaffe and Jim Tankersley

Over the past decade, big spending on government contracts and lobbying has created a wave of well-heeled insiders and transformed Washington.

• Where highest earners live

  Capital gains: Spending on contracts and lobbying propels a wave of new wealth in D .C.

  

  

  

  

  

  

  

  

  

  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  Written by Greg Jaffe Jim Tankersley
  Published: November 17
  E-mail the writers
  So much money to be had if you know where to look.
  The avalanche of cash that made Washington rich in the last decade has transformed the culture of a once staid capital and created a new wave of well-heeled insiders.
  The winners in the new Washington are not just the former senators, party consiglieri and four-star generals who have always profited from their connections. Now they are also the former bureaucrats, accountants and staff officers for whom unimagined riches are suddenly possible. They are the e
  
  
  
  
  
  
  ntrepreneurs attracted to the capital by its aura of prosperity and its super-educated workforce. They are the lawyers, lobbyists and executives who work for companies that barely had a presence in Washington before the boom.
  During the past decade, the region added 21,000 households in the nation’s top 1 percent. No other metro area came close.
  
  
  The share of money the government spent on weapons and other hardware shrank as service contracts nearly tripled in value. At the peak in 2010, companies based in Rep. James P. Moran’s congressional district in Northern Virginia reaped $43 billion in federal contracts — roughly as much as the state of Texas.
  At the same time, big companies realized that a few million spent shaping legislation could produce windfall profits. They nearly doubled the cash they poured into the capital.
  The signs of the new Washington are everywhere — from the Tiffany & Co. store that Fairfax County development officials boast is the most profitable in the country to the new Tesla dealership in Tysons Corner. Every morning on the Beltway, contractors, lobbyists and some of the country’s highest-paid lawyers sit in the nation’s worst traffic. Sports talk radio crackles with rants about the Redskins and the latest ads from Deltek, a firm that advises companies on “capture strategies” for winning government contracts. The radio signal doesn’t extend much beyond the Washington commute. It doesn’t have to. The ad barely makes sense to most Washingtonians, let alone those living outside the capital.
  At Cafe Joe, a greasy spoon near the National Security Agency in suburban Maryland, software engineers with top-secret clearances merely have to look at the place mats under their fried eggs to find federal contractors trying to entice them away from their government jobs with six-figure salaries and stock options. The place-mat ads cost $250 a week. They are sold out through 2014.
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
   The new money and jobs have raised Washington’s stature in the global economy. Tens of thousands of the nation’s best-educated workers have flocked here, some for contracting jobs, some simply to be part of the newly energized business climate. The money and brainpower have supercharged the region.
  Now, with lawmakers struggling to shrink the nation’s debt and contract dollars declining, Washington is revving its economic engine. If it can run on its own — if all this new wealth and brainpower can innovate and produce beyond government work — the region may be able to sustain its growth.
  Venture capital is already flowing in, and the thriving local economy continues to draw the nation’s best-trained workers. Essentially, Washington has been the beneficiary of a ­decade-long, taxpayer-funded stimulus package. “We could have been a dodo bird,” said Mark Muro, policy director at the Brookings Institution’s Metropolitan Policy Program. “Instead we are the center of the universe.”
  Washington has long been a place where power outshone money, where companies tried to be discreet about their influence, where defense contractors knew not to wear watches that outshone the admirals’. The new Washington has lost some of those old inhibitions and has begun to resemble other global financial centers. Power still animates the city, but so increasingly does the pursuit of wealth.
  
  
  The entrepreneur
  Ulysese Jefferson was the kind of everyman only Washington could produce. He’d spent 30 years traveling the world fixing computers for the State Department. In 2002, he had a tidy pension, a split-level home in Laurel and about $5,000 in the bank. He was 64, a widower, and looking for something to keep him busy.
  “I knew there was pressure to reduce the size of the federal workforce,” he said. “But someone still had to do the work. Obviously, they were going to turn to contractors.”
  And who better to turn to than Jefferson? He knew the work and stayed in touch with dozens of State Department retirees. His goal was to win some State Department IT contracts and build a business that he could leave to his sons, both of whom were pretty good with computers. “I was never trying to make a fortune,” he said.
  Nearly 10 years later, Jefferson sold his company to the contracting giant ManTech for $90 million.
  Jefferson’s feat was accomplished during the post-9/11 period, when taxpayer money poured into the Washington area at rates that dwarfed those at any other time in the capital’s history.
  By 2010, the government was spending $80 billion a year on contracts here, much of it driven by the wars in Iraq and Afghanistan. “The culture changed,” said Brett Lambert, the Pentagon’s former head of industrial base policy. “It was spend, spend, spend.”
  It’s hard to say exactly how many of Washington’s households in the top 1 percent draw their incomes from the broad business of serving, supplying or influencing the government. But an analysis of tax data by the Economic Policy Institute shows that the area’s 1-percenters are most likely to be lawyers and executives, or people who work in management consulting or IT. Nearly 1 in 10 of those households is headed by a government worker.
  Jefferson was a small player in the federal contracting scrum. Every morning he would scan his contractor badge and head for the State Department cafeteria. His sons, who often joined him, thought of their dad as the quintessential State Department man. He was a fastidious dresser, but never flashy. He wore reading glasses perched on the tip of his nose. Over coffee, he caught up with old colleagues, sharing stories of Africa, Afghanistan, Pakistan and China. These conversations were where he picked up his best leads.
  Because Jefferson was part of a special program for minority-owned small businesses, he could receive small contracts without going through the months-long competitive bidding process. By 2005 his company, which he named Worldwide Information Network Systems (WINS), had picked up several million dollars in contracts and had a couple of dozen employees.
  “What happened to me and my company was built on my relationships,” he said.
  Most of his employees were State Department retirees who worked at government desks. Companies like Jefferson’s are known around the Beltway as “body shops” or, more derisively, as “butts-in-seats” businesses. Jefferson paid his employees about 30 to 40 percent more than they had made in the State Department.
  The contract workers were supposed to be cheaper over the long run because they could be laid off when they were no longer needed. Instead, they often became permanent fixtures. Each year, Jefferson added more contracts with the State Department. He picked up work with the Justice and Commerce departments. By 2008 his company had about 120 employees and annual revenue of about $30 million. Jefferson took his workers on annual Potomac boat cruises and paid for a formal Christmas party in a hotel ballroom where he passed out $500 Tiffany and Gucci gift certificates as prizes.
  Jefferson’s big breakthrough came at the Pentagon’s Defense Intelligence Agency. Unlike the cash-strapped State Department, the DIA was awash in war spending. Jefferson now had access to the insular world of military intelligence. He immediately moved his son Mark into DIA headquarters to oversee the company’s work there. Then, following a well-worn Washington path, he lured away one of the agency’s division managers, paying him $235,000 a year, a big raise over his government paycheck.
  “Now there was someone from their family inside our company,” Jefferson said.
  Since his firm lacked experience bidding for billion-dollar contracts, he hired an executive with a DIA background away from Booz Allen Hamilton. He paid her $256,000 a year.
  
  Ulysese Jefferson said his goal in 2002 was to win some State Department IT contracts and build a business that he could leave to his sons. “I was never trying to make a fortune,” he said. (Michel du Cille/The Washington Post)
  
   
• From left, Hank Hendricks, Ulysese Jefferson and Richard Martin watch the Redskins game in Jefferson’s 24-seat skybox at FedEx Field. Jefferson bought the suite after selling his government contracting business. (Michel du Cille/The Washington Post)
  In 2010, his company won a slot on a $6.6 billion DIA “contract vehicle,” one of the new insider currencies of Washington’s boom years. The vehicle was essentially a hunting license. Only the 11 winning firms would be allowed to bid for DIA computer work over the life of the five-year contract. Ten of the winning firms were based in the Washington area. The sole non-local winner, SAIC, was in the process of relocating its headquarters from the West Coast to Northern Virginia.
  Immediately after his win, Jefferson began fielding calls from suitors for his company. He didn’t want to sell. But he did wonder how much it was worth. He and his sons, David and Mark, met at an Irish pub near Bowie to discuss the offers and the future.
  “If I could ever build a $25 million company, that would be the most wonderful thing,” he told his sons.
  David guessed it was already worth $25 million to $30 million. Mark said $50 million.
  “Dad and I thought he was out to lunch,” David said.
  The company’s revenue doubled to about $70 million in the first year after the DIA win. Jefferson now had more than 200 employees, and one big worry. His company no longer qualified for the small-business minority preference program and would have to compete with the world’s largest defense companies — Lockheed Martin, Northrop Grumman and Booz Allen — for work. Wealthy private-equity investors were in the mix now, too. They enticed former generals, admirals and Cabinet secretaries to join their companies’ advisory boards. Some of these firms’ boards packed more brass than the Joint Chiefs of Staff. How much star power would Jefferson need to compete?
  “I would consider selling if I got an offer of $75 million,” he told his sons. He reluctantly agreed to shop the business.
  The sale to ManTech was finalized in late 2011 . Jefferson’s closest friends said he seemed more sad than elated.
  “How do you turn something like that down?” John Cabral, a friend and State Department employee, recalled telling him. “It is just too much money.”
  Jefferson set aside about $1.5 million for bonuses that he paid to two dozen of his top employees. He bought houses for his five children (only two worked full time with the company) and established trusts for his 12 grandchildren. He gave tens of thousands of dollars to his church.
  This fall he made one more purchase: a 24-seat skybox at FedEx Field. On a fall Sunday, there he is, an ordinary Washingtonian, borne by a wave of government spending to one of the city’s exclusive symbols of success.
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