FORWARD-LOOKING STATEMENTS

The matters discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Form 10-Q, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," and "would" or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to predict or control accurately. The factors listed or referred to in the section captioned "RISK FACTORS," as well as any cautionary language in this Form 10-Q, provide examples of risks, uncertainties, and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-Q. Subsequent events and developments may cause our views to change. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so.

OVERVIEW

We are a leading provider of technology and strategic consulting services and solutions to government organizations. We offer a broad range of technology and strategic consulting services spanning the information technology life cycle, including: strategic consulting; systems design, development, and integration; and outsourcing and managed services. Our business solutions include text and data mining; information assurance, cyber security and privacy protection; enterprise resource planning; business intelligence; contingency and disaster planning; enterprise architecture and portfolio management; identity management; information sharing and knowledge management; outsourcing, managed services, and infrastructure modernization; service-oriented architecture; training, modeling, and simulation; air traffic management; clinical research outsourcing, regulatory consulting and data management; and wireless integration services. These business solutions consist of repeatable tools, techniques, and methods that reflect the specific competencies we have gained from significant experience in these areas. We provide services in three target markets: national security, civil government, and health care and public health. Our largest market, national security, includes the Department of Defense, the National Guard, the Department of Homeland Security, the intelligence agencies, and other government organizations with homeland security missions.

Since our founding in 1978, we have derived the majority of our revenue from services provided to federal government clients. According to the Federal Information Technology Market Forecast, FY 2008-FY 2013 report published by INPUT, an independent federal government market research firm, the contracted portion of U.S. federal government spending on information technology is forecasted to grow at an annual rate of 4.1% from $71.9 billion in federal fiscal year 2008 to $87.8 billion in federal fiscal year 2013. We estimate that our addressable market, which also includes management consulting, engineering and other professional services for local, state, and federal governments, is currently over $150 billion in size. Our growth is driven in part by contract awards and how we build-out our contracts. Ideally, the level of quarterly business awards would exceed the revenue booked in the quarter to drive backlog growth.

We work with the federal government under three primary contract types:
cost-plus-fee, time-and-materials, and fixed-price contracts. Cost-plus-fee contracts are typically lower risk arrangements and thus yield lower profit margins than time-and-materials and fixed-price arrangements. Time-and-materials and fixed-price contracts typically generate higher profit margins reflecting their generally higher risk. Where customer requirements are clear, we prefer to enter into time-and-materials and fixed-price arrangements rather than cost-plus-fee arrangements. Typically under time-and-materials and fixed-price, as compared with cost-plus-contracts, the customer can save money and we can earn better margins, given the more specific delivery requirements of these structures.

Most of our revenue is generated based on services provided either by our employees or subcontractors. Thus, once we win new business, the key to delivering the revenue is through hiring new employees to meet customer requirements, retaining our employees, and ensuring that we deploy them on direct-billable jobs. Therefore, we closely monitor hiring success, attrition trends, and direct labor utilization. Since we earn higher profits from the labor services that our employees provide compared with subcontracted efforts and other reimbursable items such as hardware and software purchases for customers, we seek to optimize our labor content on the contracts we win. We also develop and sell proprietary software and hardware to customers. For example, our Era business develops, manufactures and sells flight tracking and surveillance solutions. The amount of proprietary software and hardware that we sell may vary from period to period depending on specific contract and customer requirements.

Cost of services includes labor, or the salaries and wages of our employees, plus fringe benefits; the costs of subcontracted labor and outside consultants; third-party materials, such as hardware and software that we purchase for customer solutions; and other direct costs such as travel incurred to support contract efforts. Since we earn higher profits on our own labor services, we expect the ratio of cost of services to revenue to decline when our labor services mix increases relative to subcontracted labor or third-party material purchases. Conversely, as subcontracted labor or third-party material purchases for customers increase relative to our own labor services, we expect the ratio of cost of services to revenue to increase. As we continue to bid and win larger contracts, our own labor services component could decrease. This is because the larger contracts typically are broader in scope and require more diverse capabilities resulting in more subcontracted labor with the potential for more third-party hardware and software purchases. In addition, we can face hiring challenges in staffing larger contracts. While these factors could lead to a higher ratio of cost of services to revenue, the economics of these larger jobs are nonetheless generally favorable because they increase income, broaden our revenue base, and produce a favorable return on invested capital.

We have been able to build and effectively use what we refer to as a central services model. This central services model employs the use of central services for marketing, business development, human resources, recruiting, finance and accounting, infrastructure and other core administrative services. This central services model allows us to reduce selling, general and administrative expenses as a percentage of revenue as revenue grows organically and through selective acquisitions, thereby contributing to the growth in operating income. As we continue to expand internationally, selling, general and administrative expenses may increase as a percentage of revenue due to additional travel, infrastructure and compliance costs. Additionally, as we increase our product offerings, we expect an increase in selling, general and administrative expenses as a percentage of revenue and a decline in cost of services as a percentage of revenue.

Depreciation and amortization expenses are affected by the level of our annual capital expenditures and the amount of identified intangibles related to acquisitions. We do not presently foresee significant changes in our capital expenditure requirements, which have averaged approximately 1% of revenue over the last three fiscal years. As we continue to make selected strategic acquisitions, the amortization of identified intangible assets may increase as a percentage of our revenue.

Our operating income, or revenue minus cost of services, selling, general and administrative expenses, and depreciation and amortization, and thus our operating margin, or the ratio of operating income to revenue, is driven by the mix and execution on our contracts, how we manage our costs, and the amortization charges resulting from acquisitions.

Our cash position is driven primarily by the level of net income, working capital in accounts receivable, capital expenditures, acquisition activities and share repurchases.

SELECTED KEY METRICS EVALUATED BY MANAGEMENT

We manage and assess the performance of our business by evaluating a variety of metrics. Selected key metrics are discussed below.

Revenue Growth

Revenue for the three months ended December 31, 2008 decreased by 3.3% from the three months ended December 31, 2007. The decrease in revenue for the three months ended December 31, 2008 was due primarily to the loss of our Advanced Information Technology Services (AITS) contract, which accounted for 6.8% of our revenue in the three months ended December 31, 2007. The lost revenue from our AITS contract was partially offset by revenue growth in our U.S. services business. Increases from acquisitive revenue were offset by divested revenue during the quarter

For the six months ended December 31, 2008, revenue increased by 2.1% from the six months ended December 31, 2007. This growth was primarily acquisitive in nature and resulted from our July 2008 acquisition of Era Systems Corporation (Era) and our August 2007 acquisition of Constella Group, LLC (Constella).

For the immediate future, we intend to direct our primary focus to the U.S. services business, delivering differentiated information technology and professional solutions to government agencies. While we will focus primarily on organic growth in the near term, part of our growth strategy includes selectively pursuing strategic acquisitions to complement and accelerate internal growth by adding new capabilities, customers or intellectual property. From July 1, 2007 through December 31, 2008, we completed the following acquisitions:

Acquisition                   Strategic Value             Closing Date       Purchase Price
                                                                              (in millions)
Constella Group, LLC          Health Sciences and         August 9, 2007     $          190.6
                              Drug Development
Interface and Control         Product Development and     July 2, 2008                    8.3
Systems, Inc.                 Engineering Services
Era Systems Corporation       Advanced Surveillance       July 30, 2008                 124.4
                              Technologies

We are anticipating slippage in orders in our Era business due, in part, to political and economic instability in our customers' countries. The requirement to obtain licenses to sell export controlled technology may further delay sales or limit the countries to which we are permitted to sell our products. These risks are discussed in more detail in the section captioned "RISK FACTORS."

Contract Backlog

Future growth is dependent upon the strength of our target markets, our ability
to identify opportunities, and our ability to successfully bid and win new
contracts. Our success can be measured in part based upon the growth of our
backlog. The following table summarizes our contract backlog:



                                       December 31,    June 30,
                                           2008          2008
                                            (in millions)
                      Backlog:
                      Funded          $        801.7   $   676.5
                      Unfunded               3,115.1     3,182.7

                      Total backlog   $      3,916.8   $ 3,859.2

Our total backlog of $3.9 billion as of December 31, 2008 represented a 1.5% increase over the June 30, 2008 backlog. Our backlog includes orders under contracts that in some cases extend for several years, with the latest expiring during calendar year 2015. Congress often appropriates funds for our clients on a yearly basis, even though their contract with us may call for performance that is expected to take a number of years. As a result, contracts typically are only partially funded at any point during their term, and all or some of the work to be performed under the contracts may remain unfunded unless and until Congress makes subsequent appropriations and the procuring agency allocates funding to the contract.

We currently expect to recognize revenue during the remaining two quarters of fiscal 2009 from approximately 14.9% or $584.9 million of our total backlog as of December 31, 2008. Of this amount, $477.3 million is included in funded backlog and $107.6 million is included in unfunded backlog under multi-year contracts. The amount of revenue that we expect to recognize from backlog is calculated by summing forecasted revenue for the remainder of the fiscal year for each project included in backlog. The primary risks that could affect our ability to recognize such revenue are the unilateral right of the government to cancel multi-year contracts and related orders or to terminate existing contracts for convenience or default, and, in the case of unfunded backlog, the potential that full funding may not be available. In addition, the amount of revenue we expect to realize under a particular engagement included in backlog may change because a program schedule could change or a contract could be modified.

Contract Mix

Contract profit margins are generally affected by the type of contract. We can typically earn higher profits on fixed-price and time-and-materials contracts than cost-plus-fee contracts. Thus, an important part of growing our operating income is to increase the amount of services delivered under fixed-price and time-and-materials contracts. The following table summarizes our historical contract mix, measured as a percentage of total revenue, for the periods indicated:

                                 Three Months Ended          Six Months Ended
                                    December 31,               December 31,
                                 2008           2007        2008          2007
          Cost-plus-fee              35 %           42 %        36 %          42 %
          Time-and-materials         43             42          42            42
          Fixed-price                22             16          22            16

Operating Margin

Operating margin, or the ratio of operating income to revenue, is affected by the mix of our contracts and how we manage our costs. Our operating margins were 5.9% and 8.0% for the six months ended December 31, 2008 and 2007, respectively. The decrease in operating margin for the six months ended December 31, 2008 is

primarily due to increased selling, general and administrative costs as a percentage of revenue. As discussed in the section captioned "RESULTS OF OPERATIONS," this decrease in operating margin was attributable to our Era and Global Clinical Development (GCD) businesses as well as increased investments in marketing and sales and higher recruiting costs. The write-off of in-process research and development related to the Era acquisition also contributed to the lower operating margin.

Headcount and Labor Utilization

Because most of our revenue derives from services delivered by our employees, our ability to hire new employees and deploy them on direct-billable jobs is critical to our success. As of December 31, 2008, we had 6,951 employees. Direct labor utilization was 76.3% and 76.4% for the three months and six months ended December 31, 2008, respectively. These percentages exclude our Era business as direct labor utilization is not a relevant metric for that business.

Proprietary Software Sales

In connection with our service offerings, we also develop and sell proprietary software products to customers. We believe intellectual property represents a differentiating factor in new business opportunities and we have recently increased our focus and investment in this area. Sales of our proprietary software can increase our operating margin and may vary substantially quarter to quarter. Proprietary software sales were $2.6 million and $1.5 million for the three months ended December 31, 2008 and 2007, respectively and $3.5 million and $3.1 million for the six months ended December 31, 2008 and 2007, respectively.

Days Sales Outstanding

Days sales outstanding (DSO) is a measure of how efficiently we manage the billing and collection of our accounts receivable, our most significant working capital requirement. For the three months ended December 31, 2008, DSO increased to 82 days from 79 days for the three months ended September 30, 2008. This increase was due primarily to the billing terms of Era's existing contracts, which are heavily dependent on contract milestones and, therefore, may cause significant fluctuations in our accounts receivable balances. We have a number of internal process initiatives underway that we believe will enable us to continue to improve our invoicing and collection of accounts receivable.

RESULTS OF OPERATIONS

The following tables set forth some items from our condensed consolidated
statements of operations, the period-over-period rate of change in each of the
line items and the items expressed as a percentage of revenue, for the periods
indicated.



                                     Three Months Ended                             Six Months Ended
                                        December 31,                                  December 31,
                                     2008            2007        % Change          2008            2007        % Change
                                       (in thousands)                                (in thousands)
Revenue                          $    369,323      $ 382,015         (3.3 )%   $    761,678      $ 746,142          2.1 %
Operating costs and expenses:
Cost of services                      268,050        286,029         (6.3 )         555,872        560,998         (0.9 )
Selling, general and
administrative                         74,560         59,872         24.5           145,768        112,990         29.0
Depreciation and amortization           7,415          6,424         15.4            14,293         12,591         13.5
Acquired in-process research
and development                          (200 )           -         100.0               900             -         100.0

Total operating costs and
expenses                              349,825        352,325         (0.7 )         716,833        686,579          4.4

Operating income                       19,498         29,690        (34.3 )          44,845         59,563        (24.7 )
Interest expense                       (2,155 )         (752 )          *            (3,935 )       (1,605 )          *
Interest income                           631            889        (29.0 )           1,403          2,488        (43.6 )
Gain on sale of Constella
Futures Holding, LLC.                      -              -            -              1,939             -         100.0

Income before taxes                    17,974         29,827        (39.7 )          44,252         60,446        (26.8 )
Provision for income taxes              7,144         11,836        (39.6 )          18,008         23,996        (25.0 )

Net income                       $     10,830      $  17,991        (39.8 )%   $     26,244      $  36,450        (28.0 )%


                                            (as a                                         (as a
                                   percentage of revenue)                        percentage of revenue)
Revenue                                 100.0 %        100.0 %                        100.0 %        100.0 %
Operating costs and expenses:
Cost of services                         72.6           74.9                           73.0           75.2
Selling, general and
administrative                           20.2           15.7                           19.1           15.1
Depreciation and amortization             2.0            1.7                            1.9            1.7
Acquired in-process research
and development                          (0.1 )           -                             0.1             -

Total operating costs and
expenses                                 94.7           92.2                           94.1           92.0

Operating income                          5.3            7.8                            5.9            8.0
Interest expense                         (0.6 )         (0.2 )                         (0.6 )         (0.2 )
Interest income                           0.2            0.2                            0.2            0.3
Gain on sale of Constella
Futures Holding, LLC.                      -              -                             0.3             -

Income before taxes                       4.9            7.8                            5.8            8.1
Provision for income taxes                1.9            3.1                            2.4            3.2

Net income                                3.0 %          4.7 %                          3.4 %          4.9 %

* Period-over-period rate of change greater than 100%.

THREE MONTHS ENDED DECEMBER 31, 2008 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
2007

Revenue

For the three months ended December 31, 2008, our revenue decreased 3.3% to $369.3 million, from $382.0 million for the three months ended December 31, 2008. This decrease was driven by the loss of our AITS contract, which accounted for 6.8% of our revenue in the three months ended December 31, 2007. This decrease to revenue was partially offset by revenue growth in our U.S. services business. Revenue derived from the acquisitions of Era and Interface and Control Systems, Inc. (ICS) was almost entirely offset by the loss of revenue from the sale of Constella Futures Holding, LLC (Futures).

Cost of Services

For the three months ended December 31, 2008, cost of services decreased 6.3% to $268.1 million, from $286.0 million for the three months ended December 31, 2007. This decrease in cost of services was due primarily to the loss of our AITS contract. As a percentage of revenue, cost of services decreased to 72.6% for the three months ended December 31, 2008, from 74.9% for the three months ended December 31, 2007. This decrease was due primarily to an increase in our labor services mix relative to purchased third-party materials.

Selling, General and Administrative Expenses

For the three months ended December 31, 2008, selling, general and administrative expenses increased 24.5% to $74.6 million, from $59.9 million for the three months ended December 31, 2007. As a percentage of revenue, selling, general and administrative expenses increased to 20.2% for the three months ended December 31, 2008, from 15.7% for the three months ended December 31, 2007. This increase as a percentage of revenue was attributable to several factors. Revenue in our GCD business declined due to deteriorating economic conditions in the commercial contract research industry, causing the ratio of selling, general and administrative expenses to revenue to increase approximately 180 basis points. We continue to make investments in marketing and sales and recruiting, which accounted for approximately 120 basis points of the increase. Additionally, our Era product business, which generally has higher marketing and sales and research and development costs, accounted for approximately 50 basis points of the increase.

Depreciation and Amortization

For the three months ended December 31, 2008, depreciation and amortization increased 15.4% to $7.4 million, from $6.4 million for the three months ended December 31, 2007. As a percentage of revenue, depreciation and amortization increased to 2.0% for the three months ended December 31, 2008, from 1.7% for the three months ended December 31, 2007. The increase was due to the amortization of identified intangible assets related to our acquisition of Era.

Interest Expense

For the three months ended December 31, 2008, interest expense increased to $2.2 million, from $0.8 million for the three months ended December 31, 2007. This increase was due to the additional outstanding borrowings under our credit facility to support the acquisition of Era.

Interest Income

For the three months ended December 31, 2008, interest income decreased to $0.6 million, from $0.9 million for the three months ended December 31, 2007. This decrease was due to a general decline in interest rates during the three months ended December 31, 2008 compared to the three months ended December 31, 2007.

Income Taxes

Our effective income tax rate was 39.7% for both the three months ended December 31, 2008 and 2007.

SIX MONTHS ENDED DECEMBER 31, 2008 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
2007

Revenue

For the six months ended December 31, 2008, our revenue increased 2.1% to $761.7 million, from $746.1 million for the six months ended December 31, 2007. This increase was primarily acquisitive and driven by our July 2008 acquisition of Era. The revenue lost from the sale of Futures was almost entirely offset by the revenue derived from the acquisitions of Era and ICS.

Cost of Services

For the six months ended December 31, 2008, cost of services decreased 0.9% to $555.9 million, from $561.0 million for the six months ended December 31, 2007. As a percentage of revenue, cost of services decreased to 73.0% for the six months ended December 31, 2008, from 75.2% for the six months ended December 31, . . .