Tuesday, November 03, 2009

No-Win Situation: Region Could Not Keep SAIC

No-Win Situation: Region Could Not Keep SAIC
By MIKE ALLEN - 11/2/2009
San Diego Business Journal Staff

When SAIC Inc. said it was leaving San Diego for a suburb of Washington, D.C., most of the region’s business leaders barely blinked.

For the past several years, it was common knowledge among top insiders that the $10 billion engineering and research firm, one of the area’s largest employers, was going to relocate its headquarters east to be closer to its primary customers, the federal government and the Department of Defense.

But despite this knowledge, the San Diego Regional Economic Development Corp., a publicly and privately funded agency focused on retaining and attracting companies to the area, did not make a formal proposal to persuade the company, also known as Science Applications International Corp., to maintain its headquarters in the University City area.

Julie Meier Wright, chief executive at the EDC, said she had several discussions with SAIC officials over the years, but there was never a formal package of incentives presented. She said the discussions, some that included Mayor Jerry Sanders, made it clear that SAIC intended to move to the Washington, D.C., area to be closer to its customers, and there wasn’t anything that could change that decision.

“There was really nothing, with the tools we have in California, that we could have done,” Wright said of the move, announced Sept. 24.

At the announcement of the relocation, Virginia Gov. Timothy Kaine said the state offered $7 million in incentives, plus $1.5 million for road improvements, to accommodate SAIC’s expansion of existing offices in McLean, Va., where about 17,000 employees already work.

The move will initially result in about 20 corporate positions moving to Virginia. SAIC has about 4,300 employees in San Diego, including about 900 corporate staff members.

SAIC spokeswoman Laura Luke said the company relocated its headquarters so it could be closer to its federal government customers, and to have its corporate executives in the same place.

“SAIC’s decision was unrelated to the business climate in California, and in particular to San Diego, where we have always had excellent support from local business and political leaders and organizations, and expect this to continue,” Luke said.

Several local business leaders said California and the region should be trying harder to keep major corporations from moving elsewhere.

“I think it’s important that San Diego and the state of California do whatever it can to retain a company as much as it does to attract companies to come here,” said Ted Owen, president and CEO of the Carlsbad Chamber of Commerce.

Yet most interviewed for this story said SAIC’s decision to relocate was made years ago, and nothing could have dissuaded it from moving its top executives east.

In June, SAIC hired Walter Havenstein to succeed retiring Ken Dahlberg as chief executive and president of the 40-year-old firm started by J. Robert Beyster.

Havenstein is a former chief operating officer of BAE Systems, which is based in Rockville, Md., also a suburb of Washington.

Ruben Barrales, president of the San Diego Regional Chamber of Commerce, said SAIC’s formal announcement to relocate its headquarters wasn’t surprising.

Barrales said the decision makes good business sense since SAIC’s main customers are in Washington.

He said the decision to move the headquarters had nothing to do with the state’s high taxes or excessive regulatory burdens.

“It was an internal business decision on how they can better relate to the decision makers who are so critical to the growth of their business,” he said.

Duane Roth, CEO of Connect, a nonprofit technology trade group, and a member of the EDC’s board of directors, said SAIC’s relocation couldn’t have been prevented by any sort of package of incentives, even though no such package had been offered.

“This had nothing to do with incentives,” Roth said. “There wasn’t anything to work with. Sometimes decisions are made and they are what they are.”

Wright said while it was disappointing to lose a Fortune 500 corporation, SAIC’s top executives have assured her that the company’s commitment in terms of community involvement and philanthropic activity in San Diego won’t change.

Wright reiterated that the EDC had ongoing discussions with SAIC executives about the relocation, and that the gist of its message was that the relocation was not a matter of if it would happen, only about when it would occur.

“We stayed in constant dialogue with them and had candid conversations with their executives. But at the end of the day, we were told there was nothing we could do to influence this decision,” she said.

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