Military extends Sierra pact

4-year extension worth $1 billion to city company

Even more work, jobs possible

It provides health care in 13 Eastern states

October 08, 2002|By Ted Shelsby | Ted Shelsby,SUN STAFF

Sierra Military Health Services Inc. announced yesterday that it has been awarded a $1 billion, four-year extension of its Defense Department contract to provide health care services to military personnel in 13 states.

The contract secures the jobs of about 750 workers, including about 500 in downtown Baltimore, said David R. Nelson, Sierra's president.

Just as important, the new award puts the Baltimore-based company in a favorable position to win an even larger military health care contract in the future that could boost its employment to 1,500 workers, perhaps as many as 2,000, Nelson said. "And the preponderance of these jobs would be in Baltimore and Maryland," he said.

Under the current arrangement, the Department of Defense divides the country into 12 health care regions, which are served by seven companies.

Sierra serves Region 1, which runs from Maine to Virginia and includes the District of Columbia. It is home to more than 1 million active-duty and retired military personnel.

Under the military's restructuring program, the 12 geographic regions are to be reduced to three, and Sierra will be bidding on a contract for a 21-state region reaching roughly from Maine to Tennessee and west to the Mississippi River.

The military's next contract is expected to be awarded in 2004.

Nelson said that if Sierra wins the bid for the larger region, it probably will hire employees of its competitors but that new hires would still be made in the Baltimore area. He said it is too soon to speculate on how many workers would be hired locally.

Although it is a four-year extension, the contract is subject to annual funding and needs to be approved by the military each year.

Sierra Military Health Services is a unit of Las Vegas-based Sierra Health Services Inc.

Sierra Military won its first Pentagon health care contact, a five-year pact valued at $1.2 billion, in 1997.

At that time it was a fledging operation with seven employees. It quickly selected Baltimore as its headquarters. In 1997, Sierra served about 600,000 military personnel and had revenue of about $250 million a year.

Nelson said the company now has revenue of about $400 million a year.

The state and Baltimore played a role in Sierra's decision to locate at the Inner Harbor, combining on a half-million-dollar package of loans, grants and job training funds to lure the company, which promised to add 300 jobs in the region.

The city guaranteed a 10-year lease for Sierra's 83,000 square feet in the Candler Building on Market Place. If Sierra had not won the contract extension, the city would have been responsible for the remaining five years of the $12.5 million lease.

"Sierra has met or exceeded every condition of the assistance package," said David S. Iannucci, secretary of the Maryland Department of Business and Economic Development, who attended yesterday's announcement ceremony at the 750 W. Pratt St. building.

Iannucci said the city and state are working on a new incentive package to keep Sierra in Maryland. He said the state is offering a $300,000 loan that is contingent upon additional funding from the city.

M.J. "Jay" Brodie, president of Baltimore Development Corp., said the city's part of the package would surpass the state's involvement, but declined to discuss details. He called Sierra "a great catch" for the city and said the funding would be used to help keep the company here.

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