The truth may actually be somewhere between both of your augments. The NEW contract has LSI paying for warehousing space they did not have to pay for in the last contract. Additionally, a number of surplus items were removed from the G/L offering which lowered LSI revenues. The scrap deal was great when the scrap prices were high but that stopped nearly a year ago.

Billy Burke, former LSI employee noted that the total cost for the new contract was 3.5% of product and the previous contract was at 2.5% with all expenses being picked up by the government.

Factoring all of that into the equation and LSI currently offering is not as proftiable as it was in the previous DoD contract.