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SEC RESPONSE LETTER

 1650 Tysons Boulevard

 McLean, VA
22102-4859

Tel 703.770.7900
Fax 703.770.7901
www.pillsburylaw.com

 September 28, 2005

 By
Courier and Facsimile

 Ms. Kathleen
Collins

 Branch Chief – Accounting

 Securities and Exchange Commission

 One Station Place,

 100 F Street, NE

 Mail Stop 4-6, Room 4561

 Washington, D.C. 20549

Re:
NCI, Inc.

Registration Statement on Form S-1/A

Filed September 6, 2005

File No. 333-127006

 Dear Ms. Collins:

 On behalf of our client, NCI, Inc. (the “Company”), we are responding to the accounting comments of the Staff of the Securities and Exchange
Commission (the “Commission”) as set forth in your letter dated September 23, 2005 to Charles K. Narang, Chairman and Chief Executive Officer of the Company, with respect to the Company’s amended Registration Statement on Form
S-1/A (the “Amended Registration Statement”) which was filed with the Commission on September 6, 2005. We are enclosing proposed amended disclosure (the “Amended Disclosure”), marked to show changes from the Amended
Registration Statement. For your convenience, the Commission’s comments have been repeated herein in bold, with the Company’s response immediately following each of the Commission’s comments.

 General

 MD&A: Critical Accounting Policies—Stock-Based Compensation, page 37

1.
We do not believe that you completely responded to our prior comments no. 27 and 43. You indicate that the valuation to determine the fair value of your common stock was
performed in-house. We would expect that since you have not obtained the valuation from an unrelated valuation specialist, the following should be disclosed in your MD&A:

•

Disclose the intrinsic value of outstanding vested and unvested options based on the estimated IPO price and the options outstanding as of the most recent balance sheet date.

•

We note your disclosures on page 37 where you indicate that the factors contributing to the increase in the fair market value are the anticipated marketability of the stock and
our increased organic growth in the first six months of 2005.” These disclosures are somewhat vague. Revise to enhance your discussion of each significant factor contributing to the difference between the fair value as of the date of
each grant and the estimated IPO price. Your discussion should clarify the reasons for any difference between the fair value at each option grant date and the estimated IPO price range. Also, based on this statement, explain why
the fair value of common stock on June 15, 2005 was $8.93 vs. $9.14 on April 1, 2005. We would expect your fair value of common stock to increase in June 15, 2005.

 Refer to paragraphs 180 and 182 of the AICPA’s Audit and Accounting
Practice Aid.

 We will revise the disclosure in the second
paragraph in MD&A: Critical Accounting Policies – Stock Based Compensation to disclose the intrinsic value of outstanding vested and unvested options based on the estimated IPO price and the options outstanding as of the most
recent balance sheet date and to clarify the discussion of significant factors contributing to the difference between the fair value as of the date of each grant and the estimated IPO price.

 The Company supplementally advises the Staff that the decline in the
estimated fair value of the Company’s common stock from the April 2005 valuation to the June 2005 valuation is due to a decline in market multiples of the selected public company comparables during that time period and an increase in the
Company’s total debt, which was incurred, in part, as a result of the distribution of previously undistributed S corporation earnings.

2.
Tell us why you believe the market approach was the appropriate valuation method to use and tell us how you considered the Company’s stage of development in selecting this
approach. Also, describe for us the selected comparable enterprises and the process followed in determining your selection.

 The Company supplementally informs the Staff that it selected the public company method under the market approach to perform the valuation because such
data for comparable public companies is readily available and reliable and this approach generally results in higher valuations. The Company believes that for purposes of determining stock compensation expense associated with option issuance, higher
valuations reflect a more conservative approach. As compared to the public company method under the market approach, the transaction method depends on data from isolated, reported transactions and is, therefore, less practical to use for on-going
valuation purposes such as setting exercise prices for stock options. The asset-based approach is used primarily for early stage companies, and would not be

appropriate for the Company. While the income approach could be an appropriate valuation methodology for a business at a development stage similar to that of
the Company, the Company believes a valuation methodology that relies entirely upon subjective financial projections is less likely to be reliable and consistent as compared to a valuation methodology based upon actual reported financial results.
Finally, the Company notes that an independent valuation expert hired by the Company to prepare an outside valuation in 1999 used the public company method under the market approach.

 The Company selected the comparable enterprises used in its valuation based on companies within its industry sector
performing work comparable to the Company and selected those most similar to the Company in size, profitability, and growth. The companies selected were Dynamics Research Corporation, DigitalNet (until their acquisition by BAE Systems in 2004), MTC
Technologies, Inc. and SI International.

3.
Your valuation calculation in Annex III indicates the use of 30% discount rate on your enterprise value for options granted during 2004 and 2005. Explain to us how you determined
that 30% discount rate demonstrates an objective determination of your fair value. Tell us why your discount rate does not change quarterly as your marketability improves with expected initial public offering. Also, tell us how you considered the
factors as outlined in paragraph 58 of the AICPA’s Audit and Accounting Practice Aid in determining the amount of your discount.

 The Company supplementally advises the Staff that it believes the 30% marketability discount is necessary to apply to determine the fair value of the
common stock on each grant date prior to the initial public offering for the following reasons:

•

There is a high concentration of ownership;

•

The Company is currently an S corporation, and the stock would be restricted upon exercise;

•

The Company had not yet filed a registration statement at the time of these options grants, and there is not certainty even now that the initial public offering will be completed;
and

•

The expected dilution impact on the share value should the initial public offering occur.

 Note 2: Summary of Significant Accounting Policies—Revenue Recognition, page F-8

4.
We note your response to our prior comment no. 39 where you indicate that fixed price completion contracts are agreements to perform all acts required in the statement of work
under a contract regardless of the actual costs incurred in performance. This statement implies that the costs incurred bear no direct relationship to the performance specified in the contract. Therefore, we are still unclear as to how you
determined that the use of the input measure of performance is the appropriate measure to use on your fixed-price completion contracts. Explain the relationship between cost and performance of services specified in the fixed-price completion
contracts and tell us why use of input measure is appropriate.

 The Company supplementally advises the Staff that under fixed price completion contracts, the Company is paid a fixed price to complete the project, regardless of the Company’s actual costs incurred, meaning
there is no price adjustment should the Company’s actual costs incurred be greater or less than originally estimated. This means that the profit that the Company earns could be higher or lower than the Company originally estimated when it
submitted the fixed price proposal, but the costs the Company incurs do still bear a direct relationship to the contract performance. Therefore, the Company believes the percentage of completion method of accounting for these projects is
appropriate, given that the Company’s estimates to complete are updated to reflect the actual costs the Company has incurred to date and expects to incur through the end of the project, and these estimates are updated throughout the life of the
project. A very small percentage of the Company’s revenue (less than 2%) is accounted for under the percentage of completion method, and only when the scope of work falls under SOP 81-1. The majority of the Company’s fixed price revenue is
accounted for under the guidance provided in SAB 104.

 Note
6—Stockholder’s Equity and Related Items, Stock Options, page F-17

5.
We note your revised table in Note 6 that shows the options granted during the twelve month period ended, June 30, 2005. Revise to include the fair value of common stock for
each month of grant. Also, include in the financial statement footnotes disclosures indicating that the valuation was contemporaneous and was performed by management.

 We will revise the disclosure to modify the table in Footnote 6 as recommended.

 Thank you for your prompt consideration of these matters. If you have further
questions or require additional information, please do not hesitate to contact me at 703.770.7996 or John McDonald at 703.770.7602.

 Sincerely,

 /S/ ALICIA A. PRATHER

 Alicia A. Prather

 Enclosures

cc:
Kari Jin

Mark P. Shuman-Branch Chief-Legal, Office of Computers and Online Services

Perry Hindin, Division of Corporate Finance

Charles K. Narang, Chairman and Chief Executive Officer

management processes to monitor contract performance and revenue estimates, including quarterly management reviews of contract estimates. These amounts are
only included in contract value when they can be reliably estimated and realization is considered probable. Estimates of award fees related to performance on certain contracts, which are generally awarded at the discretion of the client, as well as
penalties related to contract performance, are considered in estimating sales and profit rates. Incentives and penalties are recorded when there is sufficient information for us to assess anticipated performance. Anticipated losses on contracts are
recognized at the time they become known.

 From time to time,
circumstances develop or actual amounts are determinable that require us to revise our total estimated costs or revenue expectations. We record the effect of any revisions to our estimated total costs and revenue in the period in which circumstances
requiring revision become known. Consequently, operating results could be affected by revisions to prior accounting estimates. Historically, these changes relate to changes in the contractual scope of our work, and have not significantly impacted
the expected profit rate on a contract. We do not expect that revisions to our estimates and assumptions would have a material effect on the Company’s consolidated results of operations, cash flows or financial position.

 Stock-Based Compensation

 We account for stock-based compensation in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25) using the intrinsic-value method. Under this method, we recognized approximately $1.2 million and $0.3 million in compensation expense for stock options issued
during 2004 and 2003, respectively. We allocate this expense either to cost of revenues or general and administrative expenses depending on the recipient of the option. We have issued nonqualified stock options to employees at various times during
2004 and 2003 with vesting periods ranging from zero to seven years. Compensation expense for the amount that the fair value of the stock at the grant date exceeds the exercise price is being amortized over the applicable vesting periods. In
addition to the standard vesting schedule, some of the option agreements have accelerated vesting upon the occurrence of certain events, including an IPO or the achievement of certain revenue and profit goals. We estimate stock compensation expense
in 2005 will be approximately $1.7 million, including the expense for the accelerated vesting of certain options. We estimate our stock compensation expense to be approximately $0.2 million each year for 2006 through 2009, but up to an additional
$0.2 million could be expensed in the year the revenue and profit goals are achieved, which would reduce the expense in subsequent years.

  Due to the lack of a public market for our common stock, we determined the fair value of our options considering the guidance provided by the AICPA’s
Audit and Accounting Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. We estimated the fair value of the common stock underlying the options by performing contemporaneous valuations each quarter for options
granted in that quarter. The valuations were based on the public company method under the market approach, applying the valuation multiples of public companies in our sector that we determined to be sufficiently comparable on trailing twelve months
for reported revenue, EBITDA and operating income to our previous four quarters’ results, adjusted for outstanding debt, cash, and applying a discount for lack of marketability. We prepared the valuations in-house because we have reasonable
methodologies for estimating the fair value of the common stock. The following table lists the options granted during the twelve-month period ended June 30, 2005:

 Month of Grant

 Number

 of Options
Granted

Exercise
Price

Fair
Value (1)

Intrinsic
Value at
Grant
(2)

Intrinsic
Value at
IPO (3)

Fair Value
Differential
(4)

 September 2004

49,999

$
10.00

$
7.51

—

$
1.00

$
3.49

 November 2004

14,472

10.00

7.51

—

1.00

3.49

 December 2004

29,205

10.00

8.70

—

1.00

2.30

 April 2005

52,630

10.00

9.14

—

1.00

1.86

 June 2005

26,315

10.00

8.93

—

1.00

2.07

(1)
Fair value of the common stock underlying the options is based on contemporaneous valuations performed quarterly by management using the public company method under the market
approach.

 37

(2)
Intrinsic value at grant date is the amount by which the fair value of the common stock on the grant date exceeds the exercise price for the options and is the amount recorded as
stock-based compensation expense over the applicable vesting period.

(3)
Intrinsic value at the IPO is the amount by which the assumed initial public offering price ($11.00) exceeds the exercise price.

(4)
Fair value differential is the difference between the fair value of the common stock on each grant date and the assumed initial public offering price ($11.00).

  Because we use the public company
method under the market approach described above, the estimated fair value for our common stock at each grant date is affected by our results over the previous four quarters, our debt and cash levels at each measurement date, and the market
valuation of the selected comparable public companies at the measurement date. The estimated fair value change from the September and November 2004 grants to the December 2004 grants is attributable to an increase in our revenue, EBITDA, and
operating income results for the four quarters ended September 30, 2004, an improvement in the market multiples of the comparable public companies, and a decrease in our outstanding debt. The increase in estimated fair value from the December
2004 grants to the April 2005 grants is due to continued improvement in ou