UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549



                                  FORM 10-Q



              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarter Ended March 31, 2008       Commission File Number:  0-3676



                               VSE CORPORATION
           (Exact Name of Registrant as Specified in its Charter)



            DELAWARE                                       54-0649263
 (State or Other Jurisdiction of                       (I.R.S. Employer
  Incorporation or Organization)                      Identification No.)

     2550 Huntington Avenue
      Alexandria, Virginia                  22303-1499   www.vsecorp.com
(Address of Principal Executive Offices)    (Zip Code)      (Webpage)

Registrant's Telephone Number, Including Area Code:  (703) 960-4600

          Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each exchange
          Title of each class                     on which registered
          -------------------                     -------------------
 Common Stock, par value $.05 per share        The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:  None


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes [x]    No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
(Check one):

Large accelerated filer [ ]   Accelerated filer [x]   Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes [ ]    No [x]

Number of shares of Common Stock outstanding as of April 30, 2008: 5,066,498.



                              TABLE OF CONTENTS


			    						   Page
                                                                           ----
PART I

ITEM 1.	  Financial Statements(unaudited)

	  Consolidated Balance Sheets as of March 31, 2008 and
	  December 31, 2007	 . . . . . . . . . . . . . . . . . . . .     4

	  Consolidated Statements of Income for the three months
	  ended March 31, 2008 and 2007  . . . . . . . . . . . . . . . .     5

	  Consolidated Statements of Cash Flows for the three
       	  months ended March 31, 2008 and 2007 . . . . . . . . . . . . .     6

	  Notes to Consolidated Financial Statements . . . . . . . . . .     7

ITEM 2.	  Management's Discussion and Analysis of Financial
          Condition and Results of Operations  . . . . . . . . . . . . .     13

ITEM 3.	  Quantitative and Qualitative Disclosures About
          Market Risks . . . . . . . . . . . . . . . . . . . . . . . . .     29

ITEM 4.	  Controls and Procedures  . . . . . . . . . . . . . . . . . . .     29


PART II

ITEM 2.	  Unregistered Sales of Equity Securities and Use of Proceeds  .     29

ITEM 6.	  Exhibits, Financial Statements and Schedules . . . . . . . . .     29

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     30

Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   31-34








































                                       2


VSE Corporation and Subsidiaries
________________________________________________________________________________


Forward Looking Statements

This report contains statements which, to the extent they are not recitations
of historical fact, constitute "forward looking statements" under federal
securities laws. All such statements are intended to be subject to the safe
harbor protection provided by applicable securities laws. For discussions
identifying some important factors that could cause actual VSE Corporation
("VSE," the "Company," "us," or "we") results to differ materially from those
anticipated in the forward looking statements contained in this report, see
VSE's discussions captioned "Business," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Notes to Consolidated Financial Statements" contained in VSE's Annual Report
on Form 10-K for the fiscal year ended December 31, 2007 filed with the
Securities and Exchange Commission (the "SEC") on March 7, 2008.

Readers are cautioned not to place undue reliance on these statements, which
reflect management's analysis only as of the date hereof.  The Company
undertakes no obligation to revise publicly these forward looking statements to
reflect events or circumstances that arise after the date hereof.  Readers
should carefully review the risk factors described in the reports and other
documents the Company files from time to time with the SEC, including this and
other Quarterly Reports on Form 10-Q to be filed by the Company subsequent to
its Annual Report on Form 10-K and any Current Reports on Form 8-K filed by the
Company.




















































                                       3


                       PART I.  Financial Information

Item 1.    Financial Statements

VSE Corporation and Subsidiaries
Consolidated Financial Statements
<TABLE>
Consolidated Balance Sheets
--------------------------------------------------------------------------------
(in thousands except share and per share amounts)
<CAPTION>

                                                     March 31,    December 31,
                                                       2008          2007
                                                       ----          ----
                                                    (Unaudited)
<S>                                                 <C>           <C>
Assets
Current assets:
  Cash and cash equivalents  . . . . . . . . . . .  $  6,359      $    109
  Accounts receivable, principally
    U.S. Government, net . . . . . . . . . . . . .   127,705       132,389
  Deferred tax assets  . . . . . . . . . . . . . .         -         1,246
  Other current assets . . . . . . . . . . . . . .     5,253         2,755
                                                    --------      --------
    Total current assets . . . . . . . . . . . . .   139,317       136,499

Property and equipment, net  . . . . . . . . . . .    16,158        14,920
Deferred tax assets  . . . . . . . . . . . . . . .     1,821         1,888
Intangible assets  . . . . . . . . . . . . . . . .     7,776         8,034
Goodwill . . . . . . . . . . . . . . . . . . . . .     5,228         5,228
Other assets . . . . . . . . . . . . . . . . . . .     6,168         5,202
                                                    --------      --------
    Total assets . . . . . . . . . . . . . . . . .  $176,468      $171,771
                                                    ========      ========
Liabilities and Stockholders' Equity
Current liabilities:
  Bank notes payable . . . . . . . . . . . . . . .  $      -      $     81
  Accounts payable . . . . . . . . . . . . . . . .    93,407        88,565
  Accrued expenses   . . . . . . . . . . . . . . .    18,326        22,895
  Dividends payable  . . . . . . . . . . . . . . .       202           202
                                                    --------      --------
    Total current liabilities  . . . . . . . . . .   111,935       111,743

Deferred compensation  . . . . . . . . . . . . . .     4,085         3,257
Other liabilities  . . . . . . . . . . . . . . . .       431           395
                                                    --------      --------
    Total liabilities  . . . . . . . . . . . . . .   116,451       115,395
                                                    --------      --------
Commitments and contingencies

Stockholders' equity:
  Common stock, par value $.05 per share,
    authorized 15,000,000 shares; issued and
    outstanding 5,063,469 and 5,052,512,
    respectively . . . . . . . . . . . . . . . . .       253           253
  Additional paid-in capital . . . . . . . . . . .    12,208        11,963
  Retained earnings  . . . . . . . . . . . . . . .    47,556        44,160
                                                    --------      --------
    Total stockholders' equity . . . . . . . . . .    60,017        56,376
                                                    --------      --------
    Total liabilities and stockholders' equity . .  $176,468      $171,771
                                                    ========      ========

</TABLE>











  The accompanying notes are an integral part of these financial statements.

                                       4

VSE Corporation and Subsidiaries
Consolidated Financial Statements
<TABLE>
Consolidated Statements of Income (Unaudited)
--------------------------------------------------------------------------------
(in thousands except share and per share amounts)
<CAPTION>
                                                        For the three months
                                                           ended March 31,
                                                          2008         2007
                                                          ----         ----
<S>                                                   <C>          <C>
Contract revenues  . . . . . . . . . . . . . . . . .  $ 188,723    $ 120,689

Contract costs . . . . . . . . . . . . . . . . . . .    182,559      116,248
                                                      ---------    ---------
Gross profit . . . . . . . . . . . . . . . . . . . .      6,164        4,441

Selling, general and administrative expenses . . . .        420          151

Interest (income) expense, net . . . . . . . . . . .       (147)        (116)
                                                      ---------    ---------
Income before income taxes . . . . . . . . . . . . .      5,891        4,406

Provision for income taxes . . . . . . . . . . . . .      2,293        1,677
                                                      ---------    ---------
Net income . . . . . . . . . . . . . . . . . . . . .  $   3,598    $   2,729
                                                      =========    =========


Basic earnings per share . . . . . . . . . . . . . .  $    0.71    $    0.57
                                                      =========    =========
Basic weighted average shares outstanding             5,058,784    4,807,424
                                                      =========    =========


Diluted earnings per share . . . . . . . . . . . . .  $    0.71    $    0.56
                                                      =========    =========
Diluted weighted average shares outstanding           5,086,670    4,889,534
                                                      =========    =========

Dividends declared per share                          $    0.04    $   0.035
                                                      =========    =========
</TABLE>

























  The accompanying notes are an integral part of these financial statements.

                                       5


VSE Corporation and Subsidiaries
Consolidated Financial Statements
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
--------------------------------------------------------------------------------
(in thousands)
<CAPTION>
                                                          For the three months
                                                             ended March 31,
                                                              2008     2007
                                                              ----     ----
<S>                                                         <C>      <C>
Cash flows from operating activities:
Net income  . . . . . . . . . . . . . . . . . . . . . . .   $ 3,598  $ 2,729
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization . . . . . . . . . . . .     1,053      601
    Loss on sale of property and equipment  . . . . . . .         1        -
    Deferred taxes  . . . . . . . . . . . . . . . . . . .     1,313     (335)
    Stock-based compensation  . . . . . . . . . . . . . .       225      126
Change in operating assets and liabilities:
    Accounts receivable, net. . . . . . . . . . . . . . .     4,684  (16,484)
    Contract inventories  . . . . . . . . . . . . . . . .         -    2,135
    Other current assets and noncurrent assets  . . . . .    (3,381)  (1,743)
    Accounts payable and deferred compensation  . . . . .     5,670   15,553
    Accrued expenses  . . . . . . . . . . . . . . . . . .    (4,569)  (1,644)
    Other liabilities . . . . . . . . . . . . . . . . . .        36      149
                                                            -------  -------
      Net cash provided by operating activities               8,630    1,087
                                                            -------  -------
Cash flows from investing activities:
  Purchases of property and equipment . . . . . . . . . .    (1,980)  (1,089)
  Business acquisition costs  . . . . . . . . . . . . . .      (137)       -
                                                            -------  -------
      Net cash used in investing activities                  (2,117)  (1,089)
                                                            -------  -------
Cash flows from financing activities:
  Borrowings on loan arrangement  . . . . . . . . . . . .     1,140        -
  Repayments on loan arrangement  . . . . . . . . . . . .    (1,221)       -
  Dividends paid  . . . . . . . . . . . . . . . . . . . .      (202)    (169)
  Excess tax benefits from share-based
    payment arrangements  . . . . . . . . . . . . . . . .         7      385
  Proceeds from the exercise of options of common stock .        13      435
                                                            -------  -------
      Net cash (used in) provided by financing activities      (263)     651
                                                            -------  -------

Net increase in cash and cash equivalents   . . . . . . .     6,250      649
Cash and cash equivalents at beginning of period  . . . .       109    8,745
                                                            -------  -------
Cash and cash equivalents at end of period  . . . . . . .   $ 6,359  $ 9,394
                                                            =======  =======
</TABLE>



















  The accompanying notes are an integral part of these financial statements.

                                       6


                       VSE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



(1) Nature of Business and Basis of Presentation

Our business operations consist primarily of diversified engineering,
logistics, management, and technical services performed on a contract basis.
Substantially all of our contracts are with agencies of the United States
Government (the "Government") and other federal government prime contractors.
Our customers also include non-government organizations and commercial
entities.

Our accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in
the United States for interim financial information and the instructions to
Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include
all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements.  In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 2008 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2008.  For further information refer to the consolidated
financial statements and footnotes thereto included in the VSE Corporation
Annual Report on Form 10-K for the year ended December 31, 2007.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Significant estimates affecting the financial statements include accruals for
loss contracts, contract disallowance reserves, self insured health claims and
estimated cost to complete on firm fixed-price contracts.

Stock Split

On May 1, 2007, we announced a two-for-one stock split in the form of a 100%
stock dividend payable to stockholders of record as of June 11, 2007.  The
stock dividend was made on June 28, 2007.  All share and per share amounts
have been adjusted to give retroactive effect to the increased number of
shares outstanding as a result of the stock split.


(2) Debt

We have a loan agreement with a bank under which credit is made available to
us in the form of revolving loans or letters of credit. The amount of credit
available to us under the loan is subject to certain conditions, including a
borrowing formula based on our billed receivables. From time to time we may
request changes in the amount, expiration date or other terms and the bank may
amend the loan to accommodate our request.

Under the loan agreement, we may borrow against the revolving loan at any time
and can repay the borrowings at any time without premium or penalty. We pay a
commitment fee, interest on any revolving loan borrowings at a prime-based
rate or an optional LIBOR-based rate, and fees on any letters of credit that
are issued. As of March 31, 2008 and 2007, there were no letters of credit or
revolving loan amounts outstanding. Interest expense incurred on the loan was
less than a thousand dollars for the first quarter 2008 and $0 for the first
quarter 2007.

                                       7


                       VSE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



There are collateral requirements that secure our assets, restrictive
covenants, a limit on annual dividends, and other affirmative and negative
covenants. As of March 31, 2008 we have not been notified by the bank, nor are
we aware, of any default under the loan agreement.

The amount of credit available to us as of March 31, 2008 was $25 million and
the maturity date of the loan agreement is August 14, 2009. In April 2008, the
bank approved our request to increase the amount of the loan for working
capital purposes by $10 million to $35 million. We are currently working with
the bank to formally document this change and it will become effective once
the documentation is signed by us and the bank.


(3) Stock-based Compensation

Restricted Stock

On January 2, 2008, we awarded 3,500 shares of restricted VSE Stock to our
non-employee Directors under the 2006 Restricted Stock Plan.  The weighted-
average grant-date fair value of these restricted stock grants was
approximately $47.92. The shares issued vested immediately and cannot be sold,
transferred, pledged or assigned before the second anniversary of the grant
date. Compensation expense related to those grants was approximately $168
thousand for the first quarter of 2008.

On January 2, 2007, we awarded 4,800 shares of restricted VSE Stock to our
non-employee Directors under the 2006 Restricted Stock Plan.  The weighted-
average grant-date fair value of these restricted stock grants was
approximately $16.84. The shares issued vested immediately and cannot be sold,
transferred, pledged or assigned before the second anniversary of the grant
date. Compensation expense related to those grants was approximately $81
thousand for the first quarter of 2007.

On January 3, 2008 (the "2008 awards") and January 2, 2007 (the "2007
awards"), we notified certain employees that they are eligible to receive
awards under the 2006 Restricted Stock Plan based on financial performances
for the calendar years 2008 and 2007, respectively. Vesting of each award will
occur one-third on the date of award and one-third on each of the next two
anniversaries of such date of award. The date of award determination is
expected to be in March 2009 for the 2008 awards and the date of award
determination for the 2007 awards was March 3, 2008.   On each vesting date,
100% of the vested award will be paid in VSE shares.  The number of VSE shares
issued is based on the fair market value of VSE stock on the vesting date.
The earned amount will be expensed ratably over the vesting period of
approximately three years, including the service period of one year.

The compensation expense related to the eligible employees for the 2008 awards
and 2007 awards under the 2006 Restricted Stock Plan for the periods ended
March 31, 2008 and 2007 is as follows (in thousands):

                                               2008        2007
                                               ----        ----
   2008 awards                                 $ 85         $ -
   2007 awards                                   69          53
                                               ----         ---
   Total                                       $154         $53
                                               ====         ===

                                       8


                       VSE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



On March 3, 2008, the employees eligible for awards based on the financial
performance for 2007 received 6,457 shares of VSE stock, subject to the
restrictions of the 2006 Restricted Stock Plan.  The weighted-average grant-
date fair value of these awards was approximately $30.61 per share.


(4) Earnings Per Share

Basic earnings per share have been computed by dividing net income by the
weighted average number of shares of common stock outstanding during each
period. Shares issued during the period are weighted for the portion of the
period that they were outstanding.

Diluted earnings per share have been computed in a manner consistent with that
of  basic  earnings per share  while giving effect to all potentially dilutive
common shares that were outstanding during each period.  Potentially dilutive
common shares include incremental common shares issuable upon exercise of
stock options.

                                         Three Months ended March 31,
                                               2008        2007
                                               ----        ----
   Basic weighted average
     shares outstanding                     5,058,784   4,807,424
   Dilutive effect of options                  27,886      82,110
                                            ---------   ---------
   Diluted weighted average
     shares outstanding                     5,086,670   4,889,534
                                            =========   =========

During the three-month periods ended March 31, 2008 and 2007, 1,000 and 69,764
stock options, respectively, were exercised which resulted in an increase to
additional paid-in capital of approximately $19 thousand and $818 thousand,
respectively, including related income tax benefits.


(5) Litigation

VSE and its subsidiaries have, in the normal course of business, certain
claims against them and against other parties.  In our opinion, the resolution
of these claims will not have a material adverse effect on our results of
operations or financial position. However, the results of any legal
proceedings cannot be predicted with certainty.


(6) Segment Information

Management of our business operations is conducted under four reportable
operating segments, the Federal Group, the International Group, the Energy and
Environmental Group and the Infrastructure and Information Technology Group.
These segments operate under separate management teams and discrete financial
information is produced for each segment.  The various divisions within the
Federal Group and the International Group are operating segments as defined by
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," ("SFAS No. 131"), and meet the aggregation of operating segments
criteria of SFAS No. 131.  We evaluate segment performance based on
consolidated revenues and profits or losses from operations before income
taxes.

                                       9


                       VSE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



Federal Group - Our Federal Group provides engineering, technical, management,
integrated logistics support, and information technology services to the U.S.
military and other government agencies. It consists of five divisions: CED,
ELD, FSS, MSD and SED.

International Group - Our International Group provides engineering,
industrial, logistics and foreign military sales services to the U.S. military
and other government agencies. It consists of three divisions: BAV, VCG and
FMD.

Energy and Environmental Group - Our Energy and Environmental Group provides
high-level  consulting  services  in  the  field  of  energy  and environmental
management. The Energy and Environmental Group includes VSE's wholly owned
subsidiary, Energetics.

Infrastructure and Information Technology Group - Our Infrastructure and
Information Technology Group is a recent segment due to the acquisition on
June 4, 2007 of our wholly owned subsidiary, Integrated Concepts and Research
Corporation ("ICRC"). ICRC is engaged principally in providing diversified
technical and management services to the U.S. Government, including
information technology, advanced vehicle technology, aerospace services and
engineering and transportation infrastructure services.

Our segment information for the three-month periods ended March 31, 2008 and
2007 is as follows (in thousands):

                                                     2008        2007
                                                     ----        ----
Revenues:
  Federal Group                                   $122,321    $ 70,503
  International Group                               48,806      46,904
  Energy and Environmental Group                     4,079       3,246
  Infrastructure and Information
    Technology Group                                13,520           -
  Corporate                                             (3)         36
                                                  --------    --------
    Total revenues                                $188,723    $120,689
                                                  ========    ========

Income from before income taxes:
  Federal Group                                   $  3,472    $  2,726
  International Group                                1,632       1,487
  Energy and Environmental Group                       445         313
  Infrastructure and Information
    Technology Group                                   600           -
  Corporate/unallocated expenses                      (258)       (120)
                                                  --------    --------
    Income from before
      income taxes                                $  5,891    $  4,406
                                                  ========    ========

Customer Information

Our revenue by customer is as follows (in thousands):

                                                       Three Months
                                                      ended March 31,
Source of Revenues                                   2008        2007
------------------                                   ----        ----
Army/Army Reserve                                 $116,391    $ 65,884
Navy                                                38,887      40,421
Treasury                                            15,564       8,878
Other                                               17,881       5,506
                                                  --------    --------
  Total Revenues                                  $188,723    $120,689
                                                  ========    ========

                                       10

                       VSE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



We do not measure revenue or profit by product or service lines, either for
internal management or external financial reporting purposes, because it would
be impractical to do so. Products offered and services performed are
determined by contract requirements and the types of products and services
provided for one contract bear no relation to similar products and services
provided on another contract. Products and services provided vary when new
contracts begin or current contracts expire. In many cases, more than one
product or service is provided under a contract or contract task order.

Accordingly, cost and revenue tracking is designed to best serve contract
requirements and segregating costs and revenues by product or service lines in
situations for which it is not required would be difficult and costly to both
VSE and its customers.


(7) Acquisition - Integrated Concepts and Research Corporation

On June 4, 2007, we acquired all of the common stock of ICRC of Alexandria,
Virginia.  ICRC's core expertise lies in information technology, advance
vehicle technology, aerospace, engineering and transportation infrastructure.
We believe that the addition of ICRC will provide the Company with an
opportunity to expand and diversify its business across a number of project
areas, including smart vehicles, alternate fuels, large-scale port engineering
development and security, and information technology services.

The purchase price for the 2007 acquisition of ICRC included an initial cash
payment of approximately $11.8 million and potential additional cash payments
of up to approximately $5.8 million, contingent on meeting certain financial
targets during the next six years. Additionally, the Company has filed an
election under the Internal Revenue Code Section 338(h)(10) which treats the
transaction as a sale of assets for tax purposes. An additional payment will
be made by us to the seller for the seller's incremental tax liability as a
result of the election.  Tax advantages to us that arise from filing the
338(h)(10) election will exceed the additional payment that will be made to
the seller of approximately $1.6 million, which is included in goodwill and
accrued expenses on the accompanying March 31, 2008 balance sheet.  We made
the $1.6 million payment in April 2008.


(8) Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141(R), "Business Combinations; a replacement of FASB Statement No.
141," which will become effective January 1, 2009.  The new standard will
replace existing guidance and significantly change accounting and reporting
relative to business combinations in consolidated financial statements,
including requirements to recognize acquisition-related transaction and post
acquisition restructuring costs in results of operations as incurred.  SFAS
No. 141(R) will be effective for businesses acquired after the effective date.

In the first quarter of 2008, we adopted SFAS No. 157, "Fair Value
Measurements," which defines fair value, establishes a market-based hierarchy
for measuring fair value and expands disclosures about fair value
measurements.  SFAS 157 is applicable whenever another accounting
pronouncement requires or permits assets and liabilities to be measured at
fair value, but does not require any new fair value measurements.  The SFAS
No. 157 requirements for certain non-financial assets and liabilities have
been deferred until the first quarter of 2009 in accordance with Financial
Accounting Standards Board Staff Position ("FSP") 157-2.  The adoption of SFAS
157 did not have a material impact on our results of operations, financial
position or cash flows.

                                       11


                       VSE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



The fair-value hierarchy established in SFAS 157 prioritizes the inputs used
in valuation techniques into three levels as follows:

Level 1 - Observable inputs - quoted prices in active markets for identical
assets and liabilities;

Level 2 - Observable inputs other than the quoted prices in active markets for
identical assets and liabilities - includes quoted prices for similar
instruments, quoted prices for identical or similar instruments in inactive
markets, and amounts derived from valuation models where all significant
inputs are observable in active markets; and

Level 3 - Unobservable inputs - includes amounts derived from valuation models
where one or more significant inputs are unobservable and require us to
develop relevant assumptions.

The amount of other long-term assets we recorded at fair value at March 31,
2008 totaled approximately $4.1 million of investments we hold in a trust
related to a non-qualified benefit plan.  We determined the fair value of
these assets using the Level 1 methodology.

We elected not to adopt the fair value option included in SFAS 159, "The Fair
Value Option for Financial Assets and Financial Liabilities - Including an
Amendment of FASB Statement No. 115," which became effective January 1, 2008
for companies electing adoption.


(9) Subsequent Event - Acquisition of G&B Solutions, Inc.

On April 14, 2008, we acquired G&B Solutions, Inc.("G&B")of McLean, Virginia.
G&B's core expertise lies in Enterprise Architecture development; Information
Assurance/Business Continuity; Program and Portfolio Management; Network IT
Service and Systems Design and Integration.

The purchase price for G&B is approximately $19.5 million, less approximately
$600 thousand for certain adjustments made at closing. Under the terms of the
acquisition, we will be required to make additional payments of up to $4.2
million over the next three years if certain financial performance targets are
met.   If earned and paid, such additional purchase price consideration will
be recorded as goodwill on the consolidated balance sheet under existing
accounting guidance. G&B provides us with an opportunity to expand our
professional services across a wider range of federal customers. The results
of G&B's operations will be included in the consolidated financial statements
effective with the second quarter of 2008.




























                                       12


ITEM 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations



Executive Overview

Organization

Our business operations consist primarily of diversified engineering,
logistics, management, and technical services performed on a contract basis.
Substantially all of our contracts are with agencies of the United States
Government (the "Government") and other federal government prime contractors.
Our customers also include non-government organizations and commercial
entities.

Our unincorporated divisions include BAV Division ("BAV"), Communications and
Engineering Division ("CED"), Coast Guard Division ("VCG"), Engineering and
Logistics Division ("ELD"), Field Support Services Division ("FSS") beginning
in June 2007, Fleet Maintenance Division ("FMD"), Management Sciences Division
("MSD"), and Systems Engineering Division ("SED"). Energetics Incorporated
("Energetics"), Integrated Concepts and Research Corporation ("ICRC"),
acquired in June 2007, and G&B Solutions, Inc., acquired in April 2008, are
our currently active subsidiaries.

Customers and Services

We provide engineering, design, logistics, management and technical services
to the U.S. Government (the "government"), other government prime contractors,
and commercial entities. Our largest customer is the U.S. Department of
Defense ("DoD"), including agencies of the U.S. Navy, Army, and Air Force.

Operating Segments

We manage our business operations under four reportable operating segments:
the Federal Group, the International Group, the Energy and Environmental
Group, and the Infrastructure and Information Technology Group.

Federal Group - The Federal Group provides engineering, technical, management,
integrated logistics support and information technology services to all U.S.
military branches and other government agencies. This Group includes CED, ELD,
FSS, MSD and SED.

CED - CED is dedicated to supporting the Army's Communications and Electronics
Command ("CECOM") in the management and execution of the Rapid Response ("R2")
Program, which supports clients across DoD and the government. CED manages
execution of tasks involving research and development, technology insertion,
systems integration and engineering, hardware/software fabrication and
installation, testing and evaluation, studies and analysis, technical data
management, logistics support, training and acquisition support. A large
portion of our current work on this program is related to the U.S. military
involvement in Iraq and Afghanistan, including the Army Equipment Support
Program and the Assured Mobility Systems Program.

     CED Army Equipment Support Program - In December 2005, our CED division
was awarded a task order on the Rapid Response support contract to provide
maintenance and logistics services in support of U.S. Army equipment in Iraq
and Afghanistan. Services provided under this program include deployed
sustainment management, deployed logistics and repairs management, unique
system training and curriculum support, resource management and acquisition
and administrative support. A large majority of the services on this program
are provided by CED's subcontractor. Profit margins on subcontract work are
generally significantly lower than on work performed by our own personnel. We
provide certain program management services and remain accountable for
contract performance and compliance as the prime contractor. Work on this
program began in 2006. The original contract task order for this program,
including  modifications  made subsequent  to award,  had a  ceiling  value of

                                       13


approximately $446 million. This task order expired in February 2008 and a
follow on task order with a  ceiling value of approximately $282 million was
awarded to continue the program work through February 2009. This program had
revenues of approximately $219 million for the year ended December 31, 2007
and approximately $66 million for the first quarter of 2008.

     CED Assured Mobility Systems Program - In December 2006, our CED division
was awarded a task order on the Rapid Response support contract to provide
technical support services including program management, integrated logistics,
repairing, and sustaining route and area clearance countermine/counter
Improvised Explosive Device ("IED") system in support of U.S. Army PM Assured
Mobility Systems and TACOM. A large majority of the services on this program
are provided by CED's subcontractor. Profit margins on subcontract work are
lower than on work performed by our own personnel. We provide certain program
management services and remain accountable for contract performance and
compliance as the prime contractor. The original award was for a 16-month task
order representing potential revenues of approximately $164.8 million if all
options are exercised. Subsequent task order modifications have increased the
ceiling value to approximately $271 million and extended the period of
performance to September 2008.

ELD - ELD provides full life cycle engineering, logistics, maintenance, and
refurbishment services to extend and enhance the life of existing equipment.
ELD principally supports the U.S. Army, Army Reserve and Army National Guard
with core competencies in combat and combat service support system
conversions, technical research, sustainment and re-engineering, system
integration and configuration management.

FSS - We formed FSS in June 2007 to provide worldwide field maintenance and
logistics support services for a wide variety of military vehicles and
equipment, including performance of organizational, intermediate and
specialized depot-level maintenance. FSS principally supports the U.S. Army
and Marine Corps by providing specialized Field Service Representatives
("FSR") and Field Support Teams ("FST") in areas of combat operations and
austere environments. In June 2007, FSS began providing some field service
support on the CED Army Equipment Support program.

MSD - MSD provides nationally and internationally recognized experts in
product and process improvement, supporting a variety of government and
commercial clients. MSD provides training, consulting, and implementation
support in the areas of: Enterprise Excellence, Lean Six Sigma, process and
product optimization, project management, leadership quality engineering,
Integrated Product and Process Development ("IPPD"), and reliability
engineering. MSD's services range from individual improvement projects to
global organizational change programs.

SED - SED provides comprehensive systems and software engineering, logistics,
and prototyping services to DoD. Our services offered through SED principally
support U.S. Army, Air Force, and Marine Corps combat and combat support
systems. SED's core competencies include: systems technical support,
configuration management and life cycle support for wheeled and tracked
vehicles and ground support equipment; obsolescence management, service life
extension, and technology insertion programs; and technical documentation and
data packages. A large portion of our current SED work is related to the U.S.
military involvement in Iraq and Afghanistan, including the TBPS Program and a
task order to provide installation and follow-on support services to the U. S.
Army for vehicular remote detection devices.

     TBPS Program - Our SED Division performs work on a program providing a
protection system, the Tanker Ballistic Protection System ("TBPS"), for
vehicles deployed by the U.S. Army in Iraq. Under this program, SED applies a
polyurethane based ballistic coating system and necessary Add-on Armor Panels
for Army Fuel Dispensing Tankers as protection from hostile fire. Delivery of
completed vehicle protection systems began in January 2005.

SED has performed on the TBPS program under multiple firm fixed price per unit
contracts. Subsequent to program implementation, we received modifications to

                                       14


consolidate contracting activity into fewer contracts and to adjust the number
of tankers based on Army tanker availability and needs, and the possibility
remains that there may be future contract modifications as the Army's needs
change. The total contract ceiling value on the TBPS Program contracts as of
March 31, 2008 was approximately $94.2 million, and the remaining available
contract ceiling as of March 31, 2008 was approximately $6.9 million. The
contract ceiling amounts are fully funded. We have contractual coverage on the
program that runs through July 2008.

The TBPS Program has contributed to our financial results in 2007 and 2008.
The work performed on this program increases our fixed price contract work,
which in general carries a higher level of risk and has higher profit margins
than work on other contract types. Accordingly, the TBPS program presents our
business with the potential for both increased profit margins and increased
risk.

International Group - The International Group provides engineering, industrial,
logistics, and foreign military sales services to the U.S. military and other
government agencies. This Group includes BAV, FMD and VCG.

BAV - Through BAV, we provide assistance to the U.S. Navy in executing its
Foreign Military Sales ("FMS") Program for surface ships sold, leased or
granted to foreign countries by providing program management, engineering,
technical support, logistics services for ship reactivations and transfers and
follow-on support. BAV's expertise includes: ship reactivation/transfer,
overhaul and maintenance, follow-on technical support, FMS integrated
logistics support, engineering and industrial services, training and spare and
repair parts support.

       BAV Ship Transfer Program - BAV provides its ship transfer services to
the Navy under large comprehensive ("omnibus") management contracts. During
its life, this program has been a significant revenue producer for us. The
level of revenues and associated profits resulting from fee income generated
by this program varies depending on a number of factors, including the timing
of ship transfers and associated support services ordered by foreign
governments and economic conditions of potential customers worldwide. We have
experienced significant quarterly and annual revenue fluctuations and
anticipate that future quarterly and annual revenues will be subject to
variation due to changes in the level of activity associated with the Navy's
ship transfer program.

The original contract associated with this program was a ten-year cost-plus
award fee contract awarded in 1995 with a total ceiling value of more than $1
billion. BAV was awarded a second contract in April 2005 to continue work on
the program. The new contract is a five-year cost-plus award fee contract with
a total ceiling value of approximately $544 million.

Contract terms under both the original and new contract specify base fee
payments and award fee payments to BAV. Base fee payments are determined by
level of contract activity and base fee income is recognized each month. Award
fee payments are determined by performance and level of contract activity.
Contract modifications authorizing award fee payments are issued subsequent to
the period in which the work is performed. We do not recognize award fee
income until the fees are fixed and determinable, generally upon contract
notification confirming the award fee. Award fees are made three times during
the year. Accordingly, our financial results typically show three quarterly
reporting periods per year that include the recognition of BAV award fee
income and one quarterly reporting period that does not include BAV award fee
income. Due to such timing, and to fluctuations in the level of revenues,
profits as a percentage of revenues will fluctuate from period to period. We
recognized BAV award fee income in the three-month period ended March 31,
2008. In 2007, we recognized BAV award fee income in each of the three-month
periods ended March 31, June 30 and December 31, and did not recognize any BAV
award fee income in the three-month period ended September 30.

FMD - FMD provides global field engineering, logistics, maintenance, and
information technology services to the U.S. Navy and Air Force, including

                                       15


fleet-wide ship and aircraft support programs. FMD's expertise includes ship
repair and modernization, ship systems installations, ordnance engineering and
logistics, facility operations, war reserve materials management, aircraft
sustainment and maintenance automation and IT systems integration. FMD also
provides management, maintenance, storage, and disposal support for the U.S.
Department of Treasury's seized and forfeited general property program.

       Treasury Seized Asset Program - In August 2006, FMD was awarded a
contract to support the U.S Department of the Treasury seized and forfeited
general property program. Such support includes: 1) consolidating general
personal property into Regional Property Management Centers, 2) optimizing
vehicle sales at facilities nationwide, 3) providing field representatives
nationwide to support local seizures, 4) utilizing the services of recognized
sales and marketing organizations to increase the sales of general property
and vehicles and 5) providing the Government with visibility, accountability,
and controls. This is a single award, cost-plus-incentive-fee contract that
includes a base period of performance, four option periods, and award term
provisions. If all option and award term periods are exercised, contract
performance is expected to continue through September 30, 2014. Actual
revenues are dependent on service requirements. This program has the potential
to be a significant contributor to our financial results during the term of
the contract.

Contract terms specify incentive fee payments to us, with the incentive fee
amount ranging between a minimum percentage of 2% of cost incurred and a
maximum percentage of 12% of cost incurred. Incentive fee amounts above the
minimum are awarded once annually and are determined based on an evaluation by
the customer following the government's September 30 fiscal year end. We do
not know the amount of incentive fee income above the minimum until after
notification of the results of this evaluation, and we do not recognize fee
income until the fees are fixed or determinable. Accordingly, we will not
recognize incentive fee income above the minimum until after notification of
the results of the evaluation. Due to such timing, and to fluctuations in the
level of revenues, profits as a percentage of revenues may vary from period to
period. We recognized the minimum incentive fee income on this contract for
the first quarters of 2008 and 2007.

VCG - VCG provides the U.S. Coast Guard with FMS support and life cycle
support for vessels transferred to foreign governments. VCG's core
competencies include pre-transfer joint vessel inspections, reactivations,
crew training, transit assistance, heavy-lift contracting, logistics support,
technical support and overseas husbandry.

Energy and Environmental Group - Our Energy and Environmental Group provides
consulting services in the field of energy and environmental management to the
U.S. Department of Energy, including the Office of Nuclear Energy, Science and
Technology; to the U. S. Department of Homeland Security, through new contract
work won in 2007; and to other government agencies and commercial clients. The
Energy and Environmental Group includes our wholly owned subsidiary,
Energetics.

Energetics is an energy and environmental consulting company providing
technical and management support in areas of nuclear energy, technology
research, development, and demonstration. Energetics' expertise lies in state-
of-the-art and advanced technology assessment, technical and economic
feasibility analysis, technology transfer, R&D program planning, engineering
studies, market assessment, strategic resource management, regulatory
analysis, environmental compliance and risk management.

Infrastructure and Information Technology Group - We formed our Infrastructure
and Information Technology Group in the second quarter of 2007, upon acquiring
ICRC. We purchased ICRC in June 2007 for an initial cash purchase price of
approximately $11.8 million plus potential additional payments in future years
(see Notes to Consolidated Financial Statements).

ICRC is engaged principally in providing diversified technical and management
services to the government, including information technology, advanced vehicle

                                       16


technology, aerospace services, and engineering and transportation
infrastructure services. The acquisition of ICRC provides us with an
opportunity to open or expand our presence in certain markets, including smart
vehicles, alternate fuels, large-scale port engineering development and
security and information technology services; and adds several long-term
contracts to our business base.

     Port of Anchorage Project - A significant amount of ICRC's revenue and
net income comes from a job performed for the Port of Anchorage in Alaska (the
"POA Project"). This intermodal expansion program to provide infrastructure
services to the port will significantly expand the size of the port's
facilities and allow for larger ships, more dock space, improved cargo flow,
improved traffic flow next to the port, more environmentally friendly port
operations and other modernization benefits.

POA Project work has been performed under a contract originally awarded to
ICRC prior to our acquisition of ICRC. This is a ten-year contract with the
U.S. Department of Transportation ("DOT") awarded to ICRC in 2003 under the
Section 8(a) Program of the United States Small Business Administration
("SBA"). Contracts awarded under the Section 8(a) Program are restricted to
small minority-owned businesses, such as ICRC prior to our acquisition. After
our acquisition of ICRC, DOT announced its intention to award a new contract
to ICRC for this work that will not be restricted to small minority-owned
businesses. We are currently negotiating the terms of this contract with DOT.

Our revenues from the POA Project were approximately $7 million for the period
ending March 31, 2008 and approximately $31 million during the period from
June 4, 2007 (when we acquired ICRC) to December 31, 2007.

Acquisition of G&B Solutions, Inc.

In April 2008, we acquired G&B Solutions, Inc. ("G&B"), a diversified
information technology and management consulting company. G&B is an
established information technology provider to many federal agencies,
including the Departments of Homeland Security, Interior, Labor, Agriculture,
and Housing and Urban Development, the Pension Benefit Guaranty Corporation,
and the National Institutes of Health. The company's core expertise lies in
Enterprise Architecture development, Information Assurance/Business
Continuity, Program and Portfolio Management, Network IT Services and Systems
Design and Integration.

The purchase price for G&B is approximately $19.5 million, less approximately
$600 thousand for certain adjustments made at closing. Under the terms of the
acquisition, we will be required to make additional payments of up to $4.2
million over the next three years if certain financial performance targets are
met.

Government Procurement Policies and Practices

Our business is also subject to the risks arising from economic conditions and
political factors that may impact the budgets and program funding of customers
served through our contracts. Our revenues have historically been subject to
annual fluctuations resulting from changes in DoD spending. Future budgetary
and funding decisions by government lawmakers or DoD restructuring efforts
could affect the types and level of services provided by us to our government
customers and could potentially have a material adverse impact on our results
of operations or financial condition.

Our revenues depend on our ability to win new contracts and on the amount of
work ordered by the government under our existing contracts. Our ability to
win new contracts is affected by government acquisition policies and
procedures, including government procurement practices that in some years have
bundled work efforts under large omnibus contracts. This emphasis on large
contracts presents challenges to winning new contract work, including making
it more difficult for us to qualify as a bidder, increasing the level of
competition due to the award of fewer contracts, and forcing us into
competition with larger organizations that have greater financial resources

                                       17


and larger technical staffs. Competing for these contracts requires us to use
teams of subcontractors to be able to offer the range of technical
competencies needed to do the work. While the use of subcontractors on a large
scale basis allows us to compete for this work, profit margins on subcontract
work are lower than on work performed by our own employees, thereby reducing
our overall profit margins.

The use of subcontractors on government contracts also raises certain
performance and financial risks to us. Government prime contractors are
responsible for performing to the requirements of the contract and ensuring
compliance with U.S. Government regulations relative to the performance by
subcontractors.

Other government procurement practices that can affect our revenues are: 1)
the length of contracts issued, which may vary depending on changes in
contracting regulations and other factors; 2) the use of past performance
criteria that may preclude entrance into new government markets; and 3)
government social programs that limit contract work to small, female, or
minority owned businesses.

Additional risk factors that could potentially affect our results of
operations are the government's right to terminate contracts for convenience,
the government's right to not exercise all of the option periods on a
contract, and funding delays caused by government political or administrative
actions.

Global Economic Conditions and Political Factors

Our business is subject to risks arising from global economic conditions and
political factors associated with current and potential customers. An economic
slowdown in countries served under our BAV Ship Transfer Program could
potentially affect sales. Failure by the government of a potential foreign
customer to approve and fund acquisition of U.S. Navy ships serviced under
this program could affect sales. In any one year, a significant amount of our
revenues may result from sales on the BAV Ship Transfer Program to a single
foreign government. BAV sales to Egypt have historically comprised a large
percentage of our total sales in any one year.

Revenues from our CED Army Equipment Support, BAV Ship Transfer, TBPS and
other programs for which we perform work in foreign countries are subject to
political risks posed by ongoing conflicts in the Middle East and potential
terrorist activity. A significant amount of our revenues in recent years has
resulted from the U. S. military involvement in Iraq and Afghanistan. An end
to this U. S. military involvement in the future could potentially cause a
decrease in our revenues. Similarly, a change in the political landscape in
Egypt or other client countries served could potentially cause a decrease in
our revenues. International tensions can also affect our FMD work on U.S. Navy
ships when they are deployed outside of U.S. Navy facilities and are
unavailable for maintenance work. Adverse results arising from these global
economic and political risks could potentially have a material adverse impact
on our results of operations.



























                                       18


                           Concentration of Revenues
                                (in thousands)
                     For the three months ended March 31,
                     ------------------------------------
                                         2008               2007
       Source of Revenue               Revenues     %     Revenues     %
       -----------------               --------     -     --------     -

       CED Army Equipment Support      $ 65,542     35    $ 41,983     35

       BAV Egypt                         11,908      6      13,911     12
       BAV India                             57      -       9,354      8
       BAV Other                          3,955      2       2,769      2
                                       --------    ---    --------    ---
	  Total BAV                      15,920      8      26,034     22

       Treasury Seized Asset Program     15,280      8       8,542      7

       Port of Anchorage Contract         7,402      4           -      -

       CED Assured Mobility Systems      15,108      8       2,662      2

       TBPS Program                       4,127      2       8,166      7

       VSE Other                         65,344     35      33,302     27
                                       --------    ---    --------    ---
	  Total Revenues               $188,723    100    $120,689    100
                                       ========    ===    ========    ===

Management Outlook

Both revenues and profits continued to grow in the first quarter of 2008 as
compared to the same quarter a year ago, and we believe that we are in a
position to continue growing throughout 2008. The large percentage increases
in revenues and profits for the year ended December 31, 2007 may be difficult
to sustain in 2008, but we believe growth will continue at a more moderate
pace. Discussion of some of the events and circumstances that will impact our
growth follows below.

CED Army Equipment Support Program. CED began work on this program in 2006 and
revenues were approximately $66 million for the first quarter of 2008 and
approximately $219 million for the year ended December 31,  2007. This program
has the potential to continue to be VSE's largest revenue producer in 2008. A
follow on contract task order was awarded in February 2008 to continue work on
the program for an additional twelve months. The contract task orders for this
program are incrementally funded, with funded backlog of approximately $206
million as of March 31, 2008. While profit margins on this program are
expected to be low, we expect to benefit from the revenue base that this
program provides.

ICRC Acquisition. The acquisition of ICRC added to our revenues and profits
for the year ended December 31,  2007 and we expect results from ICRC will
continue to help VSE grow in 2008. Our revenues from ICRC for the almost seven
months in 2007 since the acquisition date were approximately $50 million.

CED Assured Mobility Systems Program. CED began work on this program in 2007
and revenues for the year ended December 31, 2007 were approximately $28
million. We expect work on this program to continue to help our growth in
2008. Revenues for the first quarter 2008 were approximately $15 million.
Contract task orders are incrementally funded, with funded backlog of
approximately $61 million as of March 31, 2008. The contract task order
expires in August 2008. While profit margins on this program are expected to
be low, we expect to benefit from the increased revenue base that this program
provides.

G&B Acquisition. We believe that the acquisition of G&B gives us an
established information technology provider, access to new federal agencies, a
250 employee professional Information Technology staff, and additional
opportunities for continued growth.

                                       19


BAV Ship Transfer Program. During 2007, BAV supported the transfer of five
excess U.S. Navy ships to ship transfer FMS clients. A large amphibious ship
was transferred to India and four mine hunter ships, two each, were
transferred to Egypt and Greece. This marks the first opportunity BAV has had
to work with India and a resumption of support for Greece after several years
of inactivity. It also represents a significant increase in ship transfer
activity in Egypt. These efforts, as well as the integration of four ex-U.S.
Navy ships into the fleet operations of the Taiwan Navy under this program,
provide us with some solid prospects for follow-on technical support and
training services in these countries. We expect the BAV Ship Transfer Program,
including follow-on technical support provided to countries with transferred
U.S. ships and systems, to continue to be a major provider of revenues in 2008
and future years. Funded backlog on the BAV Ship Transfer Program was
approximately $84.3 million as of March 31, 2008.

Treasury Seized Asset Program. Phase in work on this contract began in 2006
to transition the program from a predecessor contractor and our work on this
contract increased significantly in 2007. This program was a significant
contributor to our financial results in 2007 and is expected to contribute in
future years. If all option and award term periods are exercised, contract
performance is expected to continue through September 30, 2014 with revenue
amounts that are dependant on service requirements.

ELD Equipment Refurbishment Services. We have provided the U.S. Army Reserve
with military vehicle and equipment refurbishment services for several years.
Beginning in 2006, we formed ELD to continue the performance of these
services. ELD has expanded its workforce, facilities, capacity to perform
work, contractual coverage and funding since its inception, resulting in
increases in revenues from these services in 2006 and 2007. We expect further
increases in 2008 and future years.

TBPS Program. This program is expected to continue to be a strong contributor
to our financial results in 2008, but probably at lower revenue levels than in
prior years. Contractual coverage on the program currently runs through July
2008, and we have completed most of the work that has been identified by our
customer. Funded backlog remaining on the program was approximately $6.9
million as of March 31, 2008.

Other Significant Contracts. We have three multiyear, multiple award,
indefinite delivery, indefinite quantity contracts that have large nominal
ceiling amounts with no funding committed when they were awarded. We are one
of several awardees on each contract. While we can't predict future revenue
from these contracts, having them provides the Company with the opportunity to
compete for work that could contribute to our revenue growth. These three
contracts are described below.

Our CED Division has a multiyear Rapid Response support contract awarded by
CECOM in January 2003. The contract enhances our revenue producing
capabilities by allowing us to provide services through any of our operating
entities or through our subcontractors for various government customers. If
all options are exercised, this contract has a potential total nominal ceiling
of approximately $2.9 billion over an eight-year period. While we cannot be
certain of the amount of the ceiling that will eventually be realized, we have
received over $1.8 billion in task order awards and over $1 billion of funding
since inception of the contract. This contract generated revenues of
approximately $126 million in the first quarter of 2008 and approximately $62
million in the first quarter of 2007.  The CED Army Equipment Support Program
is performed through this contract.  We continue to pursue new orders on this
contract that present potential revenue opportunities for the future.

Our FMD division has a contract with the U.S. Navy, SeaPort Enhanced, awarded
in April 2004, which includes a five-year base period and two five-year option
periods. This contract is a procurement vehicle for the Navy to use for
ordering services from a wide range of contractors to support all phases of
naval ship and shipboard weapons systems acquisition and life-cycle support.
While this award does not guarantee any revenues for us, we are one of several
contractors eligible to bid for services during the life of the contract. As


                                       20


of March 31, 2008, we have been awarded approximately $21 million in contract
task orders under this contract.

Our ELD division has a contract, the Field and Installation Readiness Support
Team ("FIRST") Contract, awarded in November 2006, with the U.S. Army to
provide a broad range of logistics and engineering and technical services to
Army activities in the continental United States and overseas locations. The
contract has a five-year base period and three five-year option periods. We
are one of several awardees eligible to share in the potential total contract
ceiling amount, which is expected to be several billion dollars. The award of
this contract provides us with the opportunity to compete for work which may
help our future revenue growth.

Funded Backlog

Revenues in government contracting businesses depend on contract funding
("Bookings") and funded contract backlog is an indicator of potential future
revenues. A summary of our bookings and revenues for the period ended March
31, 2008 and 2007, and funded contract backlog as of March 31, 2008 and 2007
is as follows:
                                                       (in millions)
                                                      2008        2007
                                                      ----        ----
        Bookings                                      $350        $205
        Revenue                                       $189        $121
        Funded backlog                                $570        $384

Approximately $193 million of the bookings for 2008 were on the CED Army
Equipment Support Program and CED Assured Mobility Systems Program.  These two
programs accounted for approximately $89 million of the bookings for 2007.

Longer Term

The growth in our revenues and profits during 2007 and the first quarter of
2008, and the expected growth for the rest of 2008 presents us with both
challenges and opportunities. Certain work efforts that have supported our
growth in recent years have expired or are due to expire. A large majority of
the originally proposed work on the TBPS Program has been delivered and
current contractual coverage is scheduled to expire in July 2008. Large task
order awards under the Rapid Response support contract, including the CED Army
Equipment Support Program, typically are made for shorter time periods than
most of the Company's other contracts.  The potential expiration of these
programs may reduce our annual revenues if the expiring work is not replaced
by new or follow-on work.

We believe that we are prepared to meet the challenge of replacing the
expiring work. Some of the contracts mentioned earlier in this discussion will
help us replace the expiring work. These include: the Treasury Seized Property
Management program, which we expect to provide revenues for several years in
the future; the FIRST contract, which provides us with a contract that can
support continued increases in ELD's equipment refurbishment services and
other ELD services; and the Rapid Response support contract, under which we
continue to seek new task order awards. We believe we will also be able to
replace expiring work and continue our growth as a result of the acquisitions
of ICRC in 2007 and G&B in 2008.

Opportunities associated with our recent growth may include a more competitive
price structure with which to bid on future work, a wider range of employee
skill sets, and a broader name recognition and past performance record for use
in expanding our customer base. Our larger revenue level and capital base
built up in recent years improves our ability to pursue larger programs and
potential acquisition opportunities.


                                      21


VSE Stock in Employee 401(k) Plan and ESOP Accounts

We have decided that employees should be given the opportunity to diversify
their shares of VSE stock in their 401(k) accounts beginning with our 2008
Plan year. In January 2008, employees were notified that they may make an
election to move any portion of their 401(k) accounts that is invested in
shares of VSE stock from that investment into another investment alternative
under the Plan. This right extends to all of the shares of VSE stock held
under the 401(k) portion of the Plan.  In addition, we have decided to
terminate and liquidate the ESOP portion of the VSE Corporation Employee
ESOP/401(k) Plan,  and as elected by the employees, either distribute the
shares of VSE stock held in the ESOP accounts to the employees or rollover
such shares into an Individual Retirement Account or employee plan selected by
the employee.  We anticipate that the distribution of ESOP shares to employees
will occur in the third quarter of 2008.


Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141(R), "Business Combinations; a replacement of FASB Statement No.
141," which will become effective January 1, 2009. The new standard will
replace existing guidance and significantly change accounting and reporting
relative to business combinations in consolidated financial statements,
including requirements to recognize acquisition-related transaction and post
acquisition restructuring costs in results of operations as incurred. SFAS No.
141(R) will be effective for businesses acquired after the effective date.

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements,"
which is effective January 1, 2008 for all financial assets and liabilities.
SFAS No. 157 defines fair value, establishes a market-based framework or
hierarchy for measuring fair value and expands disclosures about fair value
measurements. The new standard generally is applicable whenever another
accounting pronouncement requires or permits assets and liabilities to be
measured at fair value. On February 12, 2008, the FASB issued FASB Staff
Position No. 157-2, "Effective Date of FASB Statement No. 157," to delay the
effective date of SFAS No. 157 for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value
in the financial statements on a recurring basis (that is, at least annually).
For items with its scope, the FSP defers the effective date of SFAS No. 157 to
fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years. The adoption of SFAS No. 157 did not have a material
impact on the Company's results of operations, financial position or cash
flows.


Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States, which require
us to make estimates and assumptions. Please refer to our Annual Report on
Form 10-K for the fiscal year ended December 31, 2007 filed with the Securities
and Exchange Commission (the "SEC") on March 7, 2008 for a full discussion of
the Company's accounting policies.

Revenue by Contract Type

Our revenues by contract type for the three months ended March 31, 2008 and
2007 were as follows (in thousands):

                                   2008             2007
          Contract Type          Revenues    %    Revenues    %
          -------------          --------    -    --------    -
          Cost-type . . . . .    $ 44,018    23   $ 39,341    33
          Time and materials.     135,704    72     70,620    58
          Fixed-price . . . .       9,001     5     10,728     9
                                 --------   ---   --------   ---
                                 $188,723   100   $120,689   100
                                 ========   ===   ========   ===

                                      22


A large amount of the time and materials revenues shown in the table above is
attributable to revenues from the CED R2 contract. A large majority of the
revenues on this contract have resulted from the pass through of subcontractor
support services that have a very low profit margin.

Risk Funding Revenue

We will occasionally perform work at risk, which is work that we perform prior
to when the government formalizes funding for such work. We do not recognize
revenue related to work we perform at risk until it can be reliably estimated
and its realization is probable. We recognize this "risk funding" as revenue
when we incur the associated costs or when we perform the work. We are at risk
of loss for any risk funding not received. We provide for anticipated losses
on contracts by a charge to income during the period in which we first
identify the losses. Our revenue for the first quarter of 2008 includes risk
funding of approximately $365 thousand. We believe that we will receive
funding for all of the risk funding revenue.


Results of Operations

We show certain items in the table below, including our consolidated revenues,
pre-tax income, and net income, and the changes in these items for the three
month periods ended March 31, 2008 and 2007 (in thousands).

                                               2008      2007    Change    %
                                               ----      ----    ------    -
Revenues . . . . . . . . . . . . . . . . .  $188,723  $120,689   $68,034   56
Contract costs . . . . . . . . . . . . . .   182,559   116,248    66,311   57
                                            --------  --------   -------  ---
Gross Profit . . . . . . . . . . . . . . .     6,164     4,441     1,723   39
Selling, general and
  administrative expenses                        420       151       269  178
Interest income, net . . . . . . . . . . .      (147)     (116)      (31)  27
                                            --------  --------   -------  ---
Income before income taxes . . . . . . . .  $  5,891  $  4,406   $ 1,485   34
Provision for income taxes . . . . . . . .     2,293     1,677       616   37
                                            --------  --------   -------  ---
Net income   . . . . . . . . . . . . . . .  $  3,598  $  2,729   $   869   32
                                            ========  ========   =======  ===

Our revenues and contract costs increased by approximately 56% and 57%,
respectively, for the first quarter of 2008, as compared to the first quarter
of 2007. The primary reasons for the increase are 1) increased revenues from
the Army Equipment Support program and other CED task orders, including the
U.S. Army PM Assured Mobility Systems and TACOM support; 2) revenues from
ICRC, which we acquired in the second quarter of 2007; 3) increased revenues
from the Treasury Seized Property Management Program and other FMD contract
work; and 4) an increase in ELD equipment refurbishment services.

Selling, general and administrative expenses consist primarily of costs and
expenses that are not chargeable or reimbursable on the Company's operating
unit contracts. The increase in these expenses for the first quarter of 2008,
as compared to the first quarter of 2007, is primarily due to the amortization
of intangible assets attributable to the ICRC acquisition and to the inclusion
of ICRC's selling, general and administrative expenses in our results in 2008
but not in 2007.

Income before income taxes increased by approximately 34% for the first
quarter of 2008 as compared to the first quarter of 2007. The increase is
primarily due to profits from the inclusion of the revenues of ICRC, the
increase in revenues on the CED Army Equipment Support program and other CED
task orders, increased BAV fee income, and revenue and margin increases on
ELD's equipment refurbishment services.

                                      23


Federal Group Results

We show consolidated revenues and income before income taxes and the changes
in these items for our Federal Group for the first quarter of 2008 and 2007 in
the following table (in thousands).

Description                     2008      2007       Change      %
-----------                     ----      ----       ------      -
Revenues                     $122,321   $70,503     $ 51,818     73
                             ========   =======     ========     ==
Income before income taxes   $  3,472   $ 2,726     $    746     27
                             ========   =======     ========     ==
Profit percent                   2.8%      3.9%

Revenues for our Federal Group increased by approximately 73% for the first
quarter of 2008 as compared to the first quarter of 2007. The increase in
revenues for 2008 primarily resulted from 1) revenues from the CED Army
Equipment Support Program work; 2) additional work on other CED task orders,
including CED's U.S. Army PM Assured Mobility Systems and TACOM support; and
3) increased revenues from ELD's equipment refurbishment services. The
increases in revenues of this segment were offset partially by a decrease in
TBPS Program revenues.

Income before income taxes for our Federal Group increased by approximately
27% for the first quarter of 2008 as compared to the first quarter of 2007.
The increase is primarily due to the increase in revenues on the CED Army
Equipment Support Program work and other CED task orders; increased
profitability of SED services performed on the TBPS Program; and profits
associated with the increased military equipment refurbishment services
performed by ELD. Since a significant amount of the increase in revenues
resulted from the CED Army Equipment Support Program work and from other CED
task orders which have lower profit margins, profits as a percentage of
revenues decreased in the first quarter of 2008 as compared to 2007.

International Group Results

We show consolidated revenues and income before income taxes and the changes
in these items for our International Group for the first quarter of 2008 and
2007 in the following table (in thousands).

Description                     2008      2007       Change      %
-----------                     ----      ----       ------      -
Revenues                      $48,806   $46,904     $  1,902      4
                              =======   =======     ========     ==
Income before income taxes    $ 1,632   $ 1,487     $    145     10
                              =======   =======     ========     ==
Profit percent                   3.3%      3.2%

Revenues for our International Group increased by approximately 4% for the
first quarter of 2008 as compared to the first quarter of 2007. The increase
in revenues for 2008 primarily resulted from the Treasury Seized Property
Management Program and other FMD contract work. Our BAV division had a
substantial amount of 2007 revenue from a ship transfer to India that was
completed in 2007, and there was no similar ship transfer in the first quarter
of 2008. This resulted in a decrease in BAV revenues for the first quarter of
2008 that partially offset the increase in revenues for this segment from the
Treasury Seized Property Management Program.

Income before income taxes for our International Group increased by
approximately 10% for the first quarter of 2008 as compared to the first
quarter of 2007. The increase resulted primarily from losses on a certain BAV
job in 2007 that decreased BAV's 2007 profits. The absence of these losses in
2008 resulted in increased 2008 profits for this segment.

                                      24

Energy and Environmental Group Results

We show consolidated revenues and income before income taxes and the changes
in these items for our Energy and Environmental Group for the first quarter of
2008 and 2007 in the following table (in thousands).

Description                     2008      2007       Change      %
-----------                     ----      ----       ------      -
Revenues                      $ 4,079   $ 3,246     $    833     26
                              =======   =======     ========     ==
Income before income taxes    $   445   $   313     $    132     42
                              =======   =======     ========     ==
Profit percent                  10.9%      9.6%

Revenues for our Energy and Environmental Group increased by approximately 26%
for the first quarter of 2008 as compared to the first quarter of 2007. The
increase in revenues for 2008 primarily resulted from new work performed for
the U. S. Department of Homeland Security.

Income before income taxes for our Energy and Environmental Group increased by
approximately 42% for the first quarter of 2008 as compared to the first
quarter of 2007. This increase is primarily due to profits earned on the
increased revenues.

Infrastructure and Information Technology Group

We show consolidated revenues and income before income taxes and the changes
in these items for our Infrastructure and Information Technology Group for the
first quarter of 2008 and 2007 in the following table (in thousands).

Description                     2008      2007       Change
-----------                     ----      ----       ------
Revenues                      $13,520   $     -     $ 13,520
                              =======   =======     ========
Income before income taxes    $   600   $     -     $    600
                              =======   =======     ========
Profit percent                   4.4%

This segment consists of our ICRC subsidiary. Our consolidated results of
operations for the first quarter of 2008 include ICRC revenues and income
whereas our 2007 results do not include ICRC revenues or income because our
acquisition of ICRC occurred after the first quarter of 2007.


Financial Condition

Our financial condition did not change materially during the first quarter of
2008. Our largest assets are our accounts receivable. Our largest liabilities
are our accounts payable and accrued expenses. Accounts receivable decreased
by approximately $4.7 million, accounts payable increased by approximately
$4.8 million, and accrued expenses decreased by approximately $4.6 million
during the first quarter of 2008. These increases and changes to our other
asset and liability accounts were due primarily to our increase in business
activity, contract delivery schedules, subcontractor and vendor payments
required to perform our work, the timing of associated billings to our
customers, and to collections of billings to our customers.

The increase in our stockholders' equity in 2008 resulted from earnings and
dividend activity and from the exercise of stock options. In June 2006, our
Board of Directors authorized the repurchase up to 50,000 shares of our stock
from time to time on the open market, subject to corporate objectives. As of
March 31, 2008, we had not purchased any of these shares.





                                      25


Liquidity and Capital Resources

Cash Flows

Our cash and cash equivalents increased by approximately $6.2 million during
the first quarter of 2008. Approximately $8.6 million in net cash was provided
by operating activities, approximately $2.1 million was used in investing
activities, and approximately $263 thousand was used in financing activities.
The difference between cash provided by operating activities of approximately
$8.6 million in the first quarter of 2008 as compared to approximately $1.1
million in the first quarter of 2007 is mostly due to differences in the
levels of accounts receivable, contract inventories, accounts payable and
accrued expenses associated with our contract requirements and our billing and
collections cycle, and to our increase in profits. Our investing activities
included the expansion and improvement of facilities of approximately $1.2
million, purchases of property and equipment, net of dispositions, of
approximately $772 thousand and acquisition costs of approximately $137
thousand. Our financing activities included approximately $202 thousand used
to pay dividends, approximately $81 thousand used for net repayments on our
bank loan, and approximately $20 thousand provided by stock purchase
transactions by our directors and officers and associated excess tax benefits
related to the exercise of stock options.

Our cash and cash equivalents increased by approximately $650 thousand during
the first quarter of 2007. Approximately $1.1 in net cash was provided by
operating activities, approximately $1.1 was used in investing activities, and
approximately $650 thousand was provided by financing activities. Our
investing activities included the expansion and improvement of facilities of
approximately $505 thousand and purchases of property and equipment, net of
dispositions, of approximately $584 thousand. Our financing activities
included approximately $820 thousand provided by stock purchase transactions
by our directors and officers and associated excess tax benefits related to
the exercise of stock options, and approximately $169 thousand used to pay
dividends.

We paid a quarterly cash dividend of $.04 per share during the first quarter
of 2008. Pursuant to our bank loan agreement, our payment of cash dividends is
subject to annual rate restrictions. We have paid cash dividends each year
since 1973.

Liquidity

Our internal sources of liquidity come mostly from operating activities,
specifically from changes in the level of revenues and associated accounts
receivable and accounts payable, and from profitability. Significant increases
or decreases in revenue and accounts receivable and accounts payable can cause
significant increases or decreases in internal liquidity.

Our accounts receivable come from our billings to the government or other
government prime contractors for the services we perform, and payments
received on our accounts receivable provide our principal source of cash. Our
accounts receivable levels can be affected significantly by the timing of
large materials purchases and subcontractor efforts used in performance our
contracts. Our accounts receivable levels are also affected by contract
retainages that the government may withhold from their payments to us;
differences between the provisional rates that the government has authorized
us to bill and the costs actually incurred by us; differences between amounts
we are authorized to bill by contract terms and costs we actually incur; and
contract funding delays that may arise from job performance, government delays
in processing administrative paperwork, or other issues.

Our accounts payable arise primarily from our purchases of subcontractor
services and materials we use in the performance of our contract work.
Payments made on accounts payable, along with payments made to satisfy our
employee payroll and payroll taxes, make up our principal cash requirements.
Our accounts payable levels can be affected by changes in the level of the


                                      26


work we perform and by the timing of large material purchases and
subcontractor efforts used in on our contracts.

From time to time, we may also invest in the acquisition of another company.
Our acquisition of ICRC in 2007 required a significant use of our cash.
Subsequent to our first quarter of 2008, we also used a significant amount of
cash to acquire G&B. While there are no firm plans for additional acquisitions
at this time, the possibility exists that we could make additional future
acquisitions.

Other cash requirements include income tax payments, the acquisition of
capital assets for shop, office and computer support, and the payment of cash
dividends. We may also invests in expansion, improvement, and maintenance of
our operational and administrative facilities. The growing level of equipment
refurbishment services we provide through ELD required us to invest in our
operational facilities over the past two years, including construction of an
additional 40,000 square feet of warehouse and shop space at our Ladysmith,
Virginia facility. Construction of this additional space began in July 2007
and is expected to be completed in May 2008. This project has a budgeted cost
of approximately $6.1 million, of which approximately $5.2 million was paid
prior to March 31, 2008 and approximately $900 thousand remains to be paid
after March 31, 2008.  We could possibly make additional investments in
operational or administrative facilities in 2008 and in future years.

Our external liquidity consists of a bank loan agreement that provides us with
revolving loan financing based on our accounts receivable (see "Notes to
Consolidated Financial Statements"). Our bank financing complements our
internal sources of liquidity by providing increasing levels of borrowing
capacity as our accounts receivable levels increase. Our bank loan agreement
allowed us to borrow up to a $25 million as of March 31, 2008. We requested an
increase in our borrowing limit up to $35 million for working capital
purposes. The bank approved our request for the increase subsequent to the end
of the first quarter. The amount that the bank will lend us under our loan
agreement is negotiable and we could possibly increase or decrease the
borrowing limit in the future. We have determined that this new amount is
adequate to cover known current and future liquidity requirements.
Performance of work on our larger contracts that require significant amounts
of subcontractor or material purchases have the potential to cause substantial
requirements for working capital; however, we believe that cash flows from
operations and the bank loan limit are adequate to meet our operating cash
requirements.


Inflation and Pricing

Most of our contracts provide for estimates of future labor costs to be
escalated for any option periods, while the non-labor costs in our contracts
are normally considered reimbursable at cost. Our property and equipment
consists principally of computer systems equipment, furniture and fixtures,
and land and improvements. We do not expect the overall impact of inflation on
replacement costs of our property and equipment to be material to our future
results of operations or financial condition.


Disclosures About Market Risk

Interest Rates

Our bank loan provides available borrowing to us at variable interest rates.
We used a significant amount of cash to pay for our acquisition of ICRC in
June 2007 and our acquisition of G&B in April 2008, causing us to have to
borrow on our bank loan in April 2008. The amount borrowed is not large with
respect to our cash flows and we believe that we will be able to pay down
these bank loan borrowings in a relatively short time frame. Because of this,
we do not believe that any adverse movement in interest rates would have a
material impact on future earnings or cash flows. If we were to significantly


                                      27


increase our borrowings, future interest rate changes could potentially have a
material impact on us.

Foreign Currency

While a significant amount of our business results from the services we
provide through BAV related to the transfer of ships to foreign governments,
contract payments are made to us by the U.S. Government in U.S. dollars.
Additionally, most funding requirements to support the work we perform or
services we purchase in foreign countries are made in U.S. dollars, and the
infrequent disbursements that we make in foreign currencies are reimbursable
to us in post conversion dollars. Foreign currency transactions of our other
divisions or subsidiaries are minimal. Accordingly, we do not believe that we
have exposure to any material foreign currency risk.













































                                      28


                      VSE CORPORATION AND SUBSIDIARIES

Item 3.    Quantitative and Qualitative Disclosures About Market Risks

See "Disclosures About Market Risk" in Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations.


Item 4.    Controls and Procedures

As of the end of the period covered by this report, based on management's
evaluation, with the participation of our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the disclosure controls and
procedures (as defined in Rules 13a-15(e) or 15d - 15(e) under the Securities
Exchange Act of 1934, as amended) our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures
are effective in ensuring that information required to be disclosed by us in
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms, and that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act
is accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.

There was no change in our internal control over financial reporting during
our first quarter of fiscal 2008 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

                        PART II.   Other Information

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

The Registrant did not purchase any of its equity securities during the period
covered by this report.

Under the Registrant's bank loan agreement dividends may be paid in an annual
aggregate amount of $.60 per share, provided there is no default under the
loan agreement.


Item 6.    Exhibits

           (a)  Exhibits.

 Exhibit No.
 -----------
    31.1   Section 302 CEO Certification

    31.2   Section 302 CFO and PAO Certification

    32.1   Section 906 CEO Certification

    32.2   Section 906 CFO and PAO Certification


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has omitted all other items contained in "Part II. Other
Information" because such other items are not applicable or are not required
if the answer is negative or because the information required to be reported
therein has been previously reported.

                                      29


                      VSE CORPORATION AND SUBSIDIARIES


                                 SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                               VSE CORPORATION




Date:  April 30, 2008                 /s/ D. M. Ervine
                                      __________________________________
                                      D. M. Ervine
                                      Executive Chairman



Date:  April 30, 2008                 /s/ T. R. Loftus
                                      __________________________________
                                      T. R. Loftus
                                      Executive Vice President and
                                      Chief Financial Officer
                                      (Principal Accounting Officer)

















































                                      30