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 September 30, 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, a non-accelerated filer, or a smaller reporting company. See
definition of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.:

        Large accelerated filer [ ]         Accelerated filer [x]
          Non-accelerated filer [ ]         Smaller reporting company [ ]

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

                    APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:

Number of shares of Common Stock outstanding as of October 30, 2008: 5,081,998.


                              TABLE OF CONTENTS


			    						   Page
                                                                           ----
PART I

ITEM 1.	  Financial Statements(unaudited)

	  Consolidated Balance Sheets as of September 30, 2008 and
	  December 31, 2007  . . . . . . . . . . . . . . . . . . . . . .     4

	  Consolidated Statements of Income for the three and
	  nine months ended September 30, 2008 and 2007  . . . . . . . .     5

	  Consolidated Statements of Cash Flows for the nine
       	  months ended September 30, 2008 and 2007   . . . . . . . . . .     6

	  Notes to Unaudited Consolidated Financial Statements   . . . .     7

ITEM 2.	  Management's Discussion and Analysis of Financial
          Condition and Results of Operations    . . . . . . . . . . . .     15

ITEM 3.	  Quantitative and Qualitative Disclosures About
          Market Risks   . . . . . . . . . . . . . . . . . . . . . . . .     26

ITEM 4.	  Controls and Procedures  . . . . . . . . . . . . . . . . . . .     26


PART II

ITEM 2.	  Unregistered Sales of Equity Securities and Use of Proceeds  .     26

ITEM 6.	  Exhibits, Financial Statements and Schedules . . . . . . . . .     26

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     27

Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   28-31


























                                       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 the
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 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.

Readers are cautioned not to place undue reliance on these statements, which
reflect management's analysis only as of the date hereof.  We undertake 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
we file from time to time with the SEC, including this and other Quarterly
Reports on Form 10-Q to be filed subsequent to the filing of our Annual Report
on Form 10-K and any Current Reports on Form 8-K.






































                                       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>

                                                   September 30,  December 31,
                                                        2008          2007
                                                        ----          ----
                                                     (Unaudited)
S>                                                   <C>           <C>
Assets
Current assets:
  Cash and cash equivalents  . . . . . . . . . . .   $  1,104      $    109
  Accounts receivable, principally
    U.S. Government, net . . . . . . . . . . . . .    175,517       132,389
  Deferred tax assets  . . . . . . . . . . . . . .      1,580         1,246
  Other current assets . . . . . . . . . . . . . .      6,890         2,755
                                                     --------      --------
    Total current assets . . . . . . . . . . . . .    185,091       136,499

Property and equipment, net  . . . . . . . . . . .     19,795        14,920
Deferred tax assets  . . . . . . . . . . . . . . .        882         1,888
Intangible assets  . . . . . . . . . . . . . . . .     11,636         8,034
Goodwill . . . . . . . . . . . . . . . . . . . . .     15,815         5,228
Other assets . . . . . . . . . . . . . . . . . . .      6,351         5,202
                                                     --------      --------
    Total assets . . . . . . . . . . . . . . . . .   $239,570      $171,771
                                                     ========      ========
Liabilities and Stockholders' Equity
Current liabilities:
  Bank notes payable . . . . . . . . . . . . . . .   $  6,224      $     81
  Accounts payable . . . . . . . . . . . . . . . .    132,596        88,565
  Accrued expenses   . . . . . . . . . . . . . . .     25,387        22,895
  Dividends payable  . . . . . . . . . . . . . . .        229           202
                                                     --------      --------
    Total current liabilities  . . . . . . . . . .    164,436       111,743

Deferred compensation  . . . . . . . . . . . . . .      3,832         3,257
Other liabilities  . . . . . . . . . . . . . . . .        840           395
                                                     --------      --------
    Total liabilities  . . . . . . . . . . . . . .    169,108       115,395
                                                     --------      --------
Commitments and contingencies

Stockholders' equity:
  Common stock, par value $.05 per share,
    authorized 15,000,000 shares; issued and
    outstanding 5,081,998 and 5,052,512,
    respectively . . . . . . . . . . . . . . . . .        254           253
  Additional paid-in capital . . . . . . . . . . .     13,031        11,963
  Retained earnings  . . . . . . . . . . . . . . .     57,177        44,160
                                                     --------      --------
    Total stockholders' equity . . . . . . . . . .     70,462        56,376
                                                     --------      --------
    Total liabilities and stockholders' equity . .   $239,570      $171,771
                                                     ========      ========

</TABLE>











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

                                       4

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

                                      For the three months      For the nine months
                                      ended September 30,       ended September 30,
                                       2008        2007          2008        2007
                                       ----        ----           ----       ----
<S>                                <C>         <C>            <C>        <C>
Revenues  . . . . . . . . . .      $ 306,811   $ 174,692     $ 747,222   $ 455,025

Costs and expenses of
  contracts . . . . . . . . .        297,330     168,747       723,097     438,899
                                   ---------   ---------      ---------  ---------
Gross profit. . . . . . . . .          9,481       5,945        24,125      16,126

Selling, general and
  administrative expenses . .            758         576         1,829         970

Interest income, net  . . . .             (5)       (161)         (118)       (532)
                                   ---------   ---------      ---------  ---------
Income before income taxes. .          8,728       5,530        22,414      15,688

Provision for income taxes. .          3,419       2,171         8,738       6,053
                                   ---------   ---------      ---------  ---------

Net income. . . . . . . . . .      $   5,309   $   3,359     $  13,676   $   9,635
                                   =========   =========     =========   =========


Basic earnings per share  . .      $    1.05   $    0.67     $    2.70   $    1.96
                                   =========   =========     =========   =========
Basic weighted average shares
  outstanding                      5,075,830   5,024,416     5,066,837   4,922,056
                                   =========   =========     =========   =========

Diluted earnings per share. .      $    1.04   $    0.66     $    2.68   $    1.94
                                   =========   =========     =========   =========
Diluted weighted average
  shares outstanding               5,099,794   5,063,279     5,093,715   4,977,371
                                   =========   =========     =========   =========

Dividends declared per share       $   0.045   $    0.04     $    0.13   $   0.115
                                   =========   =========     =========   =========
</TABLE>






















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

                                     -5-

VSE Corporation and Subsidiaries
Unaudited Consolidated Financial Statements
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
------------------------------------------------------------------------------
(in thousands)
<CAPTION>

                                                           For the nine months
                                                           ended September 30,
                                                              2008     2007
                                                              ----     ----
<S>                                                         <C>      <C>
Cash flows from operating activities:
Net income  . . . . . . . . . . . . . . . . . . . . . . .   $13,676  $ 9,635
Adjustments to reconcile net income to net cash
  provided by operating activities:
    Depreciation and amortization . . . . . . . . . . . .     3,813    2,385
    Loss on sale of property and equipment  . . . . . . .        19        1
    Deferred taxes  . . . . . . . . . . . . . . . . . . .       672     (587)
    Stock-based compensation  . . . . . . . . . . . . . .       688      228
Change in operating assets and liabilities, net of
    impact of acquisitions:
    Accounts receivable, net. . . . . . . . . . . . . . .   (35,728) (39,931)
    Contract inventories  . . . . . . . . . . . . . . . .         -    4,148
    Other current and noncurrent assets . . . . . . . . .    (5,334)  (1,730)
    Accounts payable and deferred compensation  . . . . .    41,867   36,686
    Accrued expenses  . . . . . . . . . . . . . . . . . .      (515)   1,035
    Other liabilities . . . . . . . . . . . . . . . . . .       299      193
                                                            -------  -------
      Net cash provided by operating activities              19,457   12,063
                                                            -------  -------
Cash flows from investing activities:
  Purchases of property and equipment . . . . . . . . . .    (7,225)  (4,867)
  Business acquisitions, net of cash acquired . . . . . .   (17,129) (11,755)
                                                            -------  -------
      Net cash used in investing activities                 (24,354) (16,622)
                                                            -------  -------
Cash flows from financing activities:
  Borrowings on bank notes payable  . . . . . . . . . . .   164,173    9,131
  Repayments on bank notes payable  . . . . . . . . . . .  (158,030)  (9,131)
  Dividends paid  . . . . . . . . . . . . . . . . . . . .      (632)    (539)
  Excess tax benefits from share-based
    payment arrangements  . . . . . . . . . . . . . . . .       173    2,018
  Proceeds from the exercise of stock options . . . . . .       208    1,947
                                                            -------  -------
      Net cash provided by financing activities               5,892    3,426
                                                            -------  -------

Net increase (decrease) in cash and cash equivalents  . .       995   (1,133)
Cash and cash equivalents at beginning of period  . . . .       109    8,745
                                                            -------  -------
Cash and cash equivalents at end of period  . . . . . . .   $ 1,104  $ 7,612
                                                            =======  =======
</TABLE>








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

                                     -6-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008



(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 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. ("G&B"), acquired in April
2008, are our currently active subsidiaries.

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 and nine months ended September 30, 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 our Annual Report on
Form 10-K for the fiscal 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 us 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
contract disallowance reserves, self-insured health claims and estimated cost
to complete on firm fixed-price contracts.


(2) Bank Notes Payable

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, maturity date, or other terms and the bank may
amend the loan to accommodate our request. The amount of credit available to
us as of September 30, 2008 was $35 million and the maturity date of the loan
agreement is May 10, 2010. The loan agreement has collateral requirements that
secure our assets, restrictive covenants, a limit on annual dividends, and
other affirmative and negative covenants. As of September 30, 2008 we have not
been notified by the bank, nor are we aware, of any defaults under the loan
agreement.

Under the terms of the loan agreement, we may borrow against the revolving
loan at any time and can repay the  borrowings at any time  without premium or

                                     -7-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008



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 September 30, 2008 and December 31, 2007,
revolving loan amounts outstanding were approximately $6.2 million and $81
thousand, respectively. Interest expense incurred on the loan was
approximately $161 thousand and $6 thousand for the nine months ended
September 30, 2008 and 2007, respectively. There were no letters of credit
outstanding in 2008 or 2007.


(3) Stock-based Compensation


Restricted Stock

On April 22, 2008, we awarded 5,831 shares of restricted VSE Stock to an
executive.  The fair value of this award was $34.30 per share at the time of
the award.  Vesting in the stock will occur as follows:  25% of the shares on
April 28, 2009, 25% of the shares on April 29, 2010 and 50% of the shares on
April 29, 2011.  Compensation expense related to this award was approximately
$17 thousand and $28 thousand for the three and nine-month periods ended
September 30, 2008.

On April 22, 2008, we awarded 4,374 shares of restricted VSE Stock to our
Executive Chairman under the 2006 Restricted Stock Plan on the occasion of his
resignation as our CEO, President and Chief Operating Officer. The fair value
of this award was $34.30 per share.  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 this award was
approximately $150 thousand during the second quarter of 2008.

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 $47.92 per
share. 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 these grants was approximately $168 thousand
during the first quarter of 2008.

On January 2, 2007 and August 15, 2007 we awarded 4,800 shares and 300 shares,
respectively, 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 $16.84 per share and $36.91 per share,
respectively. 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 these grants was approximately $11
thousand and $92 thousand for the three and nine-month periods ended September
30, 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 performance 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 shares
issued will be based on the fair market value of our common stock on the
vesting date.  The earned amount will be expensed ratably over the vesting
period of approximately three years.

                                     -8-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008



The compensation expense related to the 2008 Awards and 2007 Awards for the
periods ended September 30, 2008 and 2007 is as follows (in thousands):

                                      Three Months            Nine Months
                                   Ended September 30,    Ended September 30,
                                    2008        2007       2008        2007
                                    ----        ----       ----        ----
  2008 Awards                       $ 93         $ -       $277        $  -
  2007 Awards                         69          69        208         208
                                    ----         ---       ----        ----
   Total                            $162         $69       $485        $208
                                    ====         ===       ====        ====

On March 3, 2008, the employees eligible for the 2007 Awards received 6,457
shares of common stock.  The weighted-average grant-date fair value of these
awards was $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 represent incremental common shares issuable upon exercise of
stock options.
                                     Three Months             Nine Months
                                  Ended September 30,     Ended September 30,
                                   2008        2007        2008        2007
                                   ----        ----        ----        ----
   Basic weighted average
     shares outstanding          5,075,830   5,024,416   5,066,837   4,922,056
   Dilutive effect of options       23,964      38,863      26,878      55,315
                                 ---------   ---------   ---------   ---------
   Diluted weighted average
     shares outstanding          5,099,794   5,063,279   5,093,715   4,977,371
                                 =========   =========   =========   =========

During the three and nine-month periods ended September 30, 2008,  15,500 and
16,500 stock options, respectively, were exercised which resulted in an
increase to additional paid-in capital of approximately $361 thousand and $380
thousand, respectively, net of related income tax benefits.

During the three and nine-month periods ended September 30, 2007, 36,976 and
248,874 stock options, respectively, were exercised which resulted in an
increase to additional paid-in capital of approximately $913 thousand and $4
million, respectively, net of related income tax benefits.


(5) Commitments and Contingencies

We have, in the normal course of business, certain claims against us 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.

                                     -9-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008



(6) Segment Information

	Management of our business operations is conducted under four reportable
operating segments: the Federal Group, the International Group, the IT, Energy
and Management Consulting Group (formerly the Energy and Environmental Group,
renamed in April 2008), and the Infrastructure Group (formerly the
Infrastructure and Information Technology Group, renamed in April, 2008).
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 and the two subsidiaries within the
IT, Energy and Management Consulting 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.

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. The Federal Group includes
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.

IT, Energy and Management Consulting Group - The IT, Energy and Management
Consulting Group provides technical and consulting services primarily to
various civilian Government agencies. This group includes Energetics and, upon
acquisition in April 2008, also includes G&B. See footnote 7 for information
regarding the acquisition of G&B.

Infrastructure Group - Our Infrastructure Group was created in connection with
the June 4, 2007 acquisition of our wholly owned subsidiary, ICRC. ICRC is
engaged principally in providing diversified technical and management services
to the Government, including transportation infrastructure services, advanced
vehicle technology, aerospace services and engineering and information
technology.

Our segment information for the three and nine-month periods ended September
30, 2008 and 2007 is as follows (in thousands):


                                         Three Months         Nine Months
                                     ended September 30,  ended September 30,
                                        2008      2007       2008     2007
                                        ----      ----       ----     ----
Revenues:
  Federal Group                      $188,934  $ 91,619   $475,400  $245,414
  International Group                  55,577    58,795    156,462   174,810
  IT, Energy and Management
    Consulting Group                   15,853     3,845     33,766    10,698
  Infrastructure Group                 46,443    20,449     81,581    24,068
  Corporate                                 4       (16)        13        35
                                     --------  --------   --------  --------
    Total revenues                   $306,811  $174,692   $747,222  $455,025
                                     ========  ========   ========  ========


                                     -10-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008


                                         Three Months         Nine Months
                                     ended September 30,  ended September 30,
                                        2008      2007       2008      2007
                                        ----      ----       ----     ----
Income before income taxes:
  Federal Group                      $  4,830  $  2,815   $ 13,149  $  8,579
  International Group                   1,005     1,259      4,080     5,002
  IT, Energy and Management
    Consulting Group                    1,413       429      3,172     1,196
  Infrastructure Group                  2,011     1,469      3,369     1,636
  Corporate/unallocated expenses         (531)     (442)    (1,356)     (725)
                                     --------  --------   --------  --------
    Income before income taxes       $  8,728  $  5,530   $ 22,414  $ 15,688
                                     ========  ========   ========  ========

Customer Information

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

                                        Three Months           Nine Months
                                    ended September 30,    ended September 30,
Source of Revenues                   2008        2007       2008        2007
                                     ----        ----       ----        ----
Army/Army Reserve                  $176,449    $ 89,035   $446,413    $233,061
Navy                                 52,611      47,575    139,478     147,751
Department of Transportation         42,657      11,619     67,707      12,776
Treasury                             13,220      16,381     42,172      38,709
Other                                21,874      10,082     51,452      22,728
                                   --------    --------   --------    --------
  Total Revenues                   $306,811    $174,692   $747,222    $455,025
                                   ========    ========   ========    ========


(7) Acquisitions

G&B Solutions, Inc.

On April 14, 2008, we acquired all of the capital stock of G&B of Reston,
Virginia.  G&B is a diversified information technology and management
consulting provider to Government 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. G&B's core expertise lies in enterprise architecture
development, information assurance/business continuity, program and portfolio
management, network IT services and systems design and integration. G&B
provides us an opportunity to expand our professional services across a wider
range of Government customers.

Cash paid at closing for G&B was approximately $19.5 million, which includes
approximately $650 thousand of prepaid retention bonuses that will be expensed
in the post-acquisition period as the affected employees provide services,
less approximately $600 thousand for certain closing adjustments. We also
incurred approximately $200 thousand of direct acquisition costs consisting of
legal, accounting and other fees. 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 G&B achieves certain financial performance targets.  If earned
and paid, such additional purchase price consideration will be recorded as
goodwill on the consolidated balance sheet under existing accounting guidance.
The results of G&B's operations are included in the accompanying consolidated
financial statements beginning as of April 14, 2008.

                                     -11-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008



Of the initial cash purchase price, approximately $3.8 million was recorded as
customer related intangible assets to be amortized over approximately five
years.  In addition, $930 thousand was allocated to G&B's tradename, which has
an indefinite life, and approximately $9.8 million was allocated to goodwill.
Goodwill and intangible assets with indefinite lives are subject to review for
impairment at least annually.

In July 2008, we filed an election under the Internal Revenue Code Section
338(h)(10) to treat the G&B acquisition as a sale of assets for tax purposes.
We made a payment 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 are expected to exceed the additional payment made to the
seller of approximately $368 thousand.  We also incurred approximately $196
thousand of state income tax liabilities to various states related to the
338(h)(10) election due to G&B's former Subchapter S status. The additional
payments were made during the third quarter of 2008 and were recorded as
goodwill.

We followed the guidance of SFAS No. 141 "Business Combinations" to record the
acquisition of G&B.  We recognized the fair value of assets acquired and
liabilities assumed as follows (in thousands):

                Description                     Fair Value
                -----------                     ----------
		Current assets			 $ 8,835
		Property and equipment		     173
		Intangibles - customer related     3,820
		Intangibles - tradename              930
		Goodwill                          10,441
                                                 -------
                Total assets acquired             24,199

		Liabilities assumed               (5,182)
                                                 -------
		Total purchase price             $19,017
                                                 =======


Integrated Concepts and Research Corporation

On June 4, 2007, we acquired all of the capital 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 us with an opportunity to
expand and diversify its business across a number of project areas, including
smart vehicles, alternative fuels, large-scale port engineering development
and security, and information technology services.

The purchase price for the 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 first six years after the June 2007 acquisition.
Additionally, we have filed an election under the Internal Revenue Code
Section 338(h)(10) to treat the ICRC acquisition as a sale of assets for tax
purposes. An additional $1.6 million payment was 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 are expected
to exceed the additional $1.6 million payment made to the seller.  The
additional payment was made in April 2008 and recorded as goodwill.

                                     -12-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008



Of the initial $11.8 million purchase price, approximately $7.1 million was
recorded as contract related intangible assets to be amortized on a straight
line basis over six to eight years; approximately $1.5 million was recorded as
an intangible asset related to ICRC's tradename, which has an indefinite life;
and approximately $2 million was recorded as initial goodwill. Additional
goodwill and accrued expenses of approximately $557 thousand were recorded as
of December 31, 2007 for the earn-out payment that was made to the seller as a
result of the achievement of the specified earnings target in 2007.

We followed the guidance of SFAS No. 141 to record the acquisition of ICRC.
We recognized the fair value of assets acquired and liabilities assumed as
follows (in thousands):

                Description                     Fair Value
                -----------                     ----------
		Current assets		         $ 6,544
		Property and equipment	             429
		Other assets		              27
 		Intangibles - contract             7,134
		Intangibles - tradename            1,500
		Goodwill                           4,174
                                                 -------
		Total assets acquired             19,808

		Liabilities assumed               (5,880)
                                                 -------
		Total purchase price             $13,928
                                                 =======

The total purchase price includes additional purchase price consideration
related to the 2007 earn-out of approximately $557 thousand and the 338(h)(10)
election of approximately $1.6 million, as described above.


(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 for us on 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.

On January 1, 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.




                                     -13-

                       VSE CORPORATION AND SUBSIDIARIES
            NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                             September 30, 2008



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.

Included in other long-term assets as of September 30, 2008 is approximately
$3.7 million of investments we hold in a trust related to a non-qualified
benefit plan.  We determined the fair value of these assets and corresponding
liability using the Level 1 methodology.  We have an offsetting deferred
compensation liability for this plan.  As such, we do not have income
statement volatility as a result of fluctuations in the value of the plan's
investments.

We elected not to adopt the fair value option included in FAS 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.

























                                     -14-


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 Government prime contractors.

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. ("G&B"), acquired in April
2008, are our currently active subsidiaries.

Customers and Services

We provide engineering, design, logistics, management and technical services
to 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 IT, Energy and Management
Consulting Group (formerly the Energy and Environmental Group, renamed in
April 2008), and the Infrastructure Group (formerly the Infrastructure and
Information Technology Group, renamed in April 2008).

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 - Our CED division has a program on
its Rapid Response support contract to provide maintenance and logistics
services in support of U.S. Army equipment in Iraq and Afghanistan. In
February 2008 a new task order with a ceiling value of approximately $282
million was awarded to continue this program work through February 2009. This
program had revenues of approximately $219 million for the year ended December
31, 2007 and approximately $245 million for the first three quarters of 2008.

       	CED Assured Mobility Systems Program - Our CED division has a program on
its Rapid Response support contract to provide technical support services in
support of U.S. Army PM Assured Mobility Systems and U.S. Army Tank-automotive
and Armaments Command ("TACOM"). This program has a current ceiling value of
approximately $271 million and a period of performance that ends in March
2009. This program had revenues of approximately $28 million for the year

                                     -15-

ended December 31, 2007 and approximately $61 million for the first nine
months of 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. FSS work includes some field service support on the CED
Army Equipment Support program.

MSD - MSD provides services for 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 southwest Asia.

       	TBPS Program - Our SED Division performs work on a program providing a
protection system, the Tanker Ballistic Protection System, for vehicles
deployed by the U.S. Army in Iraq. This program is nearing completion. The
total contract ceiling value on this program as of September 30, 2008 was
approximately $96 million, and the remaining available contract ceiling was
approximately $2.7 million.

       	RCV Maintenance Program - SED was awarded contract coverage on a program
to provide maintenance work on U.S. Army Route Clearance Vehicles in Kuwait
(the "RCV Maintenance Program") in September 2008. We expect the initial phase
of this program to run for two years under contractual coverage of
approximately $194 million.

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.

FMD - FMD provides global field engineering, logistics, maintenance and
information technology services to the U.S. Navy and Air Force, including
fleet-wide ship and aircraft support programs. FMD's expertise includes ship
repair and modernization, ship systems installations, ordnance engineering and

                                     -16-

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.

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.

IT, Energy and Management Consulting Group - The IT, Energy and Management
Consulting Group provides technical and consulting services primarily to
various civilian Government agencies. This group includes Energetics and, as of
April 2008, G&B.

Energetics - Energetics provides technical and management support in areas of
nuclear energy, technology research, development, demonstration, and
consulting services in the field of energy and environmental management.
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. Customers include the U.S. Department of Energy, including the
Office of Nuclear Energy, Science and Technology; the U.S. Department of
Homeland Security, through new contract work won in 2007; and other Government
agencies and commercial clients.

G&B - G&B is an established information technology provider to many
Government 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. G&B's core
expertise lies in enterprise architecture development, information
assurance/business continuity, program and portfolio management, network IT
services and systems design and integration.

We acquired G&B in April 2008. Cash paid at closing for G&B was approximately
$19.5 million, which includes approximately $650 thousand of prepaid retention
bonuses that will be expensed in the post-acquisition period as the affected
employees provide services, less approximately $600 thousand for certain
closing adjustments. We also incurred approximately $200 thousand of direct
acquisition costs consisting of legal, accounting and other fees. 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 G&B achieves certain financial
performance targets.

Infrastructure Group - We formed our Infrastructure 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 if specified financial targets are
achieved. ICRC is engaged principally in providing engineering and
transportation infrastructure services.

       	Port of Anchorage Project - A significant amount of ICRC's revenue and
income comes from services 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 enhancements. Some of the infrastructure
services on this project typically cannot be performed during the winter
months. The seasonal nature of this work will cause fluctuations in our
revenues on this project, with higher revenue levels in summer months and
lower revenue levels in winter months. In July 2008, ICRC was awarded a new
unrestricted contract to continue work on this program. The contract has an
estimated ceiling amount of $704 million, a three-year base period of

                                     -17-

performance, and four one-year option periods. This project had revenues of
approximately $68 million for the first three quarters of 2008.



                           Concentration of Revenues
                                (in thousands)
                    For the nine months ended September 30,
                    ---------------------------------------

        Source of Revenue	           2008     %        2007     %
	-----------------                  ----     -        ----     -
	CED Army Equipment Support      $244,896    33    $149,356    33
	CED Assured Mobility Systems      61,231     8      14,515     3
	CED Other                        112,747    15      31,929     7
                                        --------   ---    --------   ---
	  Total CED                      418,874    56     195,800    43

	BAV Egypt                         36,879     5      39,380     9
	BAV India                             55     -      36,765     8
	BAV Other                         21,821     3      17,869     4
                                        --------   ---    --------   ---
	  Total BAV                       58,755     8      94,014    21

	Treasury Seized Asset Program     40,760     5      37,675     8

	Port of Anchorage Contract        67,700     9      12,708     3

	VSE Other                        161,133    22     114,828    25
                                        --------   ---    --------   ---
	  Total Revenues                $747,222   100    $455,025   100
                                        ========   ===    ========   ===

Management Outlook

The growth in our revenues and profits during 2007 and 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. Large task order
awards under the Rapid Response support contract, including the CED Army
Equipment Support Program, are due to expire in early 2009. A large majority
of the originally proposed work on the TBPS Program has been delivered and
this program is due to expire in the near future.

We believe that we are prepared to meet the challenge of replacing the
expiring work. Our work in the DoD market remains strong. ELD has expanded its
workforce, facilities, capacity to provide services, contractual coverage and
funding since its inception, resulting in increases in revenues from these
services in 2006, 2007 and the first nine months of 2008. We expect further
increases in the remainder of 2008 and in future years. The recent award of
the RCV Maintenance program gives us a major new source of work. We continue
to seek new task order awards under the Rapid Response support contract. We
have also submitted a proposal for a follow-on contract to the current Rapid
Response contract. If awarded, the Government could begin issuing new task
orders on this follow-on contract beginning in early 2009.

We are augmenting our core base of DoD work by emphasizing growth in our non-
DoD services. These efforts have included: 1) a renewed emphasis on marketing
our Energetics services that is beginning to show results in 2008, 2) work on
the Treasury Seized Property Management program, and, 3) the acquisitions of
ICRC in 2007 and G&B in 2008. We expect these efforts that are directed toward
the growth of our work in the Federal Civil marketplace to contribute to
overall future revenue growth and financial performance.

Although our current prospects for continued growth in 2009 appear to be
favorable, we recognize that 2009 is a federal government transition year and
government spending priorities may change in ways that we cannot predict at
this time.

                                    -18-

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 nine month periods
ended September 30, 2008 and 2007, and funded contract backlog as of September
30, 2008 and 2007 is as follows:

                                                       (in millions)
                                                      2008        2007
                                                      ----        ----
        Bookings                                    $1,033        $603
        Revenue                                       $747        $455
        Funded backlog                                $706        $478

Approximately $364 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 $229 million of the bookings for 2007.


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

We decided that employees should have an opportunity to diversify their VSE
stock in their 401(k) accounts held in the VSE Corporation Employee
ESOP/401(k) Plan (the "Plan") beginning with our 2008 Plan year. In January
2008, employees were notified that they may elect to transfer any portion of
their 401(k) accounts that is invested in VSE stock from that investment into
another investment alternative under the Plan. This right extends to all 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
VSE stock held in the ESOP accounts to the employees or rollover such VSE
Stock into an Individual Retirement Account or employee plan selected by the
employee. ESOP shares were distributed to employees 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 for us on 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.

On January 1, 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.






                                    -19-

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 SEC on
March 7, 2008 for a full discussion of our accounting policies.

Revenue by Contract Type

Our revenues by contract type for the nine months ended September 30, 2008 and
2007 were as follows (in thousands):


                                   2008             2007
          Contract Type          Revenues    %    Revenues    %
          -------------          --------    -    --------    -
          Cost-type . . . . .    $182,689    25   $159,932    35
          Time and materials.     533,345    71    261,889    58
          Fixed-price . . . .      31,188     4     33,204     7
                                 --------   ---   --------   ---
                                 $747,222   100   $455,025   100
                                 ========   ===   ========   ===

A significant portion of the time and materials revenues are attributable to
revenues from the CED Rapid Response contract. The majority of the revenues on
this contract have resulted from the pass through of subcontractor support
services that have lower profit margins than the margins on our other
contracts.


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
and nine month periods ended September 30, 2008 and 2007 (in thousands).

                         Three Months         Nine Months        Change
                     Ended September 30, Ended September 30, Three     Nine
Description            2008       2007       2008      2007   Months    Months
                       ----       ----       ----      ----   ------    ------
Revenues             $306,811  $174,692   $747,222  $455,025 $132,119  $292,197
Contract costs        297,330   168,747    723,097   438,899  128,583   284,198
                     --------  --------   --------  -------- --------  --------
Gross Profit            9,481     5,945     24,125    16,126    3,536     7,999
Selling, general and
  Administrative
  Expenses                758       576      1,829       970      182       859
Interest expense
(income), net              (5)     (161)      (118)     (532)     156       414
                     --------   -------   --------  --------  -------  --------
Income before income
  taxes                 8,728     5,530     22,414    15,688    3,198     6,726
Provision for income
  taxes                 3,419     2,171      8,738     6,053    1,248     2,685
                     --------   -------   --------  --------  -------  --------
Net Income           $  5,309   $ 3,359   $ 13,676  $  9,635  $ 1,950  $  4,041
                     ========   =======   ========  ========  =======  ========

Our revenues and contract costs increased by approximatley 76% for the three
months ended September 30, 2008, as compared to the same period of 2007.
Revenues increased by approximately 64% and contract costs increased by
approximately 65% for the nine months ended September 30, 2008 as compared to
the same period of 2007. The primary reasons for the increases 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) ICRC is included in our financial results for the full three and nine month
periods in 2008 compared to a shorter period in 2007 as a result of the June
2007 acquisition; 3) revenues of G&B from the April 14, 2008 date of
acquisition through September 30, 2008; and 4) increases in FMD, ELD, FSS, and
Energetics services.

Selling, general and administrative expenses consist primarily of costs and
expenses that are not chargeable or reimbursable on our operating unit

                                    -20-

contracts. The increases in these expenses for the three and nine months ended
September 30, 2008 as compared to the same periods of 2007 are primarily due
to the amortization of intangible assets attributable to the ICRC and G&B
acquisitions and to the inclusion of the acquired companies' selling, general
and administrative expenses in our results in 2008.

Income before income taxes increased by approximately 58% and 43% for the
three and nine month periods ended September 30, 2008 as compared to the same
periods of 2007. The increases are primarily due to 1) profits from the growth
of revenues on the CED Army Equipment Support program and other CED task
orders; 2) the inclusion of ICRC, G&B and FSS in our operating results for the
full three and nine month periods of 2008; 3) increased profitability of SED
services performed on the TBPS Program; and 4) revenue increases from
Energetics services.

Federal Group Results

We show consolidated revenues and income before income taxes and the changes
in these items for our Federal Group for the three and nine month periods
ended September 30, 2008 and 2007 in the following table (in thousands).

                         Three Months         Nine Months         Change
                     Ended September 30, Ended September 30, Three      Nine
Description             2008     2007       2008      2007   Months     Months
-----------             ----     ----       ----      ----   ------     ------
Revenues             $188,934  $91,619   $475,400  $245,414  $97,315  $229,986
                     ========  =======   ========  ========  =======  ========
Income before income
  taxes              $  4,830  $ 2,815   $ 13,149  $  8,579  $ 2,015  $  4,570
                     ========  =======   ========  ========  =======  ========
Profit percentage        2.6%     3.1%       2.8%      3.5%

Revenues for our Federal Group increased by approximately 106% and 94% for the
three and nine month periods ended September 30, 2008, as compared to the same
periods for the prior year. The increases 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; 3) increased revenues from ELD's equipment
refurbishment services; and 4) revenues from the inclusion of FSS in 2008. 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
72% and 53% for the three and nine month periods ended September 30, 2008, as
compared to the same periods for the prior year. The increases are primarily
due to 1) the increase in revenues on the CED Army Equipment Support Program
work and other CED task orders; 2) increased profitability of SED services
performed on the TBPS Program; and, 3) profits from the inclusion of FSS
services in our operating results in 2008. These increases in profits were
partially offset by a decline in ELD profits resulting from losses on work
performed in a new location in the third quarter. These losses are expected to
be eliminated as the work performed at this new location becomes more fully
developed. Also, a significant amount of the increase in our Federal Group
revenues resulted from the CED Army Equipment Support Program work and from
other CED task orders that have lower profit margins than our other work,
which caused profits as a percentage of revenues to decline as compared to
prior year percentages.










                                    -21-

International Group Results

We show consolidated revenues and income before income taxes and the changes
in these items for our International Group for the three and nine month
periods ended September 30, 2008 and 2007 in the following table (in
thousands).

                         Three Months         Nine Months          Change
                     Ended September 30, Ended September 30,  Three      Nine
Description             2008      2007      2008      2007    Months     Months
-----------             ----      ----      ----      ----    ------     ------
Revenues               $55,577  $58,795  $156,462  $174,810  $ (3,218) $(18,348)
                       =======  =======  ========  ========  ========  ========
Income before income
  taxes                $ 1,005  $ 1,259  $  4,080  $  5,002  $   (254) $   (922)
                       =======  =======  ========  ========  ========  ========
Profit percentage         1.8%     2.1%      2.6%      2.9%


Revenues for our International Group decreased by approximately 5% and 10% for
the three and nine month periods ended September 30, 2008, as compared to the
same periods for the prior year. Our BAV division had approximately $36.8
mllion of 2007 revenue from a ship transfer to India that was completed in
2007, and there was no similar ship transfer in 2008. This resulted in lower
BAV revenues and was the primary reason for the decreases in revenues for the
International Group in 2008. Revenue increases from FMD services partially
offset the decrease in revenues for this segment.

Income before income taxes for our International Group decreased by
approximately 20% and 18% for the three and nine month periods ended September
30, 2008, as compared to the same periods for the prior year. The decreases
resulted primarily from a reduction in the fees earned by BAV due to the lower
revenues.


IT, Energy and Management Consulting Group Results

We show consolidated revenues and income before income taxes and the changes
in these items for our IT, Energy and Management Consulting Group for the
three and nine month periods ended September 30, 2008 and 2007 in the
following table (in thousands).

                         Three Months         Nine Months        Change
                     Ended September 30, Ended September 30, Three     Nine
Description             2008     2007       2008      2007   Months    Months
-----------             ----     ----       ----      ----   ------    ------
Revenues              $15,853   $3,845    $33,766   $10,698  $12,008   $23,068
                      =======   ======    =======   =======  =======   =======
Income before income
  taxes               $ 1,413   $  429    $ 3,172   $ 1,196  $   984   $ 1,976
                      =======   ======    =======   =======  =======   =======
Profit percentage        8.9%    11.2%       9.4%     11.2%


For the three and nine month periods ended September 30, 2008, revenues for
our IT, Energy and Management Consulting Group increased by approximately 312%
and 216%, respectively, and income before income taxes increased by
approximately 229% and 165%, respectively, when compared to the same periods
for the prior year. Upon our acquisition of G&B in April 2008, G&B became part
of this segment. The inclusion of G&B revenues and profits in this segment's
results was a major reason for the increases in 2008. Increases in Energetics'
revenues and income before income taxes, primarily due to new work performed
for the U.S. Department of Homeland Security, also contributed to the
increases in this segment for these periods in 2008.


                                    -22-

Infrastructure Group Results

We show consolidated revenues and income before income taxes and the changes
in these items for our Infrastructure Group for the three and nine month
periods ended September 30, 2008 and 2007 in the following table (in
thousands).
                         Three Months         Nine Months        Change
                     Ended September 30, Ended September 30, Three     Nine
Description             2008     2007       2008      2007   Months    Months
-----------             ----     ----       ----      ----   ------    ------
Revenues               $46,443  $20,449   $81,581  $24,068  $25,994   $57,513
                       =======  =======   =======  =======  =======   =======
Income before income
  taxes                $ 2,011  $ 1,469   $ 3,369  $ 1,636  $   542   $ 1,733
                       =======  =======   =======  =======  =======   =======
Profit percentage         4.3%     7.2%      4.1%     6.8%

This segment consists of our ICRC subsidiary. Revenues for the three month
period ended September 30, 2008 increased by approximately 127%, and income
before income taxes increased by approximately 37%, when compared to the same
period for the prior year. The primary reason for the increases relates to
certain permitting issues associated with the POA Project. In 2007, ICRC work
on the POA Project was delayed while waiting for receipt of environmental
permitting prior to proceeding with the next phase of the project. This
permitting was issued in August 2007, but revenues and profits were affected
prior to receiving it. ICRC's results for 2008 were not affected by such
permitting issues.

Our consolidated results of operations include ICRC revenues and income for
the nine month period ended September 30, 2008 whereas our 2007 results
include ICRC revenues and income only from the June 4, 2007 acquisition date
through September 30, 2007.


Financial Condition

Our financial condition did not change materially in the first three quarters
of 2008. The acquisition of G&B resulted in changes to some of our assets and
liabilities including increases in bank borrowings, goodwill, and intangible
assets.


Liquidity and Capital Resources

Cash Flows

Our cash and cash equivalents increased by approximately $1 million during the
first nine months of 2008 as compared to a decrease of approximately $1.1
million for the first nine months of 2007. The reason for this difference is
that in 2007 we used cash on hand to supplement cash provided by operating
activities and financing activities to pay for investing activities whereas in
2008 we funded our investing activities entirely with operating activities and
financing activities.

Cash provided by operating activities increased by approximately $7.4 million
in the first nine months of 2008 as compared to the same period of 2007.
Approximately $4 million of this increase was due to the increase in net
income, approximately $3.2 million was due to an increase in depreciation and
amortization and other non-cash operating activities, and the remainder was
due to changes in the levels of working capital components such as accounts
receivable, contract inventories, accounts payable, and accrued expenses that
are associated with our contract requirements and billing and collections
cycle.

Cash used in investing activities increased by approximately $7.7 million in
the first nine months of 2008 as compared to the same period of 2007. This was
due  to  making  a  larger  business  acquisition  in  2008 as compared to the

                                    -23-

acquisition made in 2007 and to an increased level of investment in property
and equipment in 2008 as compared to 2007.

Cash provided by financing activities increased by approximately $2.5 million
in the first nine months of 2008 as compared to the same period of 2007. This
increase was primarily due to an increase in borrowings on our bank loan to
help finance our investing activities.

We paid quarterly cash dividends totaling $.125 per share during the first
three quarters 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 and accounts payable levels can be affected by changes in the level
of the 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 acquisitions of ICRC in 2007 and G&B in 2008 required a significant use of
our cash. While there are no firm plans for any specific additional
acquisitions at this time, we continue to seek opportunities for growth
through acquisitions.

We may also invest in expansion, improvement, and maintenance of our
operational and administrative facilities. We invested in the construction of
an additional 40,000 square feet of warehouse and shop space at our Ladysmith,
Virginia facility. Construction of this additional space was completed in the
second quarter of 2008 at a final cost of approximately $6.2 million. We may
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").

We do not use public debt security financing. Our bank continues to maintain
good financial strength ratings from the ratings services and we believe that
we are well positioned to obtain financing from other banks if the need should
arise. Accordingly, we do not believe that the current turbulence in the
financial markets will have an adverse negative impact on our ability to
finance our business, financial condition, or results of operations.


Contractual Obligations

Upon the acquisition of G&B in April 2008, we assumed liability for certain
additional operating lease commitments. Some of these lease commitments
expired on June 30, 2008 when G&B moved some of its offices from McLean,
Virginia to Reston, Virginia. After June 30, 2008, G&B had two facility leases
for office space for terms of one and six years for an aggregate amount of
approximately $1.7 million.

During 2008, we have signed eight new facility leases for office and warehouse
space for various terms for an aggregate amount of approximately $10.2
million. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2007 for a summary of our other contractual
obligations.

                                    -24-

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,
shop equipment, 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 acquisitions of ICRC in
June 2007 and G&B in April 2008, causing us to have to borrow on our bank loan
beginning 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 increase
our borrowings, future interest rate changes could potentially have a material
impact on us.








































                                    -25-

                      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 third 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

VSE 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.



                                    -26-

                      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:  October 30, 2008              /s/ M. A. Gauthier
                                      __________________________________
                                      M. A. Gauthier
                                      President,
                                      Chief Executive Officer and
                                      Chief Operating Officer



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
































                                    -26-