WT Business Beat


Many contractors fail to stand out, WT study finds

The third leg of our series of Washington Technology Insider Reports exploring partnering has been released. This one focuses on the customer perspective and offers a series of insights about what contractors do well and don’t do well from the government’s point of view.

We started producing the reports on Government IT Contractor Partnering last year when we launched our WT Insider membership program. We made a promise then that as part of the membership we would deliver exclusive market research reports.

In the first report, we looked at what subcontractors thought of primes. The second turned the question around and asked the primes what they thought of the subcontractors. Both of the reports offered critical insights into what primes and subs value and need in the relationship, and where opportunities exist for making your company a preferred partner in the market.

With this third report, we asked government customers questions about their contractors and the value they want contractors to deliver.

We asked questions around critical attributes such as ease of the working relationship, business ethics, customer knowledge, strategic value, technical expertise and pricing.

Some of our findings were expected, such as the desire for better communication and the negative impact the current budget environment has had on the relationship between customers and contractors.

But there are plenty of surprises as well, such as the fact that pricing isn’t a big deal for the customers. In fact, 67 percent rated pricing as good to excellent.

But there is one very troubling finding in our report. We asked the simple question: Is there a single best contractor who stands out overall? The answer is not pretty: 40 percent said there is no single best contractor, while 9 percent said they didn’t know.

In my mind, that is pretty damning. It tells me that nearly half – 49 percent of your customers – aren’t seeing a positive impact from their contractors. Contractors are falling way short.

From the customer’s perspective, it just doesn’t matter who their contractor is. Contractors are just one large group of companies that are indistinguishable from one another.

The report goes deeper into what the 52 percent who could name a single best contractor felt that contractor did well. And here is one of the areas where the report points the way for companies to improve their performance.

The top companies significantly outperform their peers in the areas of technical expertise, teamwork, customer knowledge, industry perception and process. In fact, the top companies deliver even more value in those areas than customers expect. They are exceeding expectations. That’s how you stand out in a crowded field.

Over the coming days, I’ll dive deeper into the report and offer more analysis in areas such as factors in choosing a contractor, the current and future state of the contractor-customer relationship and other areas where contractors can take concrete actions to differentiate themselves from competitors.

There are some eye-popping findings in this report that I don’t think you’ll want to miss.

You’ll need to be a Washington Technology Insider to access the report and our analysis. You can click here to learn more.

In addition to the Insider reports on partnering, we’ve also produced a report on purchasing plans for 2014, as well as a contract award database that you can download. The database is updated daily.

As our Insider program grows, look for more exclusive benefits and analysis that you won’t find anywhere else.

And as always, we look forward to any feedback and suggestions you want to provide.

Posted on Apr 14, 2014 at 7:20 AM2 comments


NetCents 2 protests grow by one

Just a quick update on the NetCents 2 Network Operations and Infrastructure contract. The $5.8 billion contract is now under protest by four companies.

The protests seem to be trickling in pretty slowly since the March 27 announcement of the 12 winners of the contract. The Air Force had received 29 bids, so the number of potential protesters is 17.

We’ll know in another week how many protests there will be. It all depends on when companies get their debriefing by the Air Force. The debriefing kicks off a 10-day window for protests to be filed.

The first protest was filed Monday by Intelligent Decisions. The next day, Abacus Technology and D&S Consultants filed with the Government Accountability Office.

The fourth and latest to file is EMW Inc., which filed on Thursday. EMW is an incumbent on the current NetCents contract and provides services such as system engineering and technical assistance, operations and maintenance, IT and the cloud and infrastructure.

If the number of protests stays low, it gives the Air Force flexibility in how they resolve the issue and gets the contract up and running. With a small number of protesters, the Air Force could just as easily take a corrective action and give awards to the protestors and move on.

With a large number, it’s doubtful the Air Force would take quick action. They’d either fight through the 180-day window for GAO to go through its investigation, or they’d take a corrective action that involves a more thorough re-evaluation.

We’ll have to wait and see.

Posted on Apr 11, 2014 at 10:44 AM1 comments


CACI’s Six3 Systems deal named best of the year

From the moment CACI International’s acquisition of Six3 Systems was announced last year, it had all the markings of a top deal of the year.

So, I wasn’t surprised when our panel of experts picked it as the single biggest deal of 2013 as part of our annual M&A special report.

To be considered a top deal, a transaction has to include several elements including the impact it has on the buyer, the price, what the exit means to the seller, and other so-called intangibles.

The CACI-Six3 deal has many of those in spades. Let’s consider three of them: price, impact and exit.

PRICE

The price tag of $820 million didn’t make the transaction the biggest of the year, though only a couple were larger.

I heard plenty of comments from people that CACI overpaid for Six3, and CACI executives heard some of the same comments, even from some of their analysts.

Earlier this year, I had the chance to hear CACI chief financial officer Tom Mutryn speak about the process the company went through to acquire Six3.

He was candid about how CACI had to go up against much larger bidders, so CACI had to fight to level the playing field. Plus Six3, with its product and deep intelligence business, would expose CACI to new markets - markets that CACI didn’t have the native talent to completely assess.

“We brought in outside consultants,” Mutryn said.

The benefit was two-fold; it showed the sellers that CACI was serious, and it also gave CACI confidence in the future performance of Six3.

That confidence allowed CACI to structure the debt it needed and bid the price that ultimately carried the deal.

IMPACT

The company was willing to pay that price because of the upside the Six3 brought with it. CACI is a strong and well respected contractor, but it is primarily a services company. Services today are increasingly under growth and margins pressure.

CACI executives, from Chairman Jack London on down, have made it clear that improving margins is a top priority.

Not only did Six3 have higher margins, but it also added a technology and product element to CACI’s business that many see as critical to revenue and margin growth in the government market.

Wrapping technology and products around your solutions is a way of increasing margins because of the differentiation it can bring to a company. In essence, it allows them to offer something unique to their customers.

In the case of Six3, those products and technologies are serving the intelligence community with signal intelligence systems and involvement with intelligence operations and precision geo-location solutions.

THE EXIT

Six3 Systems was barely a five-year old company, but with the backing of the private equity group GTCR, it made several of its own deals and was hitting about $470 million in annual revenue.

The company was founded by Robert Coleman, a former ManTech International executive.

For GTCR, it was successful run and is another example of why private equity likes the government market so much.

But the exit isn’t a ride into the sunset for Coleman. When the deal was announced, CACI CEO Ken Asbury made it a point of pride that Coleman and the rest of Six3’s management team were staying.

“I feel very good that we’ll preserve the core management team for two or three years,” he told me.

The deal just closed in November, so it might be too early to see specific increases in CACI’s numbers, but the long-term view is that Six3 will be a transformative deal for CACI.

CACI has never shied away from making acquisitions, and the acquisition of Six3 is the biggest in its history, but I wouldn’t think of it as a stopping point.

Given CACI’s record as an acquirer, I wouldn’t be surprised to see more deals in the coming years that build on Six3.

It might be the biggest single deal of 2013, but it also lays a foundation for the future.

Posted on Apr 10, 2014 at 12:50 PM0 comments


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