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
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.
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.
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.
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
Two more companies have filed protests with the Government Accountability Office objecting to the NetCents 2 Network Operations and Infrastructure contract.
Abacus Technology Co. and D&S Consultants Inc. have joined Intelligent Decisions in asking the Air Force to reconsider the awards it has made under the $5.8 billion contract.
The Air Force made 12 awards on March 27, but had received bids from 29 companies. The expectation is that more protests likely will be filed.
The NetCents program, which includes multiple parts being awarded under separate competitions, has been plagued by bid protests. The protests have caused numerous delays.
The latest protests involve the small business awards under the network operations portion of the procurement. Large business awards in this portion of the contract have yet to be awarded.
The Air Force went through multiple rounds of protests and corrective actions to get the NetCents 2 Products contract up and running when it essentially gave the contract awards to all protesters.
It’s much too early to predict that the Air Force is headed down a similar path with the NetOps contract. Hopefully, the Air Force learned some lessons from the earlier troubles.
For now, it looks like the more typical strategy from the contractor perspective of protesting a loss of a large multiple-award contract instead of an accusation of poor decision making on the government part.
We’ll know a lot more in the next week or so when the window closes on filing protests.
It won’t look good for the Air Force if there are protests from all the 17 losing bidders. It also won’t look good if the Air Force takes a corrective action quickly.
If all the protests are in by next Friday, the Air Force will have about 30 days to respond, so we should have a good idea what’s going to happen by mid-May.
Posted on Apr 09, 2014 at 8:13 AM0 comments