There was no sitting still for CACI International as the No. 13 ranked company restructured and added new capabilities as it prepares for a positive turn in the market.
The past year has been a challenge for nearly all the companies on the Top 100 and the broader government market.
The strategic choice many faced was either stay put and weather the storm of budget cuts and uncertainty in the market, or be bold and prepare for a time when the pendulum swings back.
For CACI International, No. 13 on the 2014 Top 100 with $1.9 billion in prime contracts, the only choice was to be bold.
The company kicked of 2013 by naming a new CEO in Ken Asbury, who was brought in to bolster the company’s business development processes, and in the eighteen months since taking the reins, Asbury has reorganized the company’s operations to be more market-focused.
“We started to look at the market differently,” he said. Like many companies the government space, CACI was organized around defense, civilian and intelligence.
“But we started to see that if agencies were buying enterprise IT, there wasn’t a lot of variability,” Asbury said. “It didn’t matter if it was DHS or Commerce that might be doing the buying.”
As the market tightened and became more competitive and cost-conscious, CACI also need to change. “This allows us to concentrate all of our talent, no matter whether they are around solutions, and not be stovepiped into different parts of the company,” he said.
Asbury said he groups the solutions and services into two areas: One is high growth areas where spending is increasing. These solutions include cyber, health care, special operations and business solutions.
The second group may not be growing robustly, but represents high volume business such as C4ISR, investigative and litigation support, and logistics and material readiness.
“We are thinking about the market differently, and now we are taking it to the next level, so I think you’ll see us win more and larger deals going forward because we’ll have bigger organizations focused on specific segments of the market,” he said.
Asbury also help CACI land the largest acquisition of the company’s 50-year history with the $820 million acquisition of Six3 Systems, which increased CACI’s work with intelligence agencies and added $470 million in annual revenue.
CACI has been cautious with the integration of Six3 since the deal closed in November. “We bought an incredible company, so we had to be careful and get to know them,” Asbury said. “The first rule of an acquisition is do no harm.”
The addition of Six3 and the more solution-focused approach to the market has paid off with CACI’s win-rates increasing in recent months, Asbury said, but CACI hasn’t seen that translate into increased organic growth.
The market has gone through three changes, all involving a slowdown in the pace of contract actions, Asbury said.
First is the delay in contract awards. January and February were off considerably from previous years, with Asbury estimating the number to be 50 percent lower. A positive note is the pace awards began to pick up in March and April, he said.
A second change is slowdown in how contracts are managed. For example, if CACI has 20 people on a contract and two left, “the government didn’t want us to replace them,” he said. “Then with sequestration, we saw mandated reductions.”
No single customer did it more than any other, but reductions came more across the board, Asbury said.
The biggest impact was the run-rates on CACI’s professional services business, he said.
The third change involves customers who maybe have been fully or partially funded, but wanted to wait until other policy decisions were made. For example, some customers have been waiting for the signing of a bilateral security agreement in Afghanistan.
The challenges of uncertainty and changes in customer buying behaviors were the biggest issues Asbury said he faced in the past year, particularly at the Defense Department.
“We focused on the business we had there and focused on business development,” he said.
The company also focused on delivering value and affordability to their customers and the role that program managers play because they touch the customer every day, Asbury said.
“I don’t know where the bottom is, but when we get there, the actions we’ve taken this year will serve us well,” he said.
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