DynCorp fights for spot on $82B LOGCAP V
By
Ross Wilkers
DynCorp International is fighting for a second shot at the Army's $82 billion 'LOGCAP V' logistics contract. The company's next steps will be determined by how that shakes out.
DynCorp International wants a second shot at keeping its role on the Army’s largest contract for global logistics and professional services.
The McLean, Virginia-based contractor has filed a protest against awards for the fifth iteration of the Logistics Civil Augmentation Program, which earlier this month went to four other bidders out of six and completely shut out DynCorp.
DynCorp filed its protest April 22 and a Government Accountability Office ruling is anticipated by July 31.
Company officials have not yet responded to a request for comment, but analysts already noted what they stand to lose in not being a part of the LOGCAP program.
Work on the current LOGCAP IV contract represents nearly 20 percent of DynCorp’s annual revenue, credit ratings agency Moody’s Investors Service wrote in a report issued Monday. That comes out to between $450 million and $500 million within the context of a company that posted $2.1 billion in revenue last year.
DynCorp’s “complete shut out was the worst possible outcome for the company and was also unexpected based on the level of mission support tasks the Army had been steering toward DI’s areas of responsibility under LOGCAP IV,” Moody’s analysts wrote.
Missing out on the new awards comes at an awkward time for DynCorp, which has seen fruit in their turnaround effort in the past two years with improving sales and profit figures after four years of declines on both fronts. Revenue last year climbed 7.2 percent to $2.1 billion and profit climbed 24 percent to $190.1 million.
DynCorp has also made headway on paying down debt to create more room for acquiring other companies, which CEO George Krivo told me last year they had a short list of possibilities.
A “concentration” deal was the more likely scenario at the time, Krivo said then. That would see DynCorp buy businesses like themselves to further shore up and create more scale in core markets they view as waiting to be consolidated.
DynCorp does have some options though with not having LOGCAP as a base of business, according to Moody’s.
“The LOGCAP V loss will hurt DI but not heavily erode the company’s mission support capabilities; it could actually spur DI’s effort to expand its service offerings through M&A,” the analysts wrote. “While DI’s financial performance improved over the past three years, consolidation of defense service contractors across the past decade has produced a more broadly skilled set of competitors.”
Indeed, many winners on LOGCAP V have been major dealmakers amid that consolidation thrust. While in different work areas, KBR has built a new government business from the ground up through a trio of acquisitions in three years.
Vectrus made its first acquisition last year in Sentel Corp., while PAE has bought FCi Federal and McFadden & Associates within the past two years. Parsons made a pair of big-ticket deals for Polaris Alpha and OGSystems in the buildup to the ongoing process for an initial public offering.
Those are all examples that DynCorp could follow.