Do you know how to navigate today's defense market?
- By Mark Hoover
- Nov 06, 2014
The good news in today's defense market is that it isn't 2013, a year marked by sequestration, a government shutdown and plenty of uncertainty around funding.
Defense spending is near the bottom of its drop due to the drawdown in Iraq and Afghanistan, and though it might take a couple more years before there is significant growth, there are still critical opportunities contractors should be tracking, said Kevin Plexico, vice president of information solutions at Deltek.
He and former QinetiQ North America CEO Duane Andrews were the featured speakers at Washington Technology's Defense Opportunities 2015 and Beyond breakfast on Thursday.
Defense contracts high on Plexico's watchlist are a pair from the Army: RS3 and ITES-3S, and DISA's Encore 3 contract. RS3 is a combination of two of the Army's bigger task order contracts, Rapid Response Third Generation, known as R2G3 and Strategic Services Sources or S3.
It's important to note that each of these three contracts is a recompete. "There isn't much new work," Plexico said, but such is the nature of today's market.
Aside from contracts, companies will want to invest in areas such as cybersecurity, C4ISR and UAV technology. Plexico said that the key here, especially with rising tensions with ISIS and other international defense issues, is to be involved in areas “where the Defense Department is able to project force without necessarily having the same level of manpower behind it.”
Ironically, another area where money exists is in cost cutting, Plexico said. Mandates are causing agencies to seek energy efficiency and other consolidation programs such as data center consolidation. In addition to consolidation is data center modernization, Plexico added, because agencies still need their remaining data centers to handle the increased workload that comes with consolidation.
Since the Overseas Contingency Operation (OCO) fund is being drawn down so heavily – the President asked for $20 billion less for the Defense Department than last year, Plexico said – areas to avoid are logistics and weapon systems, which are taking a facing the brunt of those cuts.
With budgets tight its paramount that you improve how you operate. “Even in down budgets, you can have decent growth. It just depends on where you are and where your focus is,” said Andrews said.
First on his short list of advice for contractors today is to become as lean as possible. But don’t simply go searching for low-hanging fruit, Andrews said. Rather, you must be strategic about it. “While most companies I’ve talked to have adopted this kind of approach, the most successful have removed the truly unnecessary management layers and personnel,” he said.
The contractors who do not slim down strategically often end up eliminating their growth engine, including key business development folks and essential customer contacts, he added.
Second is to organize your business for maximum agility. “It’s hard for really large companies to do this, and that’s where the midsize and small businesses have some advantage,” Andrews said. The key is to have clear and expedited reporting lines up from people in direct contact with customers to the decision makers, who need to know what customer are thinking and wanting as they make strategic decisions, Andrews said.
Third, all markets today are more competitive, so it is crucial to have good intelligence not only on your customers, but also on your competitors, Andrews said. You must figure out what is going on in each agency that you serve, but also what the competition is doing about it. “And it doesn’t come naturally,” Andrews said. “You have to force it in my experience.” That said, be ready to devote your best people, whether they are from the inside of your company or on the outside, to getting information on your competitors.
Lastly, in today's market, you must understand that your customers may not have a clue of what’s going on with their budgets. They may be telling you that everything is fine, Andrews said, when in reality, a few levels above, the program has been canceled.
You should try to learn this ahead of time, Andrews added, and in some cases, be ready to help defend your customer’s budget.
Mark Hoover is a senior staff writer with Washington Technology. You can contact him at email@example.com, or connect with him on Twitter at @mhooverWT.