TOP 100: How Engility turned its back on LPTA
The market was a different place when Engility Corp. was spun out of L-3 Communications in 2012. Lowest price, technically acceptable contracting dominated the market and Engility was formed to be a player in that world.
Engility’s charter was to be the low-cost provider of systems engineering and technical services to the government. In 2014, the market was shifting again but Engility wasn’t shifting fast enough.
Yes, it acquired TASC in early 2015 for even deeper systems engineering skills as well as high-end space and intelligence customers.
By 2016, the company saw a need for more drastic change and Lynn Dugle, a former Raytheon executive and Engility board member, made the switch from the board room to the executive suite and became the company’s CEO.
Dugle counts herself lucky. “The year prior (2015) the messy work of integration had been done,” she told me. “I had the luxury of looking at all the things we did well and then taking us in new directions.”
The company reported $2.1 billion in revenue for 206. Intelligence work represents about 33 percent of Engility’s annual revenue. Civilian work accounts for 26 percent and defense is about 41 percent.
Engility ranks at No. 22 on Washington Technology’s 2017 Top 100 list of the largest government contractors, down three spots from last year’s ranking.
Dugle started out by asking the strategic questions: Who are we? Where are we going to play? How do we best serve our customer mission?
“We had to make some pretty big changes and I was convinced from my background in development that we had to be a value-based organization,” she said.
And that meant making a hard break from the world of LPTA.
“I’m not criticizing the decision (for Engility to be an LPTA player) because when you look at the market back then, it was shrinking,” Dugle told me. “There were more people in the market than were needed. It was the dark days of the downturn.”
Shifting away from LPTA has had an impact on nearly all aspects of the business. “It really touches your DNA when your basis of competition is the price tag instead of looking at your mission experience and the outcome you’ve delivered.”
Today, Dugle says 99 percent of its work is non-LPTA. That has meant screening opportunities and sometimes walking away, she said.
That change has meant new ways of conducting business development and capture, new ways of incentivizing employees, and taking a deep look at what the company is really good at and what it delivers to customers, she said.
Even though she was a board member for several years, she discovered things she didn’t know as she looked deeper into the company.
“Much to my surprise we have deep credentials in high-performance computing,” she said. The company is applying capabilities in designing algorithms and managing the processing of huge amounts of data to big data analytics.
Engility has systems engineering and verification capabilities honed from years of working on large satellite programs and they are taking those skills to new areas such as the Internet of Things and enterprise modernization and cloud migration.
“We started shifting to the cloud 10 years ago and that movement was predicated on cost savings and virtualizing hardware and software. It was about taking cost out of the system,” she said.
But what wasn’t being done was redesigning workflows and figuring out how to work more efficiently. “We’ve done a lot of that kind of work for our intelligence customers,” she said. Now they are taking those skills to new customers.
Engility focuses on capability areas such as high-performance computing, big data analytics, systems engineering, validation and verification, enterprise modernization and cybersecurity.
Returning Engility to organic growth is Dugle’s primary objective. The company is pursuing large opportunities, often over $100 million in value. It has had some success such as a $170 million NASA win for engineering services and a $119 million Army contract to support logistics modernization.
To chase this kind of work, Dugle said she brought in a new BD team because the skills needed to pursuing larger and longer-term projects is very different from LPTA.
“When you are LPTA, you generally wait for the RFP and analyze it and determine can I get there in a low cost manner?” she said.
But to go after larger more complex projects, the BD effort takes months of work even before the solicitation is released. “That process was an area we didn’t have enough experience with,” she said.
Another area where Engility is trying to step up its game is in the pursuit of task orders under large IDIQ contracts it has won. It holds spots on contracts such as Alliant, CIO-SP3, OASIS, HCaTs and others.
“The company spent a lot of money winning those IDIQs but because of our low cost structure, we didn’t invest the resources to work the IDIQs after we won them,” she said. “We’ve had to beef that up.”
Another important area that had to change as Engility moved away from LPTA was how it took care of its people.
“As an LPTA company we had driven our benefit structure down,” Dugle said. “So I hired a senior vice president of human resources and we did a complete review of the work environment.”
Out of that came changes to Engility’s base benefits, its 401(k) plan, rewards and bonus programs. “What did we give bonuses for? We had to rewire all of that,” she said.
One area that Dugle said shows that the benefits changes are paying off is employee referrals of new hires. When she became CEO, only 11 percent of new hires were referred by current employees.
Earlier in 2017, the number was 30 percent. “That gives me a metric that we are making some progress toward a more vibrant workplace,” she said.
A big change on the horizon for Engility is the phasing out of the TASC brand. TASC is a company that has been independent then acquired and then acquired again. It was spun off and was independent again until it was acquired by Engility.
Through it all, the TASC name has survived and it has maintained its reputation as a provider of high-end systems engineering services to intelligence agencies.
“Next year, the TASC name will be gone,” Dugle said. “For me to have half the company known as TASC, an Engility company, and half as Engility is counter to everything I talk about. How do you drive synergies? How do you get help across the company? How do you share best practices?”
There also is the challenge of maintaining two brands and explaining that to new hires. “We’ll always have that heritage and nothing about the team is changing,” she said. “Our customer gets it.”
But she is quick to admit, “There is a lot of emotion around it.”
Moving forward, Dugle said she’ll remain focused on organic growth, creating a vibrant workforce and improving the balance sheet by paying down the company’s nearly $1 billion in debt.
“2015 was about integration. 2016 was about transformation. 2017 and '18 is about optimization,” she said. “We know the right things to do and how to do them. Now we have to make sure we do the right things at the right time.”
Posted by Nick Wakeman on Aug 23, 2017 at 12:21 PM