Top 100: How Leidos' size drives its flexibility
Leidos might be the No. 1 company on the 2020 Washington Technology Top 100 but its size isn’t just about scale, it's also a key factor in their ability to adapt and be flexible in the face of customer demands.
“We have the scale to spread out our overhead and keep our rates down,” said Roy Stevens, chief of business operations. “We can invest those savings in repeatable solutions that gives us differentiation for our customers.”
The company can point to five major achievements of the past year as evidence that the scale is has been adding and the investments it has been making are paying off. The company has won three major contracts: Two recompetes in DISA’s Global Solutions Management Operations II contract, worth $6.5 billion, and the Hanford site environmental clean-up contract, worth $4 billion, and one take away, the $7.6 billion Navy NGEN contract, that is still under protest by the incumbent Perspecta.
The company also closed two major acquisitions. It acquired Dynetics, a space engineering firm, for $1.65 billion and then the transportation security business of L3 Harris for $1 billion.
Looming over all of this continues to be the 2016 acquisitions of Lockheed Martin’s Information Systems and Global Solutions business, valued at $4.6 billion.
The impact of that deal still reverberates through the company, but in a very positive way.
“It is nice to stand in front of investors that were a little skeptical (in 2016) … and say here’s what we were trying to achieve and here’s what we’ve achieved,” Stevens said.
The company hit No. 1 this year with $8.1 billion in prime contracts.
Lockheed brought discipline and experience working on complex systems and projects, while Leidos had a heritage that rooted in ability and entrepreneurship.
“We brought those two into a new culture,” Stevens said. “And this is a people business so a key attractor for is that we are empowered to make decision and we have the ability to move quickly when we need to.”
The NGEN win, while still in protest limbo, is one Leidos likely would not have pursued with IS&GS and it is one they worked for three years. Simultaneously, the must-win recompetes of GSMO II and the Hanford contract and other large competitions underway.
Over the last year, Leidos faced protests over $18.6 billion worth of contract wins. It has prevailed in all of those. The NGEN contract is now at the U.S. Court of Federal Claims.
Stevens says the wins are a validation of the IS&GS acquisition. “You have to integrate, but the last 18 months to 24 months we see the fruits of all that we laid out in 2016,” he said.
Now the company has made two more big bets, though not on the scale of IS&GS, but still deals that bring scale in important market areas.
The transportation security market is one that Leidos has worked in for years, but Stevens described their presence as “sub-scale.” The company just wasn’t big enough to make much of an impact.
The proactive in pursuing the acquisition when L3 and Harris announced their merger. “We knocked on their door and said if you are looking at your portfolio, we want to be first in line,” Stevens said. “We were really persistent with that.”
With the acquisition closed, Leidos is now No. 2 globally behind the U.K. company Smith’s Detection.
Because Leidos was already in the transportation security business, it has been able to consolidate operations and find cost synergies in areas such as research and development. The plus for the folks coming over from L3Harris is that security is a core mission for Leidos. “Security and safety is in our mission statement,” Stevens said.
“We want to double down on the business,” he said. There are opportunities to expand what Leidos is doing in the United States with FAA but also globally with air traffic control customers in the U.K. and other countries.
“You’ll see that as part of the innovation we can bring to the market,” Stevens said.
L3Harris adds more products to the portfolio, which can be enhance Leidos’ services offering. “We were wanting to get a little more into our mix,” he said.
With Dynetics, Leidos is getting into areas of the space market where they didn’t have much presence and it adds capabilities such as manufacturing and prototyping. “We also saw a culture fit in that their strength is agility and doing things in a cost-effective manner and with some rapidity,” Stevens said.
Dynetics fills a gap for Leidos between R&D efforts and production with their ability to bring prototypes on line and prove new concepts. For example, they are doing a lot of work in hypersonics, “obviously an area we want to get into,” he said.
“We think they are a really nice fit and we’ll see it prove out over time,” Stevens said.
Posted by Nick Wakeman on Sep 02, 2020 at 9:39 AM