Why the contractor-owned, contractor-operated IT model is different this time

Views from the Corner Office is a new show designed to talk to the private sector leaders that influence and impact the federal market. The goal of this monthly discussion is for federal executives, lawmakers and other industry experts to gain insights and a better understanding into the trends, the challenges and the evaluation of the technology, acquisition and leadership in the federal market by the executives who lead the federal practices of government contractors.

Dan Keefe, the president and COO of ManTech’s Mission Solutions and Services Group, sat down with Federal News Radio’s executive editor Jason Miller at his office in Herndon, Virginia. Keefe announced March 13 that he will retire on June 30.

Best listening experience is on Chrome, Firefox or Safari. Subscribe to Views from the Corner Office’s audio interviews on Apple Podcasts or PodcastOne.

Here are some excerpts from that discussion.

State of the Federal Market

JM: Is it a good time to be a federal contractor?

DK: I think it certainly is. You know there have been ups and downs in this industry as the budget contracts and expands for the government. You recall a number of years ago sequestration, the Budget Control Act, the low price contracts, the drawdown overseas, which is a good thing, that occurred. What you see right now in the market is certainly increased budgets. Of course, we just went through the final Congressional review for 2018 and 2019. It held off the Budget Control Act until 2020. And so financially our customers certainly have dollars to spend. I think you add to that a real recognition in the marketplace that especially in our IT systems across a number of agencies there are requirements to upgrade and modernize them, and then a lot of our customers looking at managed services for IT, certainly cloud migration and really looking to save dollars and be more efficient.

JM: What are some of the biggest changes you have seen over the last few years from how the government talks about its goals?

DK:  Mission always has been important I think, I would say that for our agencies and services. That said, when you talk about IT modernization there’s certainly cost savings within the IT network, you save on cloud migration. But also with the systems that are out there now, you really improve efficiency horizontally across an organization. Just think of workflows instead of doing everything by e-mail, your efficient shared services and workflows that make the entire organization more efficient. And that’s what I talk to my customers about. I think when you think in those terms, CIOs look at a mission not only how do I improve my IT systems, but how to improve my agency overall from an efficiency standpoint.

Top Trends in the federal market

JM: What are some trends that you are seeing over the last couple years?

DK: If you look at ManTech, say 10 years ago, we were very much of a service provider. In other words, we were providing people. We might be doing maintenance on vehicles. We might be taking care of security towers in the combat zones. But we have really changed the company to a solutions-based company. And when you look at some of the contracts that we’ve won recently, what comes to mind is the Jet Propulsion Lab contract, which is a managed service. We’re taking all the IT services over for the Jet Propulsion Lab. You had to lay out a solution, and you have to lay out how you’re going to achieve that. We’ve put a lot of investment into solution architecture, folks that weren’t even here in this company five or 10 years ago.

JM: I’m going to pick on you for a second. We’ve heard the term managed services before. It was SEAT management. It was cloud computing and it was ASP, alternative service provider. So tell me what’s different between managed services today and what has gone on over the last 20, 25, 30 years.

DK: Well I think there’s somewhat of a recognition on the customer side, at least within the government, that this is an effective way to be more efficient across their enterprise. I will tell you that a lot of the managed services that you talked about, the old EDS model with Navy-and-Marine Corps, I mean that was years ago, and that was one of the exceptions to the rule. So I think it’s becoming more accepted now. We’ll see as an agency goes in that direction, but we’re certain to see opportunity there and we’re focused on that as a growth platform going forward.

JM: Are there new technologies or even new laws and regulations that’s affecting how you deliver services or how you are providing the solutions?

DK: You know where we are seeing a consolidation of contracts and we’re also seeing extended times. If you remember [Defense Department’s] Better Buying Power, one of the things the government was trying to do was reduce the length of contracts, and so we are seeing two-year contracts, which may have brought more competition but it certainly doubled the workload on the contracting community, both industry and government. So now what you’re seeing is larger dollar contracts because they’re being combined over a longer period of time, and because they’re being combined, you’ve got that added complexity. And then if it’s a solution-type contract, you’re talking about not a simple task to tell the government what your solution might be.

JM: Why the change from shorter to longer contracts?

DK: Certainly, you can write a strong contract over a five-year period and determine who your best competitor is. But I think although it certainly took us more time, the real challenge I saw was in the government shops getting these contracts in every two years and having to redo it. I mean, you’ve — literally in some cases — doubled the workload.

It didn’t happen as much in the civilian agencies. I’m not sure they went as far with the shorter contracts. In fact, in most places they didn’t. It was primarily in the DoD, but that was, at least in my business, 70 percent of my business.

Mergers and Acquisitions

JM: One of the reasons why I wanted to have ManTech on the show is because of how active you have been around mergers and acquisitions. I think this is one of those topics that doesn’t probably get enough notice or attention in the federal market because it’s so active and it changes what’s happening within the federal market so quickly. Let’s start with the basics. ManTech has been very active so talk a bit about your strategy.

DK: ManTech went public in 2002. Since then [Executive Chairman] Mr. [George] Pedersen’s view has always been to invest back into the business. You don’t see ManTech buying back stock like some companies. He also always has kept a very strong balance sheet which tells you that you’re not going to leverage yourself deeply in debt. But that said, that combination investing back into the business has also led us with a view that you don’t just buy a company to increase your sales. What you need to do when you acquire a company, does it give you an added capability, potentially an added customer, potentially added contract vehicles that you don’t have? But he always focuses back on, you know, if it’s 1+1=2 then it’s not a good acquisition.

You know you’ve got to find the right acquisition. If you look at the history of ManTech, you see a company—and I credit all this to Mr. Pedersen—that looked forward. He took the IPO dollars from going public and acquired into the intelligence space. But pretty good foresight as that marketplace grew. We acquired into cyberspace. You know in the old country song ‘We were cyber before cyber was cool,’ is really kind of true with ManTech, which has given us now a very strong capability in cyber. We started acquiring into the health IT market even before the Affordable Care Act and all the things that were going on in healthcare. We knew that with the electronic records. We first saw this while supporting in theater. It was hard to get records in and out of theater because of bandwidth. So we acquired and the way we acquired into the Veterans Affairs Department, the Defense Health Agency and into the Department of Health and Human Services to get us a foothold in a market which now is probably about a $200-to-$300 million dollar part of our market.

We acquired into the Department of Homeland Security. We acquired a company that gave us a foothold in their contracts. Our most recent acquisition, InfoZen, which we acquired here in October, gave us not only a road into some of the agencies within DHS, but also a very strong company in cloud migration and agile development, which was really a twofer because it got us into a new customer set, and added to a capability and gave us depth and that capability.

Big Basketball Fan

JM: Tell me about yourself a little bit.

DK: I spent 31 years in the Army, finished up as a general officer and not many claims to fame. I did play basketball at West Point. I was on Mike Krzyzewski’s first team. So that’s at least one claim to fame there with Coach K. I’ve been very fortunate to have a great career, a great family. I have two sons that are all grown up and gone away now, but still enjoy outdoor activities skiing, golfing, but no more basketball.