Competitive Pressures Loom for Defense Tech Firms
Posted on: August 5, 2015

…But most defense contractors do not yet see existential threats on the horizon even though several large firms have moved to spin off or divest their IT businesses. The idea that traditional vendors are in danger of being overrun by newcomers has created a media feeding frenzy, but some executives do not believe the hype.

“LPTA and advanced technologies and science don’t mix,” said Kevin L. Kelly, CEO of LGS Innovations.

Low bid contracting works for commodity services but not for projects that demand cutting-edge innovation or deal with sensitive technology, he said. The growing use of LPTA has “driven companies like us to inform our customers that we won’t bid on any LPTA work going forward. It has proven internally to be an absolute money loser.”

At some point, the government has to recognize that high-end technology does not come cheap, said Kelly. It brings to mind the “no bucks, no Buck Rogers” line from the space classic The Right Stuff, he added. “That’s not to say that companies should overcharge the government. It means technology costs money. Talent, testing, security clearances are not cheap.”

To be a successful government contractor “you have to focus on efficiency,” Kelly said. “But to deliver solutions you have to focus on value.” Allegations that contractors make exorbitant fees may be true from time to time but that is not the norm, he said. “There’s a tremendous amount of oversight and scrutiny throughout the process.”

The influx of nontraditional players is welcome, Kelly said. His company has teamed with commercial firms that inject innovation into projects. “It benefits us,” he said. “It doesn’t sound like it’s that threatening.”

 

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