LGS Spurring Government Innovation
LGS Innovations CEO Kevin Kelly recently sat down with the Washington Business Journal to talk innovations, government contracts, and what the future holds for LGS.
LGS is back in the game
10 years after being shut out of DARPA contracts, LGS is again spurring government innovation
By James Bach, Washington Business Journal
In 2007, the board at Herndon-based LGS Innovations LLC had a lot of star power. There was former Secretary of Defense William Perry from the Clinton administration, retired Lt. Gen. Kenneth Minihan, the former director of the National Security Agency, and Lee Buchanan, former assistant Navy secretary for research, development and acquisition.
And yet, despite this stunning entourage, LGS was about to lose a major source of revenue, a devastating blow for a company with a 90-year history of building advanced technology for the government. One of its biggest contract agencies, the Defense Advanced Research Projects Agency, was stubbornly refusing to award it any more research and development work. And LGS couldn’t do a thing to change its mind.
DARPA pulled the plug on LGS because of a merger between Lucent Technologies and French telecom giant Alcatel, creating Alcatel-Lucent. LGS had been operating as the government R&D arm of Lucent, but on Jan. 1, 2007, became a subsidiary of the foreign-owned company. It had its own proxy board and all of its in-house intellectual property was shielded from its new French owners in accordance with Pentagon rules governing foreign-owned U.S.-based subsidiaries performing classified work. While the move didn’t scare away all of LGS’s government customers, DARPA’s retreat shaved off about $50 million of the company’s $300 million in revenue overnight.
“It’s just like an athletic coach who says, ‘I’ve got some of my best players on the bench for no good reason, just spite.’ I was frustrated,” LGS CEO Kevin Kelly said. “Any profits we would generate would be absorbed by the mother company in Paris, and there’s a very practical reason they did what they did.”