On Nov. 1, CACI International Inc. President and CEO Paul Cofoni was recognized as government contracting executive of the year in the $300 million+ revenue category at the ninth annual Greater Washington Government Contractor Awards.
The recognition added an exclamation point to a impressive period for the Arlington, Va.-based intelligence, defense, homeland security, information technology and business transformation contractor.
During the first week of November, the company announced contract wins totaling more than $1.1 billion, including $635 million in U.S. Army contracts for mobility, cyber and C4ISR solutions and $350 million in intelligence IT awards.
After releasing earnings Nov. 4, CACI’s stock price jumped more than 9 percent in after-hours trading. Company profits had shot up 47 percent, while earnings per share had grown 57 percent over the prior year period.
Executive Biz caught up with Mr. Cofoni last week, where he spoke about everything from CACI’s strategy for fiscal year 2012, how to improve the partnership between industry and government, and how we should innovate and export our way to economic growh. Here is that conversation.
Can you discuss the executive of the year award and what set CACI apart?
It is a great personal honor to receive the award, but it’s an even bigger tribute to our entire team. As you can well imagine, all the finalists were people of great achievement, and I think we were singled out as much for our results as for the depth of our team. When you’re running an operation as large as CACI, no one person can claim credit for this kind of achievement.
In fact, I think the strength of our team is reflected in the announcement we recently made about our leadership succession. President of U.S. Operations Bill Fairl is set to retire in September 2012 and we’ve named Chief Operating Officer Dan Allen as the new president, effective January 1. We have enormous confidence that Dan will lead CACI’s U.S. operations to even greater success.
At the same time, Bill is staying on to heighten our focus on mergers and acquisitions and winning recompetes. We feel that we’re industry leaders in these areas and Bill’s leadership here will drive us to the next level, just as Dan’s leadership will significantly propel our overall growth momentum.
What I’ve been communicating now is not to be complacent. Things like the Executive of the Year Award can go to your head. I’ve been reminding everyone that every day is a new day, and we have to get up, compete and fight hard to continue building the organization and our capabilities.
We can never forget what it’s about, which is our clients. They have the most important missions in the world, which range from keeping America secure to providing an environment where people know their food and water are safe.
What’s so rewarding about working for our clients is that we’re helping them solve their biggest problems. Cyber warfare, for example, is a growing threat to our nation and our way of life, so we’re expanding our cybersecurity practice. We want to help our clients defeat an adversary that’s using electronics as a weapon, whether to steal from us or to map the battlefield.
We also have to address questions like how our nation can affordably provide the best healthcare in the world going forward. Then there’s energy independence and the effect it has on the economy. Having control over the drivers of the economy, the security of the nation, and the military depends on having a rapid supply of energy sources.
Looking forward, what is going to be your approach to fiscal year 2012? How will it be different from FY 11?
Our approach won’t be dramatically different than it was in fiscal 2011. In each of our core areas, we have developed a strong organic competency, although some are a little more mature than others. If you look at our intelligence, surveillance and reconnaissance (ISR) capabilities, we’ve developed both scale and strength. We have a large number of people doing this very important work, leveraging technology to help our warfighters detect the adversary before the adversary detects them.
Healthcare is an emerging area. We’ve had a growth spurt of about 25 percent per year for the past couple of years in our healthcare practice, which, like ISR, has been primarily organic. In other words, we’ve been doing this with our own R&D and our own bid and proposal work.
In both cases, we expect more of the same, plus we’re hoping to make healthcare acquisitions that will bring us new skill sets.
Cybersecurity is an area where we’ve been growing both organically and through acquisitions. Here we acquired companies in the last six months that have real strengths, one working in classified environments and the other with some of the industry’s foremost experts in cyber forensics. Acquisitions have really complemented our organic growth, and you can expect us to continue to do more of the same in fiscal year 12.
Business transformation is another very large part of our business, where our solutions can help the government find waste and govern for less cost and with greater productivity. This is all about process reengineering, lean six sigma and systems development and implementation.
In fiscal year 12 and beyond, the whole area of business transformation – taking today’s processes and completely rethinking, restructuring, reengineering and automating them – will significantly benefit the federal government by reducing deficit spending.
As pressure increases going forward, the need for solutions that lower costs and raise productivity is really going to take off.
On a longer time scale, what role will contractors have to play in delivering efficiencies?
Over the next five years, certain things need to happen in the partnership between industry and government. Years ago we were much better at collaborating. Today, we’ve put the regulation and the rules ahead of the partnership, and at this arm’s length distance we get the solutions that just don’t work. Unfortunately, the pendulum seems to have swung way over in that direction.
I understand how that happens. You go through a period of high spending and you find a few bad apples that take advantage of the system. Then you overcorrect in changing the system and restrict the good apples in the process. For the most part, our industry has a values-based culture with high integrity and ethics.
As we reduce spending, we need to increasingly improve the partnership and leverage the knowledge of the private sector, which would save a lot of money for the government and tax payers.
If you look at the commercial space, partnership with technology suppliers is designed so those suppliers gain close insight into existing problems, and solutions become much more evident.
I spent 10 years doing commercial IT outsourcing, and we were taking as much as 20 percent out of the IT costs of the typical commercial company. We were doing that routinely. In the government space, we’ve been unable to do that for a number of reasons, including the government’s resistance to full-scope outsourcing, which is bundling everything up and focusing on results rather than inputs.
I’m hopeful the pressure on spending will be so great that it will increase partnership and collaboration. If we open up the best practices that exist in the commercial space, I’d be bold enough to say we could take 12 to 20 percent out of government IT costs.
Where else can the public sector and private sector interact in meaningful ways?
It comes back to the need to capitalize on our thinking and innovate to find better ways of doing things.
The economic debate going on in Congress is a struggle between raising taxes and slashing spending. I don’t think either one of these things will do what is necessary to improve our economy.
If you look at the history of our country, what has really catapulted us forward has almost always been innovation and export. Our strength comes from being able to innovate products and services that are in high demand around the world.
We have many examples we can point to in the computer industry, in the classic sense of IBM, Microsoft or HP, or on the more user-friendly end of Apple. With pharmaceuticals, we’re a world leader, as most of the research work is done in the U.S.
To me, that’s the way out of our economic doldrums.
While we’re arguing to cut aerospace and defense programs, those are some of the largest export products and services suites thatAmericahas. Instead of looking at these things as problems, we need to look for the opportunity. Instead of cutting, how do we tell the world we’re going to invest so much in aerospace and defense that if you ever thought about buying a weapons system you would only buy it from us?
We need to make sure there are variances two generations back that we can sell to the rest of the world so we become a leader with fighter jets, not just Boeing passenger jets.
So the real debate should be: what are the copyright protections and tax considerations that act as real inducement to do R&D here? What are the policies and procedures that would enhance innovation and export? When we answer these questions, we’ll come closer to restoring our economy.