The Gazette: VECTRUS CEO: Strategy is two innings into nine-inning game

By Wayne Heilman, The Gazette, June 3, 2017-Charles Prow always wanted to be a CEO of a publicly traded company. In December, he got that opportunity when Colorado Springs-based defense contractor Vectrus Inc. named him to replace Ken Hunzeker, the company’s first CEO who suddenly retired after Vectrus lost two of its biggest contracts.

Prow, 58, spent 30 years as an executive at IBM, PricewaterhouseCoopers and Coopers & Lybrand, working with Department of Defense and other government customers on information technology and other services.

Much of that time was spent at IBM, where he headed units from 2007-15, that provided a variety of services to U.S. and overseas government agencies.

He was selected after a “comprehensive” CEO search as part of a “succession planning process,” based on his “solid record of developing strong teams and expanding market share at various federal agencies,” according to a Vectrus news release announcing his hiring.

Vectrus Chairman Lou Giuliano said Prow’s experience and expertise “will assist Vectrus in expanding our customer base and capturing new opportunities we see in the facilities and logistics services market.”

Prow arrived about two months after Vectrus lost its largest contract, the Kuwait-Base Operations and Security Support Services contract, in a rebid to KBR-Triple Canopy. That award was set aside after a series of protests and Vectrus in March won a one-year, $521.6 million extension – with two options to extend the work another year – while the Army combines that contract with other logistics work into the $82 billion Logistics Civil Augmentation Program V contract. That award likely will be made in mid-2018 to up to six bidders who will compete for individual task orders for a wide array of support and logistics services for deployed troops in contingency operations worldwide.

After retaining two key contracts and winning the Kuwait extension, Vectrus last month raised its revenue and profit forecasts for the year after reporting better-than-expected first quarter financial results.

Based on the improved results, Vectrus boosted its revenue forecast for 2017 by $80 million to between $990 million and $1.09 billion, and increased its profit forecast by at least $1.7 million to between $18.7 million, or $1.68 a share, and $22.3 million, or $2 a share.

Prow said he doesn’t keep a home in Colorado Springs but spends about a third of his time at the company’s headquarters here, another part of his time in the Washington, D.C., area, where he lives, and the rest flying to visit clients and company personnel at various sites worldwide. He said he has no plans to move the company’s headquarters out of the Springs.

Prow was interviewed Wednesday about his first six months with Vectrus, and his plans to help it win new contracts.

You said when you took the job your top priority would be business development; what are you doing to make that happen?

Before I took the job, I spent time with some of my contacts and (business) relationships in the marketplace to see how the marketplace viewed Vectrus. They viewed us as not flashy, but a company that knows how to get things done. That is not a bad way to be viewed; it is very positive. With regard to leveraging our heritage in the federal marketplace, from a growth perspective we have a clear articulated strength in facilities, information technology and logistics management in the Department of Defense and across the federal marketplace. We are taking a strategy to do what is executable from a human capital and company capability standpoint.

Not in my wildest dreams did I expect this much progress so quickly. With any plan, the key variable is human capital and we have brought in several people to assist with that. Kevin Leonard (senior vice president of facility and logistics services) is a retired two-star general who had a role with Amazon before he joined Vectrus. He combines federal knowledge to be successful and the commercial best practices our clients have asked us for. We also hired Susan Deagle as chief growth officer to bring a fresh, relevant approach to growing our business.

You said in the last earnings release, and during the conference call, you wanted to combine the company’s expertise in logistics and information technology; what steps have been taken to implement that strategy?

As with any company developing a strategy, what needs to be the foundation of that strategy is client demand. Our clients across the federal government look for commercial best practices. The digital and physical elements of facilities management and logistics are converging with information technology as the vehicle where they are converging.

We want to be the best facilities, logistics and information technology provider we can be. We want to stay with our core competencies because we believe there are plenty of opportunities in facilities, logistics and information technology. What we have done is continue to expand our base of business by infusing technology where there are opportunities and it is approved by the client. We are beginning to harden (strengthen) our solutions that we can bring to market, expand our base of business and grow into new client areas. Our information technology solutions are not based on hard-core research and development; these are already proven in the commercial and government services marketplace. We want to leverage our knowledge and success to implement technology for our current and new clients. That could include facilities management, asset management, perimeter support and energy management. There are exciting new technologies in each of those areas, so we are creating alliances and partnerships to bring new capabilities to existing clients and move into new client areas.

What additional steps, if any, are needed to further implement that strategy, and during what timeframe?

This is a journey and that journey is not completed in a quarter or two. It will take multiple quarters or years. We need to form alliances and partnerships as we try to be a very agile and flexible information technology-enabled company. That is exactly what our clients are looking for. Any good strategy never fully plays out, but I am pleased with the receptivity to our new strategy. It won’t sit on the shelf. We will make progress every quarter and every year and our strategy will evolve. We are probably in the second inning of a nine-inning game, so we have seven innings to go. I am pleased with our progress and the receptivity of our clients and people (to the strategy).

The company’s contracts in the Middle East have been winding down for several years; where are the best opportunities for Vectrus?

Our Afghan business has declined, but our Middle East business has been very strong over the near term. Over recent months, we see that market as stable with potential for growth. With our contract win at Thule, Greenland, we have a new contract in a new geography, and having ice credibility (working in Arctic), is an important qualification to leverage in the future. We have a good base along with the work we have received in Germany with new program wins and recompetes. Then there is the eternal promise of Africa and the Pacific Rim. There is not big business value there today, but we continue to pursue opportunities there.

You said during the company’s most recent conference call that Vectrus has submitted bids on $1.5 billion in work and plans to bid on another $4 billion in contracts during the next year; when do you expect awards on these contracts and how do they fit with your new strategy?

Bids in the government marketplace depend on the pace of government acquisition, and that market has really stabilized over the last 18 months, which has stabilized our pipeline of work. I don’t see us as opportunity-constrained in the near term and I am confident in the growth team that we have put in place as well as our ability to be successful. K-BOSSS (the Kuwait contract) is a big piece of our business and we have the contract through March with two options to extend it another year. We have the ability with the Logistics Civil Augmentation Program V contract to retain that business. The Army is very valued client, and we are proud of our execution of that contract. We are excited about the process that will allow us to compete to retain that business, along with (competing for) additional work. This is a high priority for our company, and I have made several trips related to it.

What is your vision for Vectrus two or three years from now; what will the company look like and will it be smaller or larger than it is today?

We are going to be much further along in our strategy to be an information technology-enabled facility and logistics provider in the government marketplace. I see us as having brand recognition for doing the things we are talking about today. Our success doesn’t come from a strategy but a job well done. Service companies like us are all about growth. If we succeed in executing our pipeline, we will grow at or above the rest of the market.

We are going to stay focused and we will win our fair share (of work). When it comes to growth, it is not just about financial numbers but measuring the opportunities for our people. It is not just a growth strategy but developing people to make the journey with us. We have a culture I am proud of, and it all relies on people. They will enable us to get there.

What attracted you to take the CEO job at Vectrus?

Where I was in my career, the opportunity to move into a public company in the CEO role was something I always wanted to do and this was in an industry where I had spent much of my career. The physical and digital infrastructure of our client set is undergoing a generational shift and it is a fun and exciting marketplace to be in. I was honored to be selected as CEO. It was all about our position in the market, our opportunities for the future and the opportunity to work with a talented, dedicated workforce.

What challenges must Vectrus overcome to achieve your vision for the company?

The marketplace we serve is competitive with very good competitors. The onus is on us to articulate our value proposition and differentiate ourselves from the competition.

Contact Wayne Heilman: 636-0234
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