July 5 represented day one for the newly cast V2X after the merger of Vectrus and Vertex created a larger technical services provider in the government market.
One aspect of the thesis for transactions such as V2X goes like this: growth and enhanced profitability will happen faster and at greater rates after joining forces than would have happened separately.
During V2X’s third quarter earnings call with investors, CEO Chuck Prow said the new company will not have to recompete more than 2% of its revenue over the next two years.
For context: V2X pegs its expected revenue for 2022 at $3.6 billion on a pro forma basis accounting for sales from both Vectrus and Vertex.
A mere 2% of recompeted sales means much of the team’s focus can turn to pursuing the kind of new business it feels better positioned for as a larger entity.
“There’s always recompete in a portfolio that’s as broad as V2X is, it’s pretty smooth when it comes to the size and not being our largest opportunities,” Prow told analysts. “That’s going to free up some time and attention to really focus on and make progress on these net new opportunities that are so attractive to us.”
V2X’s leadership team including Prow knows of what they speak regarding the subject of no longer having a big recompete hurdle to worry about.
What was Vectrus kept the incumbent work that was recompeted in 2019 through the Army’s $82 billion LOGCAP V logistics vehicle. That win also expanded the scope of services on the program for Vectrus and now V2X.
The now McLean, Virginia-headquartered V2X reported a total backlog of $13.6 billion as of the third quarter’s end: a number representing around 3 times this year’s pro forma sales and showing the room given for focusing on new opportunities.
Regarding those new business pursuits in the short-term, Prow cited NASA and the intelligence community as showing opportunities “that are very interesting to us” over the next six-to-18 months.
The National Science Foundation, U.S. Agency for International Development and State Department are on V2X’s list of agencies with longer-term opportunities to watch out for. Prow said those are more in the 18-to-30 month horizon.
On the integration front: V2X plans to enter 2023 with three operational business units of advanced technology, aerospace, and global mission training and support services. January 2024 is when V2X expects to be fully integrated and have realized its goal of $20 million in cost synergies from the merger.
Coronado, Calif. — Rear Adm. Brad Rosen, commander, Navy Region Southwest, toured Naval Supply Systems Command’s (NAVSUP) Fleet Logistics Center (FLC) San Diego 5G smart warehouse located on Naval Air Station North Island Sept. 8.
“The 5G smart warehouse will considerably reduce processing times and fewer errors will be made. There’s huge opportunities here to harvest,” opened Capt. Cory Schemm, commanding officer, NAVSUP FLC San Diego. “You have to elevate your gaze a little to see the full potential and value capture opportunities. This will end up decreasing the resources spent in getting parts where they need to be in a more timely and accountable manner.”
This 5G smart warehouse is the first prototype assigned to the Navy to enhance and digitalize warehouse processes by leveraging state-of-the-art 5G-enabled technology. The project kicked off in December 2020 in a three-phase (12 months per phase) approach.
The visitors were shown demonstrations of each section of the warehouse starting with receiving naval aviation customer requests and ending with parts leaving the warehouse. The demonstrations showcased how the 5G network and technology will streamline parts coming and leaving the warehouse. An RFID tag will be attributed to each package in the warehouse, tracking its movements whether it be on the shelves or moving to where it needs to be via autonomous mobile robots.
With 5G, the smart warehouse has access to the latest wireless technology, offering multi-gigabit speeds with ultra-low latency. This secure wireless transport will help provide faster processing times for tagging packages, as well as being able to find them on the shelves.
“Smart storage aids, like the newly installed vertical lift modules, will decrease pick/stow inaccuracies while allowing NAVSUP FLC San Diego to decrease storage footprints by almost 90% and increasing storage capabilities by 77%” explained Steven Burrill, Naval Base Coronado 5G smart warehouse logistics program lead, NAVSUP FLC San Diego.
The working integrated product team is comprised of engineers and scientists from Naval Information Warfare Center Pacific and a program manager and supply systems analyst from NAVUSP FLC San Diego. Together, they are collaborating with Vectrus to integrate 5G enabled technologies and software application into the warehouse. In addition, the WIPT have been in discussions with Defense Logistics Agency and industry partners to apply automation lessons learned in Navy warehouses.
“Many of those warehouses are just now exploring 5G enabled automation, meaning the Navy is actually at the forefront of automation via 5G. Implementing 5G technology offers improved performance and security that existing warehouses cannot leverage with existing technology, like Wi-Fi” continued Burrill. “Preliminary performance testing of the 5G network recorded throughput values exceeding four GB per second, four times the capability of most commercial Wi-Fi networks.”
“Our project will essentially digitalize a piece of the end-to-end supply chain’’ said Burrill “effectively enhancing Naval Sustainment System-Supply efforts while improving audit compliance across the board.”
NAVSUP FLC San Diego is one of eight FLCs under Commander, NAVSUP. Headquartered in Mechanicsburg, Pennsylvania, NAVSUP employs a diverse, worldwide workforce of more than 25,000 military and civilian personnel. NAVSUP and the Navy Supply Corps conduct and enable supply chain, acquisition, operational logistics and Sailor & family care activities with our mission partners to generate readiness and sustain naval forces worldwide to prevent and decisively win wars. Learn more at www.navsup.navy.mil, www.facebook.com/navsup and https://twitter.com/navsupsyscom.
American Vectrus which currently has the base maintenance contract at Pituffik has continued the apprenticeship program. Currently, there are 12 apprentices from Greenland on base. Two of them are Aima Qvist and Aqqaluk Fleischer, who both want to work at the base when they conclude their education.
Since 2017 the American company Vectrus’ flag has been flown over Pituffik. The company took over the Base Maintenance Contract after Greenland Contractors and chose to continue the apprentice program on base.
At the moment there are 12 apprentices on base that have very different educational backgrounds. In addition, there is one apprentice from the service economics education. The young apprentices come from all over Greenland and after an apprenticeship at Pituffik, they have good chance to land a job at Pituffik or other places in Greenland. This is stated by Margrethe Poulsen, the Apprentice Supervisor at Pituffik.
A busy workday
One of the apprentices that are at base is Aima Qvist, who was born in Uummannaq, but attends school in Nuuk. “It is wonderful to be at Pituffik as there is much to do here, and we are never bored. We work a lot and generally keep busy. The best part is to have fun colleagues and that means you feel very comfortable at your job. I learn a lot, and everybody helps each other.”
Aima Qvist will graduate as an auto mechanic in 2024, and afterward, she would like to stay at Pituffik:
“People at Pituffik is very friendly, smile a lot, and remember to greet each other when they meet. No matter where you are if there are people there, they will greet you. On weekends it is great fun to hang out with your friends. We rent cars and drive around the base and surrounding area. We can feel that the dark time with very little sun is drawing near. Even though we have the same in Uummannaq, I could feel it here too. You can get tired, but because the workplace is great, it is still a good place to be.”
Aqqaluk Fleischer is also from Uummannaq. He studies Service Economics at Campus Kujalleq but is at Pituffik for a 12-week apprenticeship.
“I think the apprenticeship has been very successful, in which I have taken part in many different tasks and made a difference. Another thing is the fact that it is peaceful here, and as a Greenlandic speaker, you get to use both Danish and English in your daily work. I really want to come back and work at the base at a point in the future.”
“The best thing is that I have had the chance of communicating with both civil and military personnel. That way, I have now had multiple experiences with cultural differences, because that was challenging in the beginning. It was also challenging to work 10.5 hours a day on average. But you get used to it, and you have to have the ability to adapt to new surroundings says Aqqaluk Fleischer.
Right now, the Base Maintenance Contract is in solicitation, and the next contract will likely run for a longer period from 2022 and all the way to 2027 with the possibility for a 5-year and subsequently a 2-year option period.
Vectrus has not been eligible to make its bid for the base Maintenance Contract as the rules have been changed in the meantime so that companies that place a bid have to be anchored in Greenland. For that same reason, Vectrus has teamed up with the Greenlandic contracting company Permagreen and formed the company Inuksuk A/S which is among the companies that have placed a bid on the new contract. Another one of those companies is Greenland Contractors and Greenland Holding.
A decision regarding the Base Maintenance Contract is expected very soon.
The rise of electronic warfare, or EW, has fueled an increase in demand for electromagnetic spectrum operations and capabilities across the GovCon landscape. This heightened demand is manifesting in increased interest and investments in 5G-enabled technologies, smart facilities, Internet of Things and more as spectrum sharing becomes more prevalent in defense and civilian applications.
To learn more about the future of 5G, the rise of spectrum sharing and the promise of emerging technologies, we spoke with Michael J. Smith, vice president of engineering and digital integration programs and chief engineer at Vectrus. Read Michael’s full interview below.
GovCon Wire: Michael, what significant changes or trends are you seeing in your industry as the demand for spectrum sharing becomes more prevalent, and how is that impacting your work at Vectrus?
Michael J. Smith: “With a growing demand for spectrum, it becomes more important to ensure reliable communications across all spectrum dependent systems. The proliferation of spectrum dependent systems amplifies the need for real-time awareness. This requires intelligent approaches to designating spectrum assignments and usage. Vectrus is engaged in helping our clients better understand and maneuver in the highly congested and often contested electromagnetic environment.
As we all know, spectrum is a finite resource, so there have been several initiatives to make additional portions of the spectrum available to meet the growing commercial needs. Through spectrum auctions, like the AWS-3 and America’s Mid-Band Initiative Team (AMBIT), the government is providing opportunities for commercial carriers to occupy certain subsets of spectral bands that were previously held in reserve. With AMBIT, the government made available 100 MHz of mid-band spectrum to be used for 5G development. So, in addition to our spectrum engineering and analytical support, Vectrus intends to leverage its experience in digital transformation, logistics and base operations to provide 5G-enabled applications to automate and integrate smart warehouses, smart installations and smart flight lines of the future.”
GCW: Can you expand on 5G? How is the federal government harnessing 5G today, and how is Vectrus supporting government adoption of 5G?
MS: “5G opens the door to the deployment of high bandwidth, low latency data transmission applications. The government is sponsoring several 5G testbed initiatives, creating spaces for prototyping new approaches to solve data intensive problems and to explore the advantages and efficacy of using private versus federal versus commercial-based networks. The Department of Defense is investing in and exploiting the benefits of 5G to enhance its technology and information dominance.
Vectrus has invested in its own convergence space in its Network for Integration, Connectivity, and Experimentation lab — we call it our NICE lab — to create new applications and solutions that improve operational efficiencies for our clients, as a leader in the logistics modernization and Internet of Military Things arenas. 5G is a key enabler in our integration of smart technologies. At NICE lab, our engineers are developing a prototype for smart warehousing. We are employing robotics, augmented reality and RFID, and we’re integrating automated storage, environmental sensing and video surveillance over 5G. Our work at NICE demonstrates Vectrus’ strength in providing converged solutions by implementing emerging technology to overcome limitations of traditionally manual systems and processes.
And of course we’re looking at other 5G-enabled applications such as flight line asset tracking and other mobile and expeditionary capabilities as they relate to base operations around the world. Vectrus was also selected to develop a 5G-enabled smart warehouse for the Naval Base Coronado in San Diego. So we’re working with our commercial 5G partners to transform a legacy warehouse into a fully tech-enabled operation that integrates engineering solutions, people and processes to improve operational readiness and to support the Navy mission.”
GCW: So Michael, I’m curious to get your opinion on what’s on the horizon for 5G. As technology advances, we’re already hearing about 6G and NextG. From your perspective, where do you think 5G is going next?
MS: “Technology is advancing at an unbelievable pace, and with this advancement, we see exponential growth in the amount of data produced and consumed within our client’s ecosystems. This demands greater capacity to transmit, manage, secure and protect that data as it’s transformed. The need for higher throughput, faster uploads and downloads, cybersecurity and data segregation is enormous. So it’s imperative that investment continues to support the development of devices that can operate in these spectral bands as well as the ability to take advantage of some of the unique techniques that are afforded us as a result of the 5G, 6G, NextG initiative — things like network slicing — that will benefit the secure co-use of networks by various users. Whether it’s 5G, 6G or NextG, a robust R&D investment is still needed to ensure that the systems we envision and build today are able to meet the evolving world changes. And the level of interconnectivity and the ubiquity of wireless devices demands that we have a communications backbone that’s flexible, scalable, resilient and secure.”
GCW: Speaking of technology, what emerging technologies do you think will have the greatest impact on the public sector in the next few years?
MS: “AI/ML is where I think we’ll continue to see development, with high demand for data in real time and greater reliance on 5G. The use of AI/ML and things like mixed reality — combinations of augmented reality (AR) and virtual reality (VR) — hold a lot of potential for smart implementations in the public sector. Smart cities, autonomous vehicles, autonomous navigation and vehicle-to-vehicle communications seem just a few steps from ubiquity. These technologies are the realization of the capabilities 5G to NextG portends to deliver. When you look at the public sector, there are an increasing number of applications that rely on enhanced data storage, secure data management and high volume data throughput. Having access to shared spectral bands to provide reliable 5G to NextG networks ensures these requirements can be met and provides greater data sharing and delivers timely information for decision making and improved situational awareness for end users.”
GCW: I want to hear more about your role at Vectrus. Can you talk about your work leading Vectrus’ Electromagnetic Spectrum Engineering program?
MS: “Vectrus is a leader in providing next-generation electromagnetic spectrum operations capabilities for our Navy clients. Our engineers deliver solutions and services that promote electromagnetic compatibility of shipboard systems and help to mitigate ship-to-ship, ship-to-shore interference. We employ agile DevSecOps techniques to deliver spectrum management applications that support our client’s mission execution.
Vectrus also provides analysis and support to help our clients better understand the impact of either vacating or sharing specific spectral bands. This is all part of the spectrum sharing, spectrum relocation and spectrum reallocation considerations, and it entails understanding everything from physics to policy in order to navigate the trade space through a thorough analysis of alternatives. To accomplish this, Vectrus is engaged in the development of state-of-the-art analytic tools and optimization algorithms. Vectrus also intends to remain at the forefront of employing artificial intelligence and machine learning to help clients optimize their spectrum operations.”
GCW: As Vice President of Engineering and Digital Integration, can you tell me about your growth strategy for the EDI line of business?
MS: “Engineering and Digital Integration (EDI) will continue to provide services and solutions that focus on delivering next-generation spectrum engineering and digital transformation capabilities. I’ve talked about our spectrum engineering work, but the potential in our digital transformation portfolio is an equal part of our growth campaign. Vectrus’ system-of-systems engineering and employing zero trust architectures, complemented by advanced data analytics and adaptive visualization tools, allow us to achieve enhanced situational awareness and informed decision support for our clients. This capability underpins Vectrus’ convergence environment approach which finds intelligent solutions to traditional manual labor challenges. The ecosystem in which our clients operate is fueled by data, so Vectrus focuses on harnessing that data and synthesizing it to arrive at actionable information that leads to smart decisions and more efficient processes that meet our clients’ mission challenges well into the future. So the continued effort to explore and exploit the spectrum engineering space, as well as our focus on digital transformation across our various client portfolios providing IoT-like solutions, I think is our primary focus for growth.”
GCW: What’s one piece of advice you would give to someone pursuing an executive-level position in today’s competitive market?
MS: “I will answer that question from a techie perspective because that’s where I live. Trying to make the transition from being a techie to an executive is sometimes challenging because your tendency is to delve deep into the weeds, to appreciate the underlying physics. I think to be successful as a tech executive, you’ve got to get to the point where you not only understand the tech, but also understand the big picture. It is getting to that point where you can see the OV-1, the Overview One graphic of the problem-space with all the various components and how to deliver a solution to a specific client problem in the most efficient cost effective way, while at the same time, maintaining focus on meeting corporate objectives for growth and revenue. And so from a techie executive perspective, learn to trust the other smart talent around you, as you provide leadership and a roadmap that addresses the broader client base and business needs.”
Executives believe bringing in the colorful brick toys helps with creativity, anxiety and communication
The engineers at German company Metafinanz snickered when they saw small piles of Lego bricks awaiting them in the conference room. The compliance team was skeptical, the risk management team was openly critical.
“But by the time we were done, the biggest critics had become the system’s loudest champions,” said Matthias Gotz, a strategist at the business and information consulting firm in Munich.
Lego A/S, the Danish maker of colorful building-block toys, was on the brink of bankruptcy in the early 2000s. But the company turned things around by making several changes, according to analysts and a spokeswoman for the firm. Gone were products that weren’t construction bricks. Instead, the company expanded its range of traditional Lego sets to also include popular licenses, like “Star Wars,” “Seinfeld” and “Harry Potter,” along with famous landmarks and other products meant to entice both children and adults.
Last year, Lego posted more than €7 billion in sales, up from about €2.2 billion in 2010. It is once again the top toy maker in the world.
The latest driver of growth for Lego is those adults who were using the product at home are also bringing it into their workplace. Those companies and individuals bringing Lego products into the office say it helps with creativity, anxiety and communication.
One driver of such growth is a program called Lego Serious Play. LSP is a training tool where employees are asked to address company concerns or aspirations by first building a small Lego model from a handful of bricks, then describing what they constructed and why.
The system is designed to improve communication and enhance a company’s performance, according to Robert Rasmussen, a business consultant in Denmark who helped develop the program more than two decades ago. LSP has been used by the U.S. Naval Warfare Division, Harvard Business School and spread across energy, transport, and finance industries. Companies including Google, Ernst & Young, Microsoft, Visa, Lexus, and Procter & Gamble have used it.
LSP training workshops cost $500 to $5,000, range from two hours to two days, and might include a handful of employees or many dozen. There are about 13,000 certified LSP facilitators worldwide today, up from about 2,500 in 2015.
“Two years ago, there weren’t many U.S.-based facilitators like myself, but it’s exploding here now,” said Wendi McGehee, a professor of organizational psychology at Azusa Pacific University in Southern California who teaches the program to her students and when consulting local companies.
Other companies are using Lego products in different ways.
Communications technology giant Ericsson uses the product to teach programming concepts to schoolchildren and has used Lego robots to demonstrate how machines change the way we live.
Google’s New York campus has a Lego room where employees can get out of creative ruts and stimulate new ideas through building Lego models, according to former employee Adam Singer and a representative from the company. Engineers at NASA’s Jet Propulsion Laboratory in Pasadena, Calif., use plastic bricks to plan and show concepts through construction design.
“South Park” co-creator Trey Parker surrounds himself with Lego sets at his company’s production studio, as detailed in the 2014 documentary film “A Lego Brickumentary.” Mr. Parker and others in the film said the prescribed instruction of building specific Lego sets is creatively liberating and therapeutic, according to film co-director, Daniel Junge.
A representative for Mr. Parker declined to comment further beyond the benefits he spoke to in the documentary.
Jessica Milmeister, director of enterprise quality at McLean, Va.-based government services company V2X Inc., began using Lego elements following an LSP demonstration. Ms. Milmeister said individuals typically come to her office in Colorado Springs, Colo., to discuss a problem by explaining it verbally before. She then asks them to build a Lego model showing the same problem while explaining what each brick represents or means.
“I often find that they build the model with assumptions that were not already explained, allowing us to dig in to find the true root cause of the problem,” she said.
The use of Lego in the workplace has been the subject of multiple studies that show how communicating through the bricks can help companies develop problem-solving skills, improve communication, and overcome creativity challenges. There is further research on how it helps work-related stress and anxiety.
Of course, bringing piles of Lego bricks into the workplace isn’t going to fix everything. The system and product isn’t a panacea against issues that run deeper than communication breakdowns or the ruts some individuals and companies experience.
“Understanding what Lego Serious Play is not is just as important as recognizing all it can be,” Mr. Rasmussen said.
Lucas O’Ceallacháin, a coach development lead at the Australian Institute of Sport, uses LSP to train future coaches and Olympic athletes.
Mr. O’Ceallacháin uses the product by giving his trainees a handful of bricks, asking each person to build a model that demonstrates how they see themselves as a coach. He also likes using Lego elements to encourage participation from those prone to introversion.
“Everyone contributes equally when they have the same pile of bricks in front of them,” he said.
V2X (NYSE: VVX) reported $498 million in sales for the second quarter of 2022, up 6 percent from the prior-year period, and said the quarterly results for the period ended July 1 reflect contributions of Vectrus prior to the completion of its merger with The Vertex Company.
In early July, Vectrus closed its all-stock merger with The Vertex Company, forming V2X as a new critical-mission platforms and services provider to defense customers worldwide.
“Revenue growth was driven by building on the momentum of programs in INDOPACOM and Europe, along with successful phase-in of new contracts, including the Logistics Readiness Center at Fort Benning,” V2X CEO Chuck Prow said
Vectrus ended the quarter with a total backlog of $4.6 billion, of which $1.3 billion was funded.
The company recorded an operating cash flow of $46 million for the second quarter, a fully diluted earnings per share of $0.88 and an adjusted earnings before interest, taxes, depreciation and amortization of $24.7 million with a margin of 5 percent.
Prow, an eight-time Wash100 Award winner, noted that V2X reached full operational capability status on Logistics Civil Augmentation Program V Kwajalein ahead of schedule, enabling the company to broaden its presence in the Indo-Pacific region.
“This program is expected to run over the next eight years and provides strategic logistics services to the DoD. Work content in the INDOPACOM region now represents 9% of total revenue, up 3% from last year, and positions us well to support the DoD in a full range of operations over the next ten years,” he added.