2018 Market Outlook: Kevin Kelly of LGS Innovations

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Kevin Kelly, CEO of LGS Innovations

Kevin Kelly, CEO of LGS Innovations

We look forward to a new year and new opportunities for innovation and growth in the government contracting community. This past year, we experienced an increased emphasis on big data, insider threat, merging technology with health care, and the internet of things, among others.

WashingtonExec reached out to those most knowledgeable and experienced in the federal contracting space. We asked executives in and around the Beltway for insight on the direction they see the government contracting community heading in 2018. Topics discussed include M&A activity, public/private sector collaboration, cloud computing, the incoming millennial workforce in defense/IT/health care, talent retention and more.​

Next in the series is Kevin Kelly, CEO of LGS Innovations. Here are his insights:

We think spectrum management and spectrum sharing will become increasingly important market drivers among our defense and intelligence customers, especially considering the growing prevalence of sensor-driven internet of things technologies and applications. Likewise, as more internet-connected devices are integrated into the daily routines of commercial and private operations, the demand for a better connected civilian government will also increase.

Our next generation of warfighters will also require secure, on-demand network-enabled services to execute their missions. As demand for continuous rich broadband connectivity increases, however, so will consumption of available wireless spectrum, creating a growing need for dynamic spectrum sharing between government agencies and commercial entities.

Gone are the days of long-term static radio frequency provisioning, which is rapidly being replaced by a far more sophisticated architecture capable of monitoring all spectrum usage and making real-time allocations of increasingly rare RF spectrum and computational-hungry processes at both the local and global levels. Given the extensive use of mobile communications throughout our government, the need for sophisticated spectrum management, monitoring, and sharing solutions will continue to be an issue throughout government and industry.

We think government contracting will continue to return to a value-based acquisition model versus that of LPTA, which has lost its luster in the eyes of both the government and the contractor community for most noncommodity programs. Further, as margins tighten in commoditized goods and services, successful providers will have to emphasize their technical differentiation to compete for more value-based work.

This will increase the need for both internal investment in technology and the acquisition of technology companies to bolster their inventory of truly innovative solutions to our government’s ever-increasing set of hard problems.

This increased demand for technically-differentiated solutions highlights a problem that has existed for some time: the limited availability of clearable, highly technical talent. Accordingly, we expect many companies to focus on what LGS has been focusing on — attracting and retaining the best and brightest minds to maintain and grow our long-standing culture of innovation.

We find that our STEM education support programs, such as internal innovation competitions, scholarship and tuition assistance programs, employee recognition plans and financial support of community STEM initiatives help to attract millennial engineers and program managers.

Our strategy has always been to focus not only on the challenges our country and our government face today, but also on those they’ll face tomorrow. We apply our talents at developing novel and efficient ways to solve those challenges, and we’ve found that by putting the mission first, our business is less susceptible to the policy changes that often accompany a change in administration.

Companies in the GovCon space all benefit from a healthy and vibrant marketplace — which as we all know is determined by congressional appropriations. In light of that, two trends that threaten our market are 1) a politically divided Congress that has elected to operate using short-term continuing resolutions versus longer-term comprehensive budgets, and 2) the recent revisions to the tax code that may generate less revenue for Congress to appropriate in the near-term.

While there is little to be excited about with respect to the first trend, the second trend is likely to increase the demand for more cost-efficient technology-based solutions, as there may be fewer appropriations available to fund less efficient alternatives. While this may continue to drive an LPTA procurement approach at some agencies, government clients with noncommoditized needs will continue to look for innovation, as well as cost efficiency.

That increased demand for technology innovation suits LGS well, and may also entice younger generations to pursue STEM-related careers — which in turn will create a more dynamic business model for the GovCon space and strengthen the U.S. government’s reputation as one of the world’s most productive innovation incubators.

One area where additional collaboration could benefit our market in general is to collectively increase our efforts to improve the STEM human capital pipeline. By developing and strengthening collaborative programs between our industry and leading U.S. colleges and universities that attract high-caliber students, we can continue to attract top engineering talent to government and GovCon careers.

LGS launched a national STEM scholarship program three years ago, not only to offer a leg up to some of our nation’s most promising college students, but also to insert our brand into the STEM college and graduate school universe and make tomorrow’s engineers aware of us as a career destination. We also offer financial support to LGS employees who volunteer to mentor young STEM students through K-12 robotics and science clubs, to help cover their incidental expenses.

Other programs that help build bridges between industry, government and academia include employee participation in steering committees and alumni advisory boards. Through active engagement with the schools — and by extension their best and brightest students — both government and its supplier community stand a better chance at attracting the next generation of STEM students to the government and GovCon market.

Congress recently passed the National Defense Authorization Act for FY2018, which includes provisions to limit the use of LPTA determinations for engineering and manufacturing programs. While the “lowest price/technically acceptable” calculus may work for procuring office supplies, it simply doesn’t scale to the acquisition of complex, mission-critical solutions — so we think this a welcome reform that will encourage more private sector innovation and enable smarter tradeoff decisions by program and procurement managers.

NDAA18 also introduces a pilot program wherein the government will seek to recover its costs related to processing unsuccessful award protests for contracts in excess of $250 million in revenue. Such an approach may help to reduce unwarranted protests and encourage best-available innovations in the market. While there are other changes to acquisition policy contained in this bill, we see these as offering the most potential to make positive changes to our acquisition environment.

The great news is that, generally speaking, this next generation of workers is very intelligent, hardworking, seeking purpose and responds well to feedback and encouragement. The downside exists only in our heads — a resistance to change.

Generally, millennials work collaboratively in groups and will not shy away from a challenge, but they may well resolve challenges in ways that are different than what we’re used to. They work on and off throughout the day instead of the typical 8 a.m. to 5 p.m. — a work-life approach resulting from growing up in a 24/7 connected world. That being said, if they have a 2-hour block in their schedule with no meetings, they might disappear to go see a movie or go for a bike ride, and then log back on in the evening. They also like and seek out regular feedback.

In my experience, it doesn’t need to be constant praise, but they do crave performance feedback more than a Generation X worker might. Lastly, they seek to derive purpose and meaning from their work versus seeing a job as a means to an end. They are less motivated by stability and predictability and more motivated by the pride they derive from their own work.

We find a remarkable level of passion among our millennial employees, and our GenXers and boomers, for that matter, for fulfilling the LGS mission of keeping our military service members and nation at large safe from harm — that’s what gets all of us out of bed in the morning.

To attract today’s younger workers, both government and commercial industry would be wise to maintain flexibility with work hours and locations, adopt a system that provides regular and continuous feedback (versus the age-old annual review), and make sure the work offered is meaningful, supported by leadership and promoted as value-based. As with most things, there are many more facets to this gem of a generation, but this is a good place to start for now.

Brown Advisory - Thoughtful Investing

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