PAE, long known for maintaining facilities overseas for the State Department, has significantly expanded its reach, adding business process outsourcing and national security work, among other areas, to become a $2.5 billion contractor.
Now, John Heller, PAE's chief executive, has set his sights on further expansion, particularly with the company's ISR joint venture as well as into Energy Department facilities.
PAE, which counts about 15,000 employees, was sold by Lockheed Martin to private-equity firm Lindsay Goldberg in 2011. According to Heller, the business had about $600 million in annual sales at the time. Under Lindsay Goldberg's ownership, PAE did a number of significant acquisitions, including picking up the global security and solutions business of U.S. Investigations Services as well as the A-T Solutions business.
Five years later, Lindsay Goldberg sold the company to Platinum Equity, another private-equity firm.
Speaking from PAE's Arlington, VA, headquarters last week, Heller told Inside Defense he sees PAE today as a more flexible and diversified business.
Five years ago, "we were at more risk to the variations of the marketplace," he said. "I knew that we needed more stability, more diversity -- from a customer standpoint and from a capabilities standpoint."
"The base is there, the stability is there," Heller said of the company's work today. "Now, I want 10-year contracts, I want contracts that are going to be sustained from a funding standpoint."
Heller told Inside Defense he's identified several areas for potential growth. One is PAE ISR, a joint venture of PAE, American Operations Corp. and Battlespace Flight Services that offers intelligence, surveillance and reconnaissance on a flight-hour basis.
PAE ISR manufactures Resolute Eagle, a long-endurance unmanned aerial system.
The UAS is "on an [indefinite-delivery, indefinite-quantity contract] with the Navy," Heller said. "And of course, we're out marketing the product around the world and here in the U.S. with other customers."
Heller said the ISR venture should produce "significantly higher growth rates than the rest of our business."
"Our expectation is that PAE ISR will be a growth engine for at least the next three years," he added.
Heller said PAE has also sought to move into areas that are natural adjacencies. For instance, though the contractor has significant logistics work, it did not count the Defense Logistics Agency as a customer until this year.
"We targeted DLA, and we won our first task order with DLA this year," he said. "We have another bid in right now with them."
Additionally, the company has sought to expand its infrastructure management expertise to win work supporting Energy Department laboratories. Already, PAE handles other facilities, such as NASA's Johnson Space Center.
"PAE is hired to support everything from building maintenance to power generation to sewage, water, water treatment, [heating, ventilation and air conditioning], electric," he said. An Energy Department lab, he said, has similar needs.
"It's not like we have to do something different. We have to apply ourselves," he said, noting that Platinum has supported PAE's effort to hire some key leaders, including Ken Myers, the former director of the Defense Threat Reduction Agency.
Heller said PAE is planning to bid an upcoming opportunity at the Hanford Site in Washington state. "Many of these contracts are 10 to 15 years," he said. "You've got to wait. So this is the next opportunity and we're pursuing it."
He said PAE has also made investments intended to grow the contractor's classified work, building on its acquisition of the USIS business and A-T Solutions.
"We really saw, again, this is core in terms of what we do, and there's no reason why PAE isn't doing more of it," he said.
At the same time, the contractor is seeking a prime spot on the Army's LOGCAP V effort. The service "created a structure that highlights geography as an overarching award mechanism, and we think that bodes well for us," Heller told Inside Defense.
He said his overarching goal is to find "long-term, sticky business," particularly pursuing programs that don't have a finite end. As a result, PAE is interested in work supporting facilities as well as in business process outsourcing.
"We saw the government outsourcing functions where you were managing information," he said. "They'd hire Leidos, [for example], to build the system, but then they bring us in to help the people who are using the system."
Under Platinum, Heller said, the company has made some new investments in the business, including in global supply chain systems and processes.
Additionally, the contractor has increased the number of what it calls "client executives," meaning people tasked with working closely with PAE customers.
"We elevated them so they report to the presidents," he said. "They're going to be at the customer four days a week, but this isn't about playing golf. This is about understanding what PAE is doing and delivering that information to the customer, but also gaining intelligence from the customer."
Heller said PAE has hired client executives focused on the Army, Air Force and the classified government agencies.
PAE also remains focused on acquisitions, he said.
While the company is not simply seeking scale, "I won't deny that I think we are a stronger business if we are a billion dollars bigger just because we will have more diversity in that base," he said.
PAE is particularly focused on national security and business process outsourcing acquisitions, according to Heller.