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Engility Highlights 3Q Contract Bookings in ‘Best-Value’ Strategy Shift Versus LPTA

Engility-LogoEngility Corp. (NYSE: EGL) described to investors Thursday three third quarter contract wins and the loss of another as examples of its shift toward pursuits of larger “best-value” programs versus lowest-price, technically-acceptable work.

A slide in the company’s third quarter earnings call presentation highlighted its potential five-year, $369 million contract announced in October for engineering and technical services to support the Federal Aviation Administration‘s NextGen air traffic modernization program and a separate five-year award worth up to $112 million for computational science services to the Food and Drug Administration.

The third key contract depicted in Engility’s presentation came from the Naval Air Warfare Center and covers systems engineering services on U.S. Navy aircraft and weapons systems for 21 months at a value of $71 million.

Engility CEO Lynn Dugle told analysts those awards will give the company both incumbent and new work and added all three bookings resulted from investments in both business development functions and an increased focus on larger bids.

The 2.2x book-to-bill ratio in the third quarter set a record for Engility and puts the company on-pace to exceed its goal of 1.0x for 2016, Dugle said.

“Our recent awards indicate that these initiatives are bearing fruit and we’re approaching the inflection point from negative to positive organic revenue growth, which we expect to achieve in 2017, ” she told analysts.

The type of best-value contracts Engility seeks, Dugle said, are centered on technical services in areas such as program management or acquisition management that has seen agencies revert away from prior LPTA purchasing methods in those services.

“When we look out across at our waterfront and consider what we will pursue, I believe that there is plenty of best value contracting where we have some very visible difference either through past performance or some kind of technical tool ladder, ” she added.

The loss of one LPTA-based contract in the third quarter removed nearly $30 million in annual sales but “isn’t the type of program we’d be targeting moving forward, ” Dugle said.

Chief Financial Officer Wayne Rehberger said the government services contractor determined in a summer review of proposal activity that 90 percent of the company’s last 50 bids fell under the best-value category.

“The last four or five large bids that I can think of… were all best value. They were not LPTA. I think we need to stay focused on winning $100 million-plus bids that are best value, that’s our sweet spot versus a $20 million LPTA, ” Rehberger said.

Engility also reported $500 million in classified contract awards during the third quarter previously under protest.

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