After sale, PAE revamps and consolidates
By Marjorie Censer,
More than a year after being sold by Lockheed Martin, Arlington-based Pacific Architects and Engineers is reestablishing itself, consolidating into one Washington area location, remaking its leadership team and setting its sights on new lines of business.
The services company’s specialties range from training military in developing countries to maintaining and operating embassies and consulates abroad. Bethesda-based contracting giant Lockheed Martin sold the company, better known as PAE, to private-equity firm Lindsay Goldberg after deciding its work no longer fit Lockheed’s business strategy.
Late last month, PAE signed a lease for more than 71,000 square feet of space at 1320 N. Courthouse Rd. in Arlington. The new office will combine four existing local offices — one in Rosslyn, two in the Tysons Corner area and another in Seabrook.
Though 3,000 of the company’s employees work at government sites in the United States and close to 7,000 at sites abroad, more than 260 will work in the company’s consolidated office.
The move marks the first time that PAE will establish its own local headquarters, chief executive Mike Dignam said. Its existing space is re-purposed Lockheed Martin offices.
The current offices aren’t “what you would design if this was your own business,” he said, adding that PAE plans to move early next year.
The relocation comes as PAE makes significant changes to its business. Last year, it made its first acquisition in Marlton, N.J.-based Defense Support Services, or DS2, which specializes in military aircraft and vehicle maintenance. The buy is meant to position PAE to win more work in maintenance and repair, anticipated to be a growth area as the military refurbishes equipment worn down from years in Iraq and Afghanistan.
The company has also formed a new leadership team, hiring this year contracting veterans Jim Reagan, former chief financial officer at Vangent and Deltek, as chief financial officer and Whit Cobb, former deputy general counsel at BAE Systems, as general counsel. Last year, PAE hired Mick Fox, formerly of AECOM, as executive vice president of business development.
Still, the services business is under pressure. Loren Thompson, a defense industry consultant, said expertise in niche areas like embassy work can be helpful, but virtually every company in the government services sector is under pressure.
“The bottom line [is] federal services are declining faster than companies that make military hardware because the money for services gets cut much more quickly,” he said.
Still, Dignam said he expects the greater flexibility afforded by private-equity ownership to help PAE grow.
The contractor is also looking to expand into adjacent work. For instance, Dignam noted that PAE could find more opportunities with the U.S. Agency for International Development because the company already has contracts in developing countries in Africa and elsewhere.