Paragon seeks to move from small to mid-size

March 3, 2013

To transition from a woman-owned, 8(a) small business to a mid-size government contractor, McLean-based Paragon Technology Group has made big changes.

The little-known company, which was founded about 15 years ago, is now headed by major industry names and backed by private-equity firm LLR Partners as it embarks on a seven-year plan to move from more than $30 million a year in revenue to more than $250 million.

The company made its latest hire in Kiran Rathod, a 10-year veteran of Lockheed Martin, who left to become Paragon’s chief technology officer. Rathod joins Scott Friedlander, Paragon’s chief executive who previously served as chief executive at Herndon-based GTSI. The corporate leadership also includes Chief Financial Officer Marc Tommer, who previously worked at Vangent; Dave Gordon, who manages Paragon’s health care business and spent more than two decades at Booz Allen Hamilton; and Tim Holmes, vice president of contracts and legal, who previously worked at SRA International.

The executives said the mid-size Paragon will seek to stand out in niche areas, including data analytics, logistics and health information technology.

“As those big companies are going through different times, it gives a mid-size company a chance,” Friedlander said.

Rathod, too, said he was drawn to Paragon’s size and potential to grow, even as government spending declines.

“When you look ... at the agile nimbleness of a company like this ... that’s what attracted me,” he said.

Still, the company has a long way to go. In early 2012, it left the 8(a) program, making it no longer eligible for certain set-aside contracts.

At that time, Gazelle Hashemian, Paragon’s majority owner, sold the contractor to LLR Partners, and Friedlander took over the company’s management.

Friedlander left GTSI as part of a 2010 deal to lift the company’s Small Business Administration suspension, which was put in place after the SBA alleged the company was part of a scheme that “resulted in contracts set aside for small businesses being awarded to ineligible contractors.”

“I did what I did to protect the company,” said Friedlander, who worked for GTSI for about a decade but only spent seven months as CEO, in an interview.

Over the past year, Friedlander has hired new management and put together a seven-year strategic plan for Paragon. He is seeking an acquisition for the business and plotting organic growth.

Friedlander said he sees the potential to grab market share from other players, while Rathod forecast some opportunities in the commercial market.

Friedlander said Paragon will stay out of some markets, such as cybersecurity, where he said there are already many established players.

Guy Ben-Ari, deputy director of the Center for Strategic and International Studies’ defense-industrial initiatives group, said mid-size companies in many cases can offer better prices and new ideas, but the budget environment will make it more difficult to win work held by incumbents.

“I personally would sign off on this logic of increased competition — go to new players, go to the ones with the smaller overheads. I think that all makes perfect sense,” he said. “But it requires a certain level of risk-taking and of innovative thinking.”

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