Moraco, who previously headed SAIC’s intelligence, surveillance and reconnaissance group, will lead one of the new companies, a government services business that will retain the SAIC name.
Moraco has plenty of experience with the company; since joining SAIC in 2006, he’s served as general manager of the company’s space and geospatial intelligence business unit and handled operations and performance excellence in the corporate office.
Capital Business recently sat down with Moraco. Here are five take-aways from the conversation.
SAIC isn’t the first to reconfigure to make its services work a separate unit. Chantilly-based Engility, for instance, was spun off from L-3 Communications last year as a low-cost government services business, separated from L-3’s product businesses.
Engility cut its staff and its costs to reposition itself to win work, even in the “lowest price, technically acceptable” competitions, in which the government isn’t seeking the best value, but instead the cheapest bid that meets the solicitation’s requirements.
Moraco said earlier this month that SAIC first came up with what it thinks will be a competitive price. From there, it has developed cost reduction initiatives, including slimming down its real estate portfolio and reducing its management levels.
Selling services separately might make sense as budgets tighten
The typical wisdom says the government wants a total package — new software and the services that go along with it, for instance.
But Moraco is positing that tougher budgetary times might change that equation. Buying services separately from products might afford government customers “some flexibility,” he said.
Buying in smaller pieces — rather than a total “solution” — allows federal agencies to “dole out smaller, more manageable dollars,” Moraco said.
Cutting conflicts of interest grows the market
When SAIC first announced the split, it said the new companies will have access to larger markets. For the new SAIC, some of that increased access will come from being able to bid for work previously blocked by potential conflicts of interest.
An organizational conflict of interest is created when, for example, one unit from a company builds a product and another unit from the same company tests it.
Even as the contracting market shrinks, eliminating these conflicts gives SAIC “addressable market that we had self-selected out of,” Moraco said.
Maintaining continuity is key
Dividing SAIC in two at times brought uncertainty to employees and to investors. But Moraco said the company has tried to ensure that the split was invisible to its government customers.
The company was “very careful to keep the spin at the corporate level,” rather than letting it affect individual programs. For instance, he said, SAIC maintained its program managers, so that customers would see the same familiar faces.
Budget uncertainty isn’t necessarily a bad thing.
“People have asked, ‘Is this a good time to spin?’” said Moraco. “My answer is yes, because of that uncertainty.”
He said the market isn’t going to grow, so companies — through repositioning — will have to win work held by competitors. “It’s a once-in-a-lifetime career opportunity,” Moraco said of the split.