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Spun off from L-3, Engility seeks to grow

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When L-3 Communications spun off its government services unit last week and created a new publicly traded company called Engility, Tony Smeraglinolo took the helm of an estimated $1.6 billion business with 9,000 employees.

Smeraglinolo is not new to the government services world; before serving as executive vice president of L-3’s services group, he was president of the global stabilization and development solutions division of DynCorp International.

He recently sat down with Capital Business to discuss Chantilly-based Engility. What follows are edited excerpts from that conversation:

What’s Engility’s place in the market?

We went through this whole strategic thinking process as part of L-3. One of the first things we wanted to take a look at [was]: Were there any things that were inhibitors to [the services’ business’s] growth? As the government got stricter [about organizational conflicts of interest], it got harder and harder for us to be a [systems engineering and technical assistance] provider at the same time being a products company. Major inhibitor. Right now, if you take a look at the portfolio, the Engility divisions really look more like companies. Each one has a president, each one has a [chief financial officer]. That really was a good way to go to market four or five years ago when things were more relationship- or user-centric. As budgets got more austere, you saw it move to more procurement-centric, where price became much more of the salient issue. Having this six or seven different entities probably isn’t how you want to go to market. We were still extremely competitive in our marketplace, but if you were going to go grow the business, you want to be not just competitive but price disruptive. We decided having a pure service company that could optimize its cost structure, not be inhibited by [organizational conflict of interest rules] was the right thing to do.

Will you be realigning Engility’s divisions?

We’re taking a look at all of that. We have not yet come up with what that final solution is going to look like.

How do you think customers will view the change?

They’re going to welcome the opportunity. I have one voice, there isn’t a diffused voice. We go to the market in a consistent way.

A lot of CEOs for contractors are stepping down right now. Is this a challenging time to take over?

We didn’t wake up last week and say, “Boy, these budgets are getting constrained.” We created Engility because of this. We’ve been planning this thing for over a year.

But you expect competition.

You see some of our competitors saying, “You know what? That is going to get too hard for us. We’re going to go take the company in a different direction.” It is never easy to go grow a business; it is even more difficult to grow a business at a point in time where the market is constrained. You typically have to take market share, you have to be more efficient than your competitors. [Engility is] a company that’s going to devote all of this energy to doing that.

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