When DynCorp shuffled its business units last year to create DynGlobal, its international arm, the move was partially a response to the drop in domestic business that contractors faced.
But DynCorp’s decision was also tailored to address the increasing number of U.S. security concerns around the globe, said Steven Gaffney, the company’s chairman and chief executive.
President Obama’s “pivot” to Asia aims at countering China’s rise by furthering America’s relationships with its neighbors. The turmoil in Ukraine has sparked a new U.S.-Russia spat. Ongoing conflicts in parts of the Middle East are being closely watched by the United States and its allies. These events mean that more countries feel the need to invest in their military capability, Gaffney said, which is changing DynCorp’s business approach.
In remarks last week at the Atlantic Council’s defense-focused “Captains of Industry” series, Gaffney talked about DynCorp’s evolving strategy and its goals for the rest of the year.
“Relying on [the U.S.] government is not a truly viable growth strategy,” Gaffney said.
Though DynCorp gets more than 90 percent of its revenue from the president’s discretionary budget, he said, expanding its global customer base is a priority in 2014. International customers are looking for partners who “know how to mobilize quickly and build capacity within their nations,” he said.
The company does business in more than 30 countries, including Saudi Arabia, Egypt and Australia.
“We’ve always been global, but now it’s a more deliberate and dedicated part of our strategy,” Gaffney saidt.
In the first quarter, DynCorp International’s revenue fell more than 30 percent compared to the previous year and it posted a net loss of $800,000. DynCorp’s international business should help offset some of the declines at home, Gaffney said.
Talking about the domestic market for government contractors, the DynCorp chairman said he believed companies needed to focus on their core strengths to stand out in today’s competitive environment.
“We’re not reinventing the wheel, we’re offering our core business through different channels,” he said.
At a discussion following his talk, Gaffney hinted at the possibility of more consolidation, saying he expects merger and acquisition activity to pick up. DynCorp would like to “remain opportunistic” when that happens, he said.
The McLean-based contractor was cited in a recent Defense Department inspector general’s report for improperly charging the government more than $100 million when it was a subcontractor for Northrop Grumman.
Among the findings are that 360 DynCorp employees working for Northrop on an Army contract did not meet specified labor requirements and that some may not have been properly qualified.
Gaffney did not discuss the findings of the report, which has not been officially released. But he responded to a reporter’s question on the issue, saying he was “confident that we did everything right.”
Christian Davenport contributed to this report.