Following the departure of Lawrence B. Prior III, the Arlington-based U.S. unit of defense contractor BAE Systems has revamped its leadership team, including promoting longtime executive David Herr to head its service sectors.
Services work has come under pressure as the government vows to cut costs, but Herr expects BAE’s unit — which handles intelligence, cybersecurity, maintenance and repair — to fare well by in part supplementing its existing work with additional commercial and international opportunities.
Capital Business sat down with Herr last week. What follows are edited excerpts from that conversation.
Why was this job a good next step for you?
For the last four years, I’ve led [BAE’s] support solutions [unit]. We’ve had to grow in a declining market. [We won] most recently the Radford ammunition contract [under which BAE operates an Army ammunition plant], we just recently won a contract with the Navy to maintain [its] trainers. Also in that business, we bought Atlantic Marine, and now we’re growing in the commercial ship construction market down in Mobile [Ala.] primarily.
How did you move into commercial work?
We did it by acquisition. The market was in a downturn when we bought [Atlantic Marine in 2010] and now, with the resurgence of the gulf, the market’s turning.
How will your responsibilities change with your new role?
In addition to support services, [the unit] also includes the intelligence and security business. We’ve got a very strong intel business. That market is forecasted to do better than a lot of others in the defense industry.
How would sequestration affect you?
In the services industry, we may take a little harder hit near-term, because I don’t think there was a lot of planning done and it’s easier to cut the [operations and maintenance] accounts this year. But longer-term, I think that the services industry will fare a little better than some of the products[-focused businesses because] there aren’t any new starts [to programs]. For example, we issued some WARN notices in our ship repair [business], but we still think there’s an enduring need to maintain those ships long-term. Their service life is being extended.
Won’t this work become less profitable?
We’ve done a lot of things to become more efficient, and we’re passing those savings on to our customer. It preserves our profit and also it helps us in our recompete [win] rate.
Will cybersecurity be as big a market as anticipated?
We think it’s going to be a fairly stable market. It’s probably not going to have some of the growth projections that people were talking about a couple of years ago just because of budget constraints.
We see a lot of services businesses — from Science Applications International Corp. to Engility — revamping their structures. Are you comfortable with your format?
We’re comfortable today, but we’re always evaluating and watching what the competition’s doing.