PAE, rides along the line of more traditional government contractor with providing services along logistics, construction, and facilities management. The company is best known for their embassy support with the U.S. Department of State. However, like many of its peers, PAE has been transitioning away from their traditional work around logistics and base operations and more towards business processes and intelligence analysis.
The company organizes itself by two (2) business units: Global Mission Services and National Security Services. Global Mission Services includes Intelligence Solutions, International Logistics and Stabilization, and Readiness and Sustainment. National Security Services includes their Business Process Solutions, Counter-Threat Solutions, and Infrastructure and Logistics.
PAE has a fairly diverse portfolio of customers, but maintains a core portfolio within the U.S. Department of State, U.S. Navy, and U.S. Army. However, they been making acquisitions to expand their reach beyond their existing customer sets and service areas.
Mergers and Acquisitions
When trying to grow your capabilities there are three paths: build (invest in development), borrow (team), or buy (acquisition). We have looked at several companies including Parsons and KBR Government Solutions who have sought to expand through acquisition of new service areas. Booz Allen Hamilton is a rare case of a company that has steadily invested in build new capabilities.
PAE has an interesting spot on this spectrum – sitting between borrow and buy. PAE has certainly engaged in “buy” as evidenced through acquisitions of a range of companies to expand both their market share in existing services and to pick up new capabilities.
Teamwork (and JVs) are Part of the Toolkit
PAE is more inclined than its peers to form joint ventures. Time and time again, the company has engaged joint ventures in some of their largest pursuits, as seen in their $1.3 billion NASA Synergy-Achieving Consolidated Operations and Maintenance (SACOM) contract.
Take a look at some other instances where PAE decided to form a joint venture to win work:
- Created in 2011 DZSP 21, is a JV between PAE and Parsons and in August 2020 was awarded the Joint Navy and Air Force Base Operations contract in Guam.
- In 2015, PAE and Perini (now Tutor Perini) formed a joint venture that was awarded a seat on the Air Force Contract Augmentation Program V.
- In 2016, PAE and Vectrus formed a JV to pursue the U.S. Army’s Logistics Civil Augmentation Program V.
- In 2019, PAE and SGT (now KBR) created a joint venture known as PAE-SGT Partners (PSP) and was awarded the NASA Base Operations, Spaceport Services contract at Kennedy Space Center.
- As mentioned earlier, the National Aeronautics and Space Administration (NASA), Stennis Space Center (SSC) and Michoud Assembly Facility, Synergy-Achieving Consolidated Operations and Maintenance (SACOM) contract awarded in 2015 is a $1.3 billion program awarded to a joint venture between PAE and BWXT. The joint venture maintains and operates Stennis Space Center, the largest rocket testing facility in the world, and the Michoud Assembly Facility, one of the largest manufacturing plants in the world.
- U.S. Department of State, Baghdad, Iraq Embassy Support: Global Mission Operations and Maintenance Support Services (OMSS) – In 2012, PAE received this 6-year, $1.2 billion IDIQ for the operations and management on all facilities and equipment as well as minor construction, janitorial services, pest control, and motor vehicle repair services.
- U.S. Department of State, Baghdad Life Support Services (BLiSS) – In March 2014, PAE was awarded this $1.2 billion IDIQ to provide nationwide management of postal services, food services, waste management, demilitarization operations, fuel services, supply chain oversight and reporting, recreation services, airfield and transportation services, warehouse operations, and supplemental staffing and maintenance services for the Regional Security Office.
- U.S. Department of Justice (DOJ), MEGA 4 Automated Litigation Support – In 2013, PAE was awarded a seat on this $1.1 billion shared ceiling contract to provide comprehensive litigation support to the Department of Justice. PAE is the second largest recipient on the contract having been awarded $389 million in task orders to provide services to help acquire, organize, develop, and present evidence through the course of litigation.
- U.S. Department of Homeland Security (DHS), U.S. Customs and Border Protection (CBP), National Aviation Maintenance and Logistics Services – In March 2020, PAE was awarded this contract to provide aviation maintenance for a fleet of over 200 aircraft through unscheduled aircraft repairs, logistics, and fuel management under this potential $1.25 billion contract.
The FedSavvy Strategies Takeaway
- The CENTRA acquisition expands PAE’s reach in the Intelligence Community with intelligence analysis and professional services, indicating a shift in desired market areas. However, only time will tell whether PAE is able to successfully leverage this acquisition to win meaningful work in the intelligence domain.
- Similar to many of their peers, the acquisition of CENTRA signals an interest to move into higher technology market segments.
- PAE will continue to provide their traditional base operations and logistics to the U.S. Department of State and U.S. Department of Defense. Their marquee contract portfolio continues to reflect this as their most successful area. This is a strong foundation to build on going forward.
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