It has been nearly 20 years since Kam Ghaffarian and Harold Stinger quit their government contractor jobs to start their own business in Ghaffarian’s basement.
Within a month of landing a $21,000 subcontract to support the now-defunct Mission Operations Data Systems directorate at NASA’s Goddard Space Flight Center in Greenbelt, Md., Stinger and Ghaffarian hired their first employee. By 2002, Stinger Ghaffarian Technologies (SGT) Inc., whose services include engineering, science and information technology (IT) support, had grown to 100 employees and $10 million in annual revenue.
Today, SGT has 1,700 employees, $400 million in revenue and a $3 billion backlog. It is one of NASA’s biggest engineering services contractors, second only to Pasadena, Calif.-based Jacobs Technology, to whom SGT just lost a $1.9 billion contract to support the Johnson Space Center in Houston for the next decade.
Ghaffarian, who bought out Stinger’s share of the business five years ago, was still awaiting NASA’s Feb. 8 decision on that contract, dubbed Johnson Engineering and Technical Services, or JETS, when he spoke with SpaceNews Deputy Editor Brian Berger.
Why did you and Harold Stinger decide to strike out on your own?
People who talk about our story, including Sen. Barbara Mikulski (D-Md.) and others, talk about how an African-American pastor and an Iranian immigrant got together to start a company.
Stinger basically came over to my basement and we moved some boxes around and that’s how SGT was born. We worked together at Lockheed and had supported Goddard Space Flight Center for many years prior to SGT.
How long before you hired your first employees?
We started in December 1994 and hired our first employee in January 1995. From 1994 to 2002, we grew the company to about 100 people, hiring one or two people at a time. Our explosive growth started in 2002. We have grown the business about 40 times in the span of 10 years.
Has SGT ever gone through an unprofitable stretch?
In the history of the company, from year one to today, there was only one year where we were not profitable. It was 2003 or 2004. And that year was intentional. We had to reinvest quite a bit in our infrastructure to support our growth. But every other year we’ve been profitable.
What happened in 2002 that led to your growth spurt?
Nothing that magical happened. We hire a lot of really good people. One of my strengths is to recognize my own deficiencies and hire a lot of people much smarter than myself. They create success. That’s one of the key things. The other is our values, which are encapsulated in three letters: ICE, for integrity, customers, employee. Integrity in everything you do; take care of your customers; and take care of your employees. Since our inception we have never lost a re-compete as a prime.
Did SGT benefit from the spike in defense spending that began in 2002?
No. The explosion happened through NASA. It’s only been the last three or four years that we’ve been growing in other areas.
We are one of the largest contractors at the U.S. Geological Survey. We run the Earth Resources Observation and Science (EROS) Data Center in Sioux Falls, S.D., under a $300 million prime contract we won about five years ago. We also are a prime contractor with U.S. Department of Transportation, specifically the Volpe Center in Boston. The National Oceanic and Atmospheric Administration is another client of ours. We currently are not a prime contractor there but we are a subcontractor on multiple contracts.
Are all of SGT’s contracts with civilian agencies?
No. About 75 percent of our revenue comes from NASA. Maybe 15 percent comes from other civilian organizations. And about 10 percent today comes from the Department of Defense (DoD) and other national security agencies.
What’s your assessment of where the market is going? Do you assume shrinking NASA budgets?
I assume a shrinking federal budget. To mitigate that, we have to have a lot more baskets to put our eggs in, not only within NASA but outside of NASA.
Can SGT continue to grow in the current budget environment?
I really believe in goal setting. When we started the company in 1994 our goal was by the time we graduate from the 8A Small and Disadvantaged Business program, which was August 2005, to do $100 million a year. We achieved that goal. In fact we were doing $102 million a year. Our goal today is that by the end of 2016 we’d like to do $1 billion a year in revenue.
How do you expect to do this?
There are some new opportunities, but to a great extent it’s winning work from others. Having delivered for our customers over and over again — past performance — is extremely important. We have a stellar past performance. Our average scores across all our contracts is over 95 percent, which is sort of unheard of. We also have a good business development engine and we are very cost competitive. Being privately held actually helps us. It’s a discriminator for us.
How does being privately held help you?
If you are publicly held there are certain profit margins you need to achieve. There are certain investments you might not make. I am the 100 percent owner. If there is a decision that needs to be made, people come to me, I sit down, I evaluate it, I make the decision and I’m not worried about what Wall Street is going to do to me or not do to me next month.
What’s your average contract win ratio?
The industry’s average win ratio is 20 to 25 percent. Our ratio, since the inception of our company, is 67 percent. We have a very good win ratio. We win two out of three major bids that we go after. That’s our history. As a result there are companies that would like to partner with us.
Who are your main competitors for DoD contracts?
There’s a wide variety of companies. If I gave you a list, there’d probably be over 30. Within the NASA pond we are a big fish. Within other ponds we are a small fish. When we go after other areas, our strategy is to go after adjacenct market spaces — places where we can leverage what we have done in NASA.
Can you give me an example on the DoD side?
For example, we work with U.S. Air Force Space Command. That work is adjacent to a lot of stuff we do for NASA. Same thing with the National Oceanic and Atmospheric Administration. We are also leveraging our engineering experience working with NASA’s Ames and Langley research centers to go after Federal Aviation Administration opportunities. The other one is IT. It’s different from engineering in that it’s portable to a multitude of agencies because you are not dealing with unique capabilities — IT is IT. So we are able to leverage our IT capabilities across many agencies
Do you have a field office near Space Command in Colorado Springs, Colo.?
We do. We made an acquisition about four years ago. We bought a company called MSL, Master Solutions LLC, in Colorado Springs. That’s where our offices are. We are leveraging that office to grow our DoD presence.
As new U.S. government program starts shrink in number, do you expect to see more competition for service contracts from the big hardware manufacturers?
Yes. We saw that on JETS with Lockheed bidding. NASA received bids from Lockheed, Honeywell, SGT and the incumbent, Jacobs. They down-selected to SGT and Jacobs.
Where does today’s technical expertise reside: with contractors or civil servants?
There’s a great deal of expertise at NASA. And there are some areas where the expertise resides with the contractor. The key to success is not so much where the expertise resides but that we work together.