Serving the Rear Echelon
Kuwaiti logistics company Agility has grown exponentially in the last five years, from $161 million in revenue in 2003 to $6.3 billion last year. Most of the company's income comes from its commercial business, which offers warehousing, distribution, inventory management and even relocation services for employees of companies that hire Agility.
Agility's defense work also focuses on warehousing, distribution and logistics, but with one particular emphasis: providing meals to about 140,000 troops and at least 100,000 defense contractors a day in Iraq and Kuwait. The firm supplies the service under a U.S. Defense Logistics Agency (DLA) contract that Agility values at $1.4 billion.
Agility's Defense and Government Services division provides the food through more than 100 dining halls and mobile kitchens through a prime vendor contract with DLA. Houston-based KBR runs these facilities and cooks and serves the food under a separate contract with the U.S. Army, known as Logistics Civil Augmentation Program (LOGCAP) III.
Operations in Iraq have spurred the growth of the Defense and Government Services division, and most of its revenue comes from the food delivery contract. Agility's other two divisions include Global Integrated Logistics, which serves the commercial sector, and Investments, a much smaller operation that handles real estate and private equity deals.
With plans by the incoming administration of U.S. President-elect Barack Obama to draw down U.S. troops in Iraq, the Defense and Government Services division is looking to diversify into other markets and other Pentagon contracts. The goal for the division is to draw 70 percent of its revenue by 2011 from contracts other than the food delivery contract, said Dan Mongeon, Agility's president and chief executive.
The division has bid or may bid on logistics contracts with the United Nations for operations in Africa, particularly in Sudan, and for contracts with the U.S. State Department and NATO forces.
"What we have been fairly successful at doing is analyzing the defense market and looking for opportunities and building a business development pipeline," Mongeon said.
Aside from the food delivery contract, Defense and Government Services' other major work includes a Defense Reutilization and Marketing contract with DLA, valued at up to $98 million over five years, to process and dispose of unserviceable excess military equipment and materiel at sites in Iraq, Kuwait and Afghanistan.
The division also is expanding work with the U.S. Air Force, Navy, Marine Corps and defense ministries in France and other countries, Mongeon said. In addition, it inventories and stores personal gear at all U.S. Marine bases worldwide.
These contracts help make Mongeon optimistic about future growth, despite the planned Iraq pullout.
With the Defense Reutilization contract, "as you draw down those units, [Agility's] workload just really increases three to ten-fold," he said. "As the units draw down, they turn in their scrap, their unserviceable items. So our business just goes up, dramatically."
Agility also has set up an internal group to look at business opportunities with the Iraqi government and Iraqi companies, including the possibility of playing a shipping or warehousing role in trade between Iraq and other countries, Mongeon said. That group's work is still in the early stages, he said.
"We're focused on Iraq for the long term," he said. "Our commercial footprint and our commercial capabilities lend itself to that kind of a scenario. It's work both inside Iraq but also [work] that connects Iraq with other trading partners and other companies within the region."
Agility says it has 550 offices in 100 countries. In the Middle East, its largest warehouse is in Kuwait City, and it also has a major logistics hub in Aqaba, Jordan.
Contracts like the Defense Reutilization deal are carried out by Taos, a Defense and Government Services unit. Taos has a Special Security Agreement with the Pentagon, giving some employees the facilities clearances needed for certain work.
Defense and Government Services also contracts out its own security forces under its Threat Management Group (TMG), established to provide security for Agility's own trucks, Mongeon said.
Agility has from 700 to 1,200 trucks moving in Iraq every day, the CEO said. Given the amount of company assets on the road, "It was only in our best interest to have this kind of capability."
There have been 31 deaths and more than 200 casualties for the company in Iraq since 2003, according to Agility. Those incidents occurred mainly in the early part of military operations in Iraq, Mongeon said.
Taos and TMG are relatively small parts of the Defense and Government Services business, Mongeon said.
The Agility defense division and CH2M HILL, an engineering services firm based in Englewood, Colo., are part of a team led by Falls Church, Va.-based DynCorp that recently won the right to compete for task orders from the Army under LOGCAP IV, a broad logistics contract to follow LOGCAP III. KBR, which held the LOGCAP III contract, also won the right to compete for task orders under LOGCAP IV, along with a third company, Irving, Texas-based Fluor.
The DynCorp team recent-ly won a task order to provide services in Kuwait, a decision KBR has protested.
Jeff Roncka, an analyst with CRA International, Boston, said that opportunities are good for logistics firms like Agility as the U.S. military prepares to decrease troops in Iraq.
"Even though the force structure is going down, for logistics companies there is an 18-month, two-year uptick to move [equipment] all back" to the United States, he said. "With these large-scale movements that are likely to go on over the next couple of years, the market is going to be, at a minimum, stable."
But the nature of the logistics work may change, Roncka added. "The guys who just do food service are likely to see a decrease," he said. "The people who move equipment, package it, break down and set up the sites, should see an uptick."
Agility is publicly traded on the Kuwaiti stock exchange and an exchange in Dubai. ■
source: defencenews.com
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