Mike Nartker
WC Monitor
1/10/2014
Huntington Ingalls Industries late last week wrapped up its acquisition of S.M. Stoller in a move intended to help HII expand its role in the Department of Energy marketplace. Going forward, Stoller will operate as a wholly owned subsidiary under HII’s Newport News Shipbuilding Division, which also includes Newport News Nuclear, part of the team that makes up Savannah River Nuclear Solutions, the managing contractor for the Savannah River Site. HII declined to comment on the terms of the acquisition this week. “With this strategic acquisition, Newport News Shipbuilding (NNS) is positioned for expanded growth within the DOE, environmental management and commercial nuclear services markets,” HII Corporate Vice President and NNS President Matt Mulherin said in a release announcing the acquisition. “Stoller’s exceptional commitment to performance and safety are well recognized by the environmental management and remediation industry and are attributes that directly support our plan for continued growth within these markets. This is an important investment in the future of our company, and we are excited to welcome Stoller to our team.”
In an interview with WC Monitor this week, NNS Vice President for Energy Programs Pete Diakun said that Stoller’s set of environmental management and remediation capabilities “was a next logical fit” for NNS as it looks to grow in the DOE market, given NNS’ operations expertise. “When I look at Stoller, one of the key reasons why they were such a good fit for us was we had a strength they did not, and what they brought to the table was a significant safety culture, first off,” Diakun said. “Second off, key personnel in both water and soil remediation and management, for example, of the [DOE Office of ] Legacy Management sites. And then thirdly, I would say a diversity of geography, whereas currently Newport News is really focused at, for the Department of Energy, the Savannah River Site, … but in this arena Stoller is across 90-plus sites … and so for us it was a great opportunity to bring to bear our nuclear opps and our breadth and depth of engineering to support Stoller.”
‘They Have a Great Brand Name…’
According to Stoller President Nick Lombardo, talks on the acquisition began about a year ago and came after Stoller and HII had worked together on several bids for DOE cleanup contracts. “We had a good working relationship with these guys and came to really value their expertise and enjoy working with them. So when we got together a little over a year ago and chatted a little bit on where they were headed and where we were headed, it seemed to make sense to start discussing that further,” Lombardo told WC Monitor. “Our goal was to grow the business to be a major player in this industry. It just happened to be timing that HII was in that same mode right now and we gathered our ownership groups together here and said maybe this is such a unique opportunity that we really need to jump on it to reach that goal that we wanted to be a big player.”
There are expected to be no changes in Stoller’s management or workforce now that the acquisition is completed. “‘Everybody is staying on board. Everybody’s excited,” Lombardo said. “Our plan is to grow.” Diakun said, “The intent is … to have them operate as independent activities, but where the opportunity makes sense for us to look at either reachback within any of the Newport News activities to support Stoller or vice versa, it provides us the flexibility to do that.” He added, “They have a great brand name and they are well known within their customer base and within the DOE industry partnership and the last thing I want to do is change that position.”
NNS Looks to Bring Modeling Capabilities to DOE
With the acquisition complete, NNS hopes Stoller will be able to help bring the modeling and simulation capabilities NNS has developed to broader use within the DOE market, according to Diakun. “We employ a very detailed strategy and modeling and simulation in our Department of Defense business, and we believe that the opportunity to deploy that in the Department of Energy arena can lead to increased performance [and] opportunities to perform jobs at cost savings … and in order to be successful, you have to demonstrate that you’ve done that somewhere before,” Diakun said. “So we think that we have an opportunity to deploy something into this DOE arena that we’re using elsewhere and we’re going to look to Stoller to be … a knowledgeable critiquer because models, one size does not fit all, but we do know that where we have been successful and in some cases, even with Savannah River where we’ve been able to deploy some of the modeling capabilities, we’ve been able to demonstrate operational performance savings.”
He went on to say, “Fundamentally, the key expertise that Stoller brings in the environmental services and remediation business of which Newport News really does not have a breadth and depth, this is really an opportunity for us to introduce this product line to them and for them to evaluate and determine what are the best applications and how it can meet the criteria for providing cost savings. We have found that everywhere we’ve deployed it … we’ve had significant success and our belief is that we can get some great insights from Stoller on how to deploy it in the DOE market as well.”
Upcoming Idaho Procurements ‘A Big Target’
Going forward, NNS and Stoller are very interested in competing for DOE’s next set of cleanup contracts at the Idaho site, for which the Department has begun preparations. Idaho will be “a big target,” Lombardo said. Also of interest are potential contracting opportunities in the United Kingdom. “We’ll have the conversation with Sellafield Ltd. and obviously the URS-led team there about what are the right opportunities and how we can support them there,” Diakun said.
Another potential upcoming opportunity is the recompete of the Savannah River Site managing contract. When asked if NNS would now look to separate itself from Fluor-led SRNS for any new contract, Diakun said, “At this point in time, I would tell you we’re great partners with Fluor and Honeywell and I would tell you that here we are just past the five year point of a 10 year contract and great things are going on there and we have no intentions at this point in time. Unless the contract structure changes in some way that both Fluor, Honeywell and ourselves don’t foresee it, I would tell you that we’re strong partners with them and we intend to continue that relationship.”
To date, NNS has largely served as a teaming partner for bids in the DOE market, and has not led proposal efforts. When asked if that would change with the addition of Stoller, Diakun said, “I would say that as all proposals go, we evaluate the proposals for what’s the customer need for that proposal, and if we believe Newport News and/or Stoller has the preponderance of those capabilities, then by all means we would look at the opportunity to lead. And then certainly, like all of the other competitors, we would look at what the contract terms and conditions are to determine whether or not there’s a risk evaluation factor in there that makes sense for us not to be the lead.”
Growth Strategy ‘A Very Purposeful One’
Going forward, NNS will continue to look for ways to further grow, but the company’s “first order” will be to focus on improving performance through the addition of Stoller, Diakun said. “I think that every opportunity for growth in the future requires looking at not only at the contracts that are out there to be bid, the contractual structure, but what percentage of the market space that we currently are in and then as well a global look and that global look either being the U.K. or maybe even potentially Japan if Japan puts up some kind of nuclear indemnification, which there is a potential that that happens. So I think our growth strategy will be a very purposeful one,” he said.
Diakun added, “We will take advantage of the step we’ve taken the first of this year, and we will work diligently to turn that growth strategy into numbers and then I would tell you that growth can be intrinsic, growth can be partnerships and growth can be acquisitions or investments in other opportunities. And so we will continue to look at every one of those. But I would say as I sit here right now, our first order is to look at performance and to look at the opportunities to improve performances on both sides of thefence because I think … cost and performance will be a key parameter for success.”
