The following interview with Cabrera Services, Inc., CEO Alan Solow was conducted by RadWaste Monitor Reporter Sarah Herness and Editor-in-Chief Martin Schneider.
When you started as CEO in September, what were some areas you immediately identified as being ripe for changes? How much of those changes were driven by the issues Cabrera experienced on the SLDA project for the Army Corps of Engineers’ FUSRAP program? How did your prior experience at Weston and Shaw influence your decisions?
Let me start that I've known Cabrera for a long time. Cabrera was a protégé of mine when I ran Federal Programs for Weston Solutions. So I've followed the Company’s growth and progress through the years.
When I came into Cabrera in September, the first thing I did as a new CEO was dive into the financials, both the income statement and the balance sheet. I traveled to all of our offices and talked with as many employees as I could, learning the culture, the issues, and understanding our projects and meeting clients.
The top of my agenda was to get to SLDA and meet the client. The second week I met with both the Pittsburgh and Buffalo Districts. I was able to spend quite a bit of time with the contracting officer's representative, met the new commander and asked them to give me a lessons learned from their view. That was a valuable meeting which set the stage for several of the initiatives we are implementing as we move the company forward.
After that meeting, we started digging into the financials with focus on driving both growth and profitability. The company is profitable and has been growing since the inception, but we're coming into a tough time for many companies right now. As an industry, we are all focused on our costs as we are seeing less opportunity or are experiencing delays. Currently, here at Cabrera, we are putting a lot of focus on our fixed price portfolio. Fixed price isn't going away and firms have to be aggressive to manage these portfolios. Key experience that I am bringing from my time with Shaw is focused risk management. Shaw’s risk management systems are best in class and we are bringing similar systems into Cabrera and implementing new processes. These initiate at the bid review and continue through the life of the project. Our PMs puts focus on both the business and contractual risk during the bid stage, putting a price and probability to that risk, building contingency into the jobs and then ensuring that we are reviewing the risk from a top-down view on a monthly basis in our project reviews. So this is a big first step.
We've also reorganized the company around functional groups, driving accountability of our project performance down a level into the organization. We have brought in new management and technical talent to bolster our already strong Health Physics team. We have an Applied Science and Engineering group and have organized our Program and Project Managers under very strong leadership. I feel that putting the types of people we have in to lead these groups under Kim Nelson, our President, is really going to drive the accountability and focus from the top-down on every project that we have.
Have you bid anything with that new sort of structure?
Yes, we are bidding our first job with this process. It’s a $10 million fixed price remediation project that is bonded. We are working to drive a more diverse portfolio and this is a commercial project so we’re excited to see this kind of work coming up. We've spent a lot of time focused on our bonding facility and squaring that up, ensuring that we can bond projects going forward. With that, we've been putting a lot of time on our balance sheet, and it's solid. We are upgrading our financial systems. We have a new CFO in place. And so from an operations standpoint I would say the first five months has been busy.
Where do you see opportunities for new services lines that Cabrera can expand into?
I believe in a shared vision and we brought our team together to develop the vision for the company and the values that will drive our operations going forward. We do traditional environmental work which is about 30 percent of our portfolio, so we are an environmental company. Our core competency is on the radiological side where we have been and will continue to be an industry leader in providing these services. With 15 health physicists along with our instrumentation and technology, we’re well positioned for future growth. We have made the decision to build on our depleted uranium munitions expertise and move into the military munitions market. Our strategy is going to build on technologies such as MetalMapper and focus on the entry into that market from a geophysics standpoint. We've got the physicists, the data management, the geographic information systems, and the positioning systems and we are looking to build around these. The radiological services market is going to be our bread and butter, and we continue to see a lot of potential growth going forward.
Without a lot of DOE work going on, a lot of companies have changed their focus and are working to break into the FUSRAP side of the house. Therefore, the competition is changing for this work going forward. There are good opportunities coming up on the FUSRAP Program and we are positioning for this growth. I think if you look at revenue, Shaw is probably the number one FUSRAP contractor, and we'd be number two. We want to continue in that mode. We've got the pending Maywood decision, the re-bid of SLDA, and a number of other great opportunities that are coming up in the next year.
Cabrera has a solid resume with the Department of Energy but currently, we are not supporting this market. We're part of the AMWTP project and are working to bring both technical review and radiological characterization to that project. DOE has got to be a focus for Cabrera. With our resume of site closure, our technology, and our radiological sciences, we’re a great fit both as a Small Business prime and as a subcontractor for DOE.
A senior government manager told us recently that Cabrera is at its best when it’s a boutique firm that’s not trying to be everything to everyone. Would you agree with that?
I'd agree with that. I think if you were to ask what our core competency is, it’s site closure. We do remediation and we do it well. We're finishing up the Linde project now, and have received great accolades from the Buffalo Corps, several of whom also oversee our SLDA project. If you look at what Cabrera does, we bring technology and technical resources to solve tough challenges. We want to be at the forefront of the tougher radiological projects, that's what we are keyed in on.
How do you balance the desire to grow with the desire to maintain your identity as a boutique firm?
The growth side of the house is very important. In the last 10 years we have literally tripled in size, if not more. From a revenue view, this year is going to be down a little with several projects coming to an end and SLDA being rebid. I want to point out that we are still on site at SLDA. There has been a lot of misinformation that has been put out there that we've been terminated, that we're gone, and that just is not the case. We have recently removed all of the waste generated and are currently doing site maintenance. We are on a team trying to re-win that project and hope to be providing radiological solutions in the near future.
From a growth standpoint though, if you look at our income statement, we want our top line to grow. We're not trying to be everything. We feel that the military munitions, especially on the geophysics side, is an area that is not too different than our niche capabilities. It's a big market. And we believe that right there is a solid growth platform for the company along with maintaining what we do.
Lorenzo Cabrera and the Board of Directors brought me in to drive the profitability of the company and to focus on growth. So if you look at where our contract base is now, it’s primarily with the Corps of Engineers. We work out of Buffalo, Baltimore, St. Louis, New York, Kansas City, and Sacramento Districts. We also have a contract with the Navy BRAC on the West Coast. We see solid growth coming from these existing contracts.
From a business line standpoint we want to re-establish ourselves within the Department of Energy as a go-to small business contractor for radiological services. And then, as I talked about, we'll focus on the military munitions where we are currently making a strategic hire.
What are some the lessons Cabrera learned from its time at the SLDA FUSRAP project and what will be part of your new approach going forward?
While I was not with the company during SLDA, the team worked very hard on developing our lessons learned from the activities that occurred that day. One item that needs to be emphasized is that the company self-reported this incident to the client. We put together a very comprehensive corrective action plan. As I was coming to meet with you, I asked our team to pull together everything in the press where Cabrera is mentioned on SLDA and I couldn't put it in my briefcase, it was unbelievable. The project, whether any issues ever happened with Cabrera, would still be in the same boat as it is right now, being rebid. The contract vehicle was Fixed Price and the unknown nature of the material in the trenches led to changed conditions from the onset of the project. Detailed lessons learned were derived, a new management structure was put into place, risk processes were developed and implemented, people lost their jobs. It was a big deal for Cabrera. It has hurt the company both financially with lost revenue and in the eyes of the market.
I would say from a lessons learned standpoint for Cabrera, having the right project and site management team in place and ensuring open book communications across functional teams is crucial to success on all of our projects. There was miscommunication that happened in the field that day. There were a number of mistakes that came
together that resulted in the material being moved into the waste processing facility. It is very interesting to read the text from our self-reporting and our lessons learned. We have taken these lessons learned and retooled our systems and processes so that the breakdowns that occurred will not happen again.
While it wasn't anticipated that you would have the kind of waste that was discovered at SLDA, does that fit in with your earlier statement that you think Cabrera can be a niche company dealing with difficult radiological situations?
Absolutely. I would love to have that project again. Keep in mind that Cabrera has completed hundreds of tough radiological projects with solid client feedback. We've got the people, technology, and systems to manage complex projects. We're an integrator; we can bring the right resources in to deal with challenging radiological situations. The SLDA issues were centered around human error that led to miscommunication.
You mentioned you have a new approach to fixed price work that you've put in place since coming onboard. If Cabrera had put in such a process before bidding this kind of work at a fixed price job, would it have taken into account sort of these risks and made it a no-bid or a bid in a different way?
Yes. As I noted, we are implementing a very stringent risk register where the project manager and his team will identify all risks beforehand prior to the bid even going in. This is discussed in detail with the project team and management where we discuss scenarios that could lead to risk and go through the management team and their capabilities. Our reorganization has pushed authority down a level so we will have more management focus on our sites and with our clients.
One thing that the SLDA contracts personnel told our project manager was that we were way too hard on ourselves in the corrective action plan. We weren't. What has floored me since taking the job with Cabrera and diving into the SLDA issues is that there is a lot of the misinformation that is out there. I have heard that Cabrera was terminated on the project which is not the case, we're still working out there. So a big part of my job right now has been in the re-branding of the company post-SLDA and putting forth the systems where this will not happen again.
When it comes to the re-bid of SLDA, is the right contract vehicle a new separate re-bid contract, or would you support one of the existing vehicles out of Huntsville being the vehicle?
I know that's come up. I would rather see a separate contract, so it's not just confined to the eight Worldwide Environmental Remediation Services contract holders. It gives an opportunity for other contractors to come in with some new ideas that may not be part of that WERS group of contract holders.
Because of the unique circumstances of the SLDA project, does it need some unique contract approaches? Would you be worried about kind of a one-size-fits-all task order approach?
It's a program. And there will definitely be multiple tasks performed under this program. I know that the Corps is planning to treat this as a single award task order contract where there will be multiple tasks under it. The contract vehicle certainly has to be in a cost-plus mode. It would be good to see the Corps allow the contractor to set a base fee and then pursue the opportunity to earn additional fee based on some performance milestones that are developed. That could be a good approach to drive some innovation and drive safety from a performance standpoint.
As you re-brand do you feel that it's more likely that Cabrera will be able to fix things with the Corps at SLDA or will you need to go do good work elsewhere?
First of all, the majority of our business comes from the Corps where we are providing very good service and are receiving strong ratings from our various clients. As for SLDA, we are moving forward and have made the necessary corrections so this will not occur again. Our corrective actions and management changes were well received. In discussions with the client, I was told that the lessons learned on the project and some of our key people would be a strength to any team. We are part of a very good team on SLDA, and we plan to be back at the site helping solve the challenges associated with the project. As discussed earlier, we put a new project manager on that job who was well liked by our client and with the lessons learned that we put together along with the modifications and changes that we put in place on that project, we become a strong and viable service for the Corps in supporting this project.
If this hadn't happened at SLDA, would you have taken a different role in the partnership you’ve formed for rebid?
No, I think we're in the same role, doing what we do best. And that's because we're definitely working to our core competencies on the radiological science side of this complex project.
How will you be able to take the lessons learned at SLDA forward into other work?
We are implementing a lot of change in the company, some of it falling out of the lessons learned on this project. Spending more time with the scope during the bid stage, having dialogue on the right project management team driving the accountability down a level in the organization where our management spends more time with their project teams, and, putting a lot of focus on the risk register where we will spend a lot of time on both contractual risk and the business risk will improve all aspects of our work including client satisfaction going forward.
Given your history at Weston, Shaw, and now at Cabrera, you've been in the position of trying to rekindle the Department of Energy market several times. What lessons have you learned in terms of leveraging that past experience and how do you rekindle Department of Energy work?
First of all, I've never had the resume that I have with Cabrera. From a site closure and a radiological science side of the house, I can’t think of another small business with the depth of resources. Cabrera actually has a good resume with the DOE but we are currently not working on any projects. We're not a staffing company, we're a project company. And with a lot of the work coming out as small business within the DOE and some of these tougher challenging projects, Cabrera will be an excellent prime and/or teaming partner. We have great relationships with some of the bigger DOE M&O contractors, and are supporting