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If you were tasked with reorganizing your finance organization, how would you restructure the function? Join Joe Cardoso, CFO at Keolis North America, as he explains how he structured his company’s finance department to compete for state and municipal contracts.
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“We’re running the rails and the buses throughout Europe and even down in Australia with its light rail. We’re bringing that technology and that breadth of experience here, and we’re the new guys on the block.”
The following is an edited abstract from the CFO Thought Leader podcast featuring Keolis North America CFO Joe Cardoso and Jack Sweeney, co-host of CFO Thought Leader.
CFOTL: When you stepped into your current role, did you arrive with a certain philosophy of finance and the kind of job that you wanted to create for yourself?
Cardoso: I did. It was a new company in so far as Keolis really looked at the United States as their growing market. They’re based in Paris, France. They had really no footprint into the United States. In the transportation world, you can’t just open up shop and bring some executives over and start doing business. In the United States, you have to qualify to bid on contracts because the transportation world is a contract world. All the contracts are bid upon, and you have to qualify for different contracts throughout the United States.
Keolis went out and purchased a mid-size transportation company based in Los Angeles. Then, after the purchase, they were bringing out some key executives, and that’s how I came upon the CFO role here. When I stepped into it, it was basically a blank slate. They pretty much let me create the finance department as I saw fit. There was a lot of things from the prior company, which was a private equity-owned company. Those companies buy small companies throughout the country, bundle them together, and then sell them. When I stepped in, it was a hodge podge of different accounting and finance roles within the company. I was able to build my own finance department.
One of the first things I thought was important, at least through the CFO role, was that at some of my previous companies the FP&A side of the department usually reported up through either a VP of accounting or a corporate controller type of position. I really didn’t see that brought much value to the company, so one of the first things I did was I basically split the finance department in two. I have my FP&A team, which is headed by a VP of FP&A; then I have my accounting side, which is headed up by my corporate controller. I thought that was one of the key first things I did in order to stabilize some of the things that were going on here.
CFOTL: What is the competitive landscape – and Keolis’s edge –for the type of services that Keolis offers today in North America?
The following is an edited abstract from the CFO Thought Leader podcast featuring Keolis North America CFO Joe Cardoso and Jack Sweeney, co-host of CFO Thought Leader.
CFOTL: When you stepped into your current role, did you arrive with a certain philosophy of finance and the kind of job that you wanted to create for yourself?
Cardoso: I did. It was a new company in so far as Keolis really looked at the United States as their growing market. They're based in Paris, France. They had really no footprint into the United States. In the transportation world, you can't just open up shop and bring some executives over and start doing business. In the United States, you have to qualify to bid on contracts because the transportation world is a contract world. All the contracts are bid upon, and you have to qualify for different contracts throughout the United States.
Keolis went out and purchased a mid-size transportation company based in Los Angeles. Then, after the purchase, they were bringing out some key executives, and that's how I came upon the CFO role here. When I stepped into it, it was basically a blank slate. They pretty much let me create the finance department as I saw fit. There was a lot of things from the prior company, which was a private equity-owned company. Those companies buy small companies throughout the country, bundle them together, and then sell them. When I stepped in, it was a hodge podge of different accounting and finance roles within the company. I was able to build my own finance department.
One of the first things I thought was important, at least through the CFO role, was that at some of my previous companies the FP&A side of the department usually reported up through either a VP of accounting or a corporate controller type of position. I really didn't see that brought much value to the company, so one of the first things I did was I basically split the finance department in two. I have my FP&A team, which is headed by a VP of FP&A; then I have my accounting side, which is headed up by my corporate controller. I thought that was one of the key first things I did in order to stabilize some of the things that were going on here.
CFOTL: What is the competitive landscape – and Keolis’s edge –for the type of services that Keolis offers today in North America?
Cardoso: Right now I think our edge is that we're the new player in the marketplace. There are four major companies that are qualified to bid on the major contracts in basically the United States, more so than Canada or Mexico. We're in the U.S. Any contract over $15 to $20 million and above per year, which equates to most contracts now in the five- to 10-year basis, you're talking about anywhere from $300 million to half a billion dollars or more per contract. There are only a few players that are able to compete for that.
As Keolis got into this, we brought a lot of the technology that we have in Europe. We're running the rails and the buses throughout Europe and even down in Australia with its light rail. We're bringing that technology and that breadth of experience here, and we're the new guys on the block. As new contracts come up for bid, a lot of the cities, the states and municipalities were hungry for somebody else. They were hungry for somebody else to come in and give them some perspective on how maybe things could be run better, more efficiently, how things are done outside the major three players that had been really running transportation in the U.S. for probably the past 20 years.
CFOTL: Do these contracts come out as RFPs which require you to put together lengthy proposals?
Cardoso: Correct. All these contracts come out as RFPs, which we then need to respond to in a timely fashion. Usually, there's a dedicated time that we have to respond, and usually it takes two sides. One is we have the technical proposal where we have to write, and illustrate, and put together a plan to run the transportation system for the client. The other side is what is it going to cost? That's where finance comes in.
We have to put together a very detailed pricing proposal for the client so that we get to – depending on the contract because all contracts are different obviously – how the contractor gets paid – by either the revenue mile or by the bus or by the passenger on the vehicle if it's a bus. Then, if it's the rails, it's a completely separate revenue model as well. They're all different. It's a very detailed pricing model that takes a substantial amount of time to put together.
Another key change that I made was that in prior companies as well as the company Keolis had here before I came, the pricing side reported to the business development side. From a control perspective – again with my accounting background –I didn't feel that was a good way to run it. So, I brought the pricing into the finance. Basically, the finance had final say on the price, so there was no pressure from the sales people and from the ops people as to how you put together a price or how we should price things. I wanted to be completely independent from that side so we get a good, true price. So if we price something at a dollar, we know what that dollar's made up of.