Government contractors face a critical decision when launching their operations: invest in visible assets that project success or build invisible systems that enable performance. Margarita Howard, sole owner and CEO/president of HX5, chose the latter approach when establishing her company in 2004, prioritizing operational infrastructure over cosmetic appearances.
This decision proved foundational to HX5’s development into a contractor employing over 1,000 people across 34 states and 90 government locations. Howard’s infrastructure-first philosophy demonstrates how disciplined capital allocation can create competitive advantages in specialized markets.
Foundation Over Facade
Howard’s approach diverged from typical startup spending patterns. Rather than allocating resources to impressive offices or high-end furniture, she focused on systems that would enable immediate operational credibility with government clients.
“Right from the beginning, we invested heavily upfront in purchasing and implementing a specialized accounting system developed for government service contracting firms,” Howard explains. This system served multiple purposes beyond basic bookkeeping. “A system we knew the government was very familiar with and that would provide us the necessary accounting tools to pass government billing audits and gain government approval for use in the performance of our government contracts.”
The accounting system became HX5’s billing mechanism for government work, establishing immediate professional credibility. Government agencies recognize contractors who understand compliance requirements from the outset, viewing such preparedness as an indicator of operational sophistication.
Howard emphasizes the conscious nature of this trade-off: “That’s something else that we did very early on, before we got big fancy furniture or offices or anything like that.” This statement captures the essence of her resource allocation philosophy — operational capability before cosmetic enhancement.
Competitive Differentiation Through Preparation
The infrastructure investment created unexpected competitive advantages beyond compliance. Large contractors, who typically serve as prime contractors on major government projects, noticed HX5’s professional systems despite the company’s small size.
“So, that was also very attractive to large businesses, that we were very small at the time and that we already had this government accounting system in place that those large businesses had,” Howard notes. This observation reveals how infrastructure investments can signal organizational maturity regardless of company size.
Large contractors must meet small business participation requirements on government projects. Finding small contractors with professional systems reduces their administrative burden and project risk. HX5’s early infrastructure investments positioned the company as a preferred subcontracting partner.
Calculated Risk Management
Howard acknowledges the financial risk inherent in her infrastructure-first approach. The Small Business Administration provides guidance on operational investments, but doesn’t mandate specific choices for new contractors.
“Those were investments a company made that were very key in the beginning. And certainly the SBA, the Small Business Administration makes those recommendations, but they don’t force you,” Howard explains. “Yeah. And it was a risk that we took and it highly paid off.”
This risk assessment demonstrates Howard’s understanding that government contracting success requires upfront investments in capabilities that may not generate immediate returns. Her willingness to accept short-term financial pressure for long-term operational advantage reflects sophisticated business planning.
Infrastructure as Business Development
The accounting system investment functioned as an indirect business development tool. Government agencies and prime contractors could immediately assess HX5’s operational readiness through its professional systems, reducing concerns about working with a new company.
Margarita Howard’s infrastructure investments extended beyond accounting software to encompass all operational systems necessary for government contracting. This comprehensive approach addressed the complex requirements that characterize government work, from proposal development to contract management.
The strategy proved particularly effective because government contracting involves extensive oversight and audit requirements. Contractors without proper systems face operational disruptions when agencies conduct reviews, potentially damaging client relationships and future opportunities.
Long-term Validation
HX5’s growth trajectory validates Howard’s infrastructure-first philosophy. The company expanded from a startup operation to a significant contractor supporting NASA, Army, Navy, Air Force, and General Services Administration missions. This expansion required systems capable of scaling with increased contract volume and complexity.
Margarita Howard’s approach offers lessons for contractors entering government markets: operational infrastructure creates credibility that cosmetic investments cannot replicate. Professional systems demonstrate commitment to compliance and performance standards that government agencies require.
The infrastructure-first strategy enabled HX5 to compete effectively against larger, established contractors by demonstrating operational readiness from the outset. Howard’s disciplined resource allocation created sustainable competitive advantages that continue supporting the company’s market position.
