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Desperately seeking defense dollars procurement

Business coalition works to increase Pentagon’s role in Oregon’s economy

By Dave Mazza

The folding tables sport faded skirting. Worn carpet stretches over damp concrete floors. Exhibitors and attendees look desperate or bored. The feel here at the government procurement fair is like any other trade show but with one important difference. People on both sides of the exhibition tables hope to make defense dollars a much bigger part of Oregon’s economy.

“This state has been ravaged by offshore outsourcing,” states John Bannister, executive director of the Pacific Northwest Defense Coalition. “For a company that has good equipment and real resources, they see defense as the next echelon.”

Reaching that next echelon was what the Jan. 12 “Government Procurement Fair 2006” was all about. Of the more than 30 exhibitors filling the Lloyd Center Double Tree exhibition hall, at least half were companies that had made that leap. The products and services these companies were providing the Defense Department ranged from titanium armor plates for tanks to special cushions for fighter jet seats and even gluten-free, wheat-free frozen foods. The remainder of the exhibitors were government agencies seeking new contractors and anxious to tell you how easily you could become one.

Then there were workshops like “Introducing Innovative Products andand Technology to the Department of Defense through Defense Acquisition Challenge and the Small Business Innovative Research/Small Business Technology Transfer Programs.” Behind the intimidating title was a seemingly interminable PowerPoint presentation explaining how to create partnerships that will more easily open government doors to your products, services and even ideas.

The partnerships Bannister and the workshop presenter speak of bring together companies seeking defense dollars with organizations already part of the military- industrial complex, such as universities. By doing so, the interested company can become eligible for federal seed money to help in the development of proposals, the administration of the bidding and contract process and in the actual start-up phase of production.

This partner strategy has generated a new industry of its own. Companies like the Northwest-based TechLink earn their keep by facilitating the creation of partnerships with the federal government. According to their literature, TechLink has established six such partnerships in Oregon, 27 in Washington, 65 in Idaho and 194 in Montana, TechLink’s home state. The company claims it secured more than $54 million in new research and development funding for clients and assisted more than 150 Northwest companies.

Through the efforts of TechLink and others, Oregon’s small businesses are overcoming the challenges they face making their way across federal procurement territory. As Bannister points out, the removal of those impediments combined with a commitment to quality on the part of those small businesses can create a new, diversified economy in which citizens, business and the government are all winners.

It’s a sentiment held by many of Oregon’s elected officials. U.S. Rep. Darlene Hooley, D-Oregon, is a member of the Pacific Northwest Defense Coalition Board of Advisors. U.S. Sen. Gordon Smith, R-Oregon, besides giving a brief bit of inspiration at the fair, is working overtime to bring defense dollars into the region. He and U.S. Sen. Ron Wyden, D-Oregon, jointly apply to the Senate Appropriations Committee for Oregon’s fair share of Pentagon funds — unique acts of Senate bipartisanism. Wyden sees it as one of his duties to help link Oregon to the Pentagon by simplifying the process whereby Oregon business’ can qualify for government contracts. As he told the Oregon Business Magazine last year, “‘We’re trying to act as a one-stop process so these people don’t have to go through bureaucratic water torture.’”

Oregon’s relationship to the military has historically been defined by specific circumstances. During World War I, Oregon’s forests were critical to the nation’s newly created air force, providing the spruce and fir from which were constructed aircraft wings and fuselages. In World War II, Portland became home to shipyards that built and launched hundreds of “Liberty Ships,” Henry Kaiser’s expendable transports that moved thousands of soldiers and tons of supplies to battlefields in Europe and the Pacific. In each case, however, once hostilities ended, so too did the flow of defense dollars to Oregon.

Over the next 50 years, as the United States evolved into a superpower and its economy became increasingly militarized, Oregon continued to remain outside the military revenue stream. Part of this is due to factors like geography. The state’s coast lacks seaports that would support naval stations like those in San Francisco Bay and Puget Sound. Oregon also lacks the remote, yet accessible, access to production centers in the deserts of California that are home to a number of air force bases. For most of this time, communities in the state were content to rely on traditional industries like timber and fishing. Even with the collapse of those industries in the 1980s and the growth of high tech in the 1990s, Oregon remains, according to Defense Department figures, at near bottom — 50th out of 51 places — in per capita receipt of defense dollars. At $151 per resident, Oregon beats out Idaho’s $143 but pales in comparison with third-place Connecticut’s $2,559 or fourth-place Alaska’s $2,103 per resident spending.

Things are changing. A long-time placeholder at the bottom of the list, Oregon is moving upwards among states receiving defense dollars on prime contracts — contracts worth more than $25,000 — currently holding 39th place. One of the reasons for this change is high tech stepping into the places formerly held by timber and other resource extraction industries that are now shadows of their former selves. Then there is the record-breaking expansion of the military under the current Bush administration, an expansion that emphasizes research and development of new equipment rather than dollars going to personnel and maintenance. Perhaps most important is the administration’s emphasis on privatizing military services wherever possible, leading to new opportunities for smaller companies to secure defense dollars for providing security, food services and transportation, even in combat zones.

Portland-based HemCon is one company that hopes to prosper from the nation’s expanded military. Founded in 2001, HemCon offers a new flexible bandage made from powdered shrimp shells that is showing to be far more effective in stopping hemorrhaging than traditional bandages. As company spokesperson Bill Gettler points out, “even if your arm is blown off and you’re hemorrhaging, the HemCon will mold to the shape of the wound and stop the bleeding — saving your life.”

The founding of the company serendipitously coincided with the entrance of a new administration bent on a new wave of military spending and wars with which to use the new equipment. While HemCon is reaching out to potential civilian customers like fire departments and emergency rooms, they see the military as their primary market and believe the Pentagon will continue to buy all the HemCon products they can access.

Other companies selling to the Pentagon are more cautious about becoming over-reliant on defense dollars. Advanced Power Technology is one such company. The Bend, Ore.-based firm produces semiconductors used in industrial applications, telecommunications, medical imaging systems and for military and aerospace power systems. They employ more than 800 workers — half of them in Oregon — and enjoyed revenues of $67 million in 2004. About 30 percent of those revenues came from business with the military.

“That’s a figure we are comfortable with,” states representative Mike Malinger. “Should there be a downturn in defense spending, we can shift our focus to other areas to make up the difference.”

While that hasn’t been necessary, Malinger notes, there are enough people in the business that can remember when Boeing nearly closed down Seattle to keep market diversity the keystone of the company’s business plan.

Other exhibitors expressed the same intent of making defense dollars just one of many revenue sources. Yet as more companies are brought into the Pentagon family, the cumulative effect is nearly the same as securing big projects like shipyards and aircraft plants in the region. But unlike the shipyard turning out nuclear submarines or the plant building bombers, this new, more discrete, military-industrial complex poses new challenges to those who wish to turn swords into plowshares. First and foremost is identifying just how much of the region’s economic fabric is made of defense dollars. Even more challenging is coming up with a way to extricate ourselves from a hyper-militarized economy. In the world John Bannister and the members of the Pacific Northwest Defense Coalition are building, the big symbols are gone. The new merchants of death are more likely located in any of a thousand suburban industrial parks or campuses.

The new warfare state that so many are pushing Oregon to join is not without new opportunities for those who seek reorganizing our economy along peaceful lines. With more defense work being performed by small businesses, the number of businesses vulnerable to pressure from a more militant peace movement is also growing. The question is whether leaders of the peace movement can break from past practices and recognize they must do more than mourn and march around empty buildings. Should they join with other parts of the progressive movement, particularly labor, it may be possible to beat Bannister and his crowd in this very important race. As evidenced by the procurement fair, the starting gun has already been fired. Now it’s time to get running.

Dave Mazza is editor of The Portland Alliance.