By Drew Dixon
While U.S. Secretary of Defense Chuck Hagel announced Monday that there will be a return of Base Realignment and Closure, many associated with the defense industry on the First Coast say contractors should have been prepared for military downsizing well before the most recent development.
Exactly what will be closed and when is yet to be determined. But Hagel made it clear military cuts are coming in a BRAC set for 2017. With two substantial bases, Jacksonville Naval Air Station and Mayport Naval Station, First Coast defense contractors are watching the BRAC developments closely.
At Orion Solutions LLC on Jacksonville’s Southside, the company is projected to make $10 million in revenue this year, mostly in military contracts for technology, tactical training and maintenance. But the company, which employs mostly military veterans, has already started to branch out into civilian information technology contracts in anticipation of shrinking military spending.
“Unfortunately, it’s very murky waters until we figure out what the nuts and bolts [of BRAC] will look like for us,” said John Murphy, vice president of Orion. “But our I.T. commercial practice is a nice little component for us. We also have a research and applied materials practice that we’ve spooled up over the past year with nanotechnology-based contracts.
“Our defense contract work has grown. And although we are still very much a defense contractor, we are balancing it and mitigating it on a portfolio basis,” Murphy said.
Joe Marino, president of the Florida Defense Contractors Association, said the Orion Solutions model has become the paradigm for the industry rather than the pariah. Marino said it’s comforting that Florida Congressional delegation members such as Rep. Ander Crenshaw, R-Fla., and Sen. Marco Rubio, R-Fla., have vowed to challenge any pending closures in this state. But contractors should have started preparing for procurement to drop months if not years ago, he said.
Marino said the apex of Florida defense contracting was in 2010 when the state saw $14 billion in government contract procurement. Compared to the $5 billion in 2000, that was a huge boost. But the curve started taking a downward turn in 2012 when the figure for statewide defense contracting procurement started to drop, coming in at $13 billion.
With the war in Iraq behind the United States for the most part and military action in Afghanistan winding down, Marino said defense contracts in Florida are simply going to be decreasing and BRAC is going to be a reality.
“It’s not exactly a surprise that they’ve been proposing putting a BRAC in,” said Marino, who represents about 100 defense contractors in Florida. “Right now, we’re still in sort of a wait-and-see mode. … But Florida [contractors] seem to be taking the approach that we’re not going to wait for a BRAC announcement because [we] know installations or missions can be moved at any moment.”
Marino pointed to aircraft carriers at Mayport Naval Station as a prime example of moving targets in the defense contracting world. Once home to two traditional carriers, Mayport now has none of the massive vessels. And it’s still not certain that Mayport will get a nuclear aircraft carrier as politicians and officials at other installations such as Norfolk, Va., debate where new vessels should go.
Marino praised contractors who’ve positioned themselves to at least delve into civilian work and not limit their focus on defense work.
“Absolutely, diversification is certainly well underway,” Marino said. “There have been a lot of businesses and employees who have been doing good work in the [defense] industry. But they have products that they can take to other markets and they’re certainly doing that more and more.”
Miriam Pemberton, research fellow at the Institute of Policy Studies in Washington, has been studying the economic impact of defense downsizing on local, state and federal economies. She said she’s impressed that the state contractors association is promoting alternatives to just landing defense contracts for companies.
Pemberton said BRAC is coming and it’s going to happen as it has happened under different guises throughout U.S. history following the end of any period of warfare.
“You can try to protect your base or try to keep your defense contracts. But it simply makes sense to not put all your eggs in that basket given that we are ending two wars and are proceeding with a defense downsizing,” Pemberton said.
Several states are already developing diversification plans. But Pemberton said the most significant assistance to communities and defense contractors may be the Office of Economic Adjustment located in the Pentagon.
“Their whole purpose is to assist communities needing to plan for an economic transition either from a base closure or from defense industry contract losses,” Pemberton said, adding a community doesn’t even have to have a contract loss to get a grant from the program.
“As long as two to three percent of your workforce is dependent on defense contracts, you are eligible for one of these grants. They are non-competitive. They simply offer money to underwrite a planning process and technical assistance,” she said. “They [contractors] are not just thrown out on their own.”
Aaron Bowman is the former commander of Mayport Naval Station until he retired and went into civilian work in 2011. He spent a stint at BAE Systems, which used to be known as Atlantic Marine, that provides maintenance and repair work for the U.S. Navy. Bowman now is the senior vice president of business development for JAX USA Partnership and sits on the military issues committee for JAX Chamber.
Bowman acknowledged anytime BRAC is mentioned it evokes anxiety among defense contractors. After all, Cecil Field on Jacksonville’s Westside was closed as part of BRAC in 1999. But Bowman said it’s doubtful there will be any deep cuts to Mayport or Jacksonville Naval Air Station.
“If I look over at the last four to five years at what steps we’ve taken at Mayport, and NAS Jax for that matter, if you look at what the Navy has spent in infrastructure… it’s a pretty darn strong case that the Navy recognizes the importance strategically and geographically of having Mayport as a viable and active base,” Bowman said.
The basin at Mayport was dredged to 50 feet deep for larger nuclear aircraft carriers. Roads are already being revamped at the base. The Navy also spent over $20 million on a new fitness gym and base housing has already undergone revitalization — all signs, Bowman said, of a solid military commitment to the First Coast.
Ultimately, while Bowman said he’s confident Jacksonville bases may evade much of BRAC, it is incumbent among defense contractors to eye additional work outside government jobs.
“I think what happened this week is an acknowledgement that we have to look at everything we’re doing,” Bowman said. “I would hope that any company out there at all times is constantly re-evaluating where they are and where they want to go and what they’re doing. I would say, yeah, now’s a good time.”