Defending Defense | The companies that supply the U.S. military drive the state's economy. But does anyone care?
Photo/Edd Cote
Rich Helle, president of BJA Magnetics of Rutland, is one of 2,434 defense contractors in Massachusetts.
Photo/Edd Cote
Rich Helle, president of BJA Magnetics of Rutland, is one of 2,434 defense contractors in Massachusetts.
Rich Helle knew his company, BJA Magnetics, in Rutland could offer large defense companies great magnetic components, but he wasn't sure how to break into the behemoth that is the U.S. defense industry.
Over time - and with a lot of networking - BJA succeeded in finding a niche in the defense world. And as a result the company is one of 2,434 defense companies that employ 32,240 workers in Massachusetts.
But there are challenges the state faces in maintaining and growing its defense and high tech sectors as well as protecting its existing military bases.
A recent report from the Mass Insight Corp., a Boston-based consulting firm, found that the broader category of defense and high tech is responsible for 331,000 jobs and âhas the largest economic impact of any state industry.â However, the report warns that âslowing growth and the lack of a state strategyâ could lead to Massachusetts becoming a âhigh-tech outpost.â
Covering The Bases
One key aspect of protecting the state's defense industry is protecting its two military bases, according to Greg Bialecki, undersecretary of business development at the Executive Office of Housing and Economic Development.
âThe two military bases that we have are very important to keep in Massachusetts. As can be seen from the past decade, any military base that isn't growing is at risk to be closed,â Bialecki said.
The Pentagon periodically undertakes the Base Realignment and Closure (BRAC) process to reassess its assets. Those reviews can result in base closure, like it did for Fort Devens in the 1980s.
More recently in 2005, Hanscom Air Force Base in Bedford and the Natick Soldier Systems Center made it through another BRAC process. But the state's not resting on its laurels.
Gov. Deval Patrick and other state officials are lobbying, along with the state's congressional delegation, to make Massachusetts home to the first new Air Force command in 20 years: the Cyberspace Command. Of course, 17 other states are trying too, but Massachusetts has a lot of high tech and scientific companies that could support the new command, Bialecki said.
âHanscom is the big dog in the area. It has a $3 billion impact on the region's economy and we want to ensure that continues,â said Brigadier General Donald Quenneville USAF (Ret.), director of the Defense Technology Initiative, a regional organization in Waltham that works on behalf of New England's defense companies and the region's military facilities.
Another large part of the state's defense industry is the Natick Soldier Systems Center, a military research complex where a wide range of clothing, food, shelter and other supplies are developed and tested, which contributed $500 million to the state's economy for the last two-year period, according to Len Dube, the principal deputy to the center's commanding general.
During the last BRAC process, the Pentagon made it clear it would like to see more activity at the center. In response, the Natick center created a Science and Technology Advisory Board, made up of defense companies, academia, business people and other community leaders. Its purpose is to bring the center and its research to the attention of more people, while bringing smaller, technical companies to the notice of one of the larger defense companies or the center itself.
âWe need to capitalize more on the work we do here, and we need to communicate just how much we already do,â Dube said.
Working The Network
And BJA Magnetics of Rutland is just the kind of company Bialecki and Dube are talking about.
In order to get established within the defense sector, Helle had a steep learning curve to climb. Several years ago the couple learned about the Department of Defense's procurement technical assistance centers, which bring together large defense contractors and small companies who can help contractors meet requirements of using a percentage of their contracts on small businesses.
Helle began attending conferences, which are set up along the lines of speed-dating. Companies make appointments with the larger defense firms, and spend five to 10 minutes describing their products and services to the Raytheons and BAE Systems of the world.
By attending these conferences, the company has gotten a number of contracts including one to provide precise magnets for new naval warships that will use electric power in part from its propellers.
âWe can provide speed, flexibility and innovation that some larger producers just can't do quickly,â said Helle, who is president of the company that his wife Jan owns.
While there are options for Massachusetts companies like BJA to network with the big players in the defense sector, at least one important stream of funding for similar high-tech firms is in danger. Small Business Innovation Research grants, a program administered by the Small Business Administration, is up for re-authorization. And there's a current political fight that could jeopardize the program's funding and mission.
The SBIR funds come from percentages of research dollars at agencies like the Department of Defense and the National Institutes of Health. Historically, small and medium Massachusetts companies have excelled at getting SBIR grants from the Department of Defense to develop ideas and then bring them to market. In 2005, the state ranked second in the nation for SBIR grants, and first in Small Business Technology Transfer grants, receiving a total of $137 million.
But in 2005, the number of those grants also dropped from 528 to 503, a decrease of 4.7 percent. Total funding dropping 13 percent at the same time.
Politics Aside
Right now, the SBIR program needs to be reauthorized by the U.S. Congress by Sept. 30 or it will expire. There is pressure from the biotech industry to allow companies that are majority-owned by larger companies to qualify for grants and increase the amount of later stage grants. An SBIR bill that included those changes passed the U.S. Congress, but the issue is now being studied by the U.S. Senate's Small Business and Entrepreneurship Committee, chaired by U.S. Sen. John Kerry, D-MA.
â(Executive Office of Housing and Economic Development) Secretary (Daniel) O'Connor works very closely with Sen. Kerry on a variety of issues. We know there are a number of small defense companies who have benefitted from the program and we want to make sure those federal opportunities to support small, innovative businesses continues,â Bialecki said.
âI think we in the small business community know the importance of research and development companies in Massachusetts, and the number is higher than those in the biotech industry. We need to make sure we preserve the same kind of activity levels,â said Michael Squillante, vice president of research with SBIR-funded Radiation Monitoring Devices Inc. in Watertown. âI also think that the state understands about small companies, that many of them are ready to grow and they want to make sure they don't grow somewhere else.â
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