Defense contractors diversify while eying sequestration

Bruce Smith/AP

Like many in states with a heavy defense presence, South Carolinians are warily following Congress’ stalemated budget talks and hoping for a breakthrough that will head off the dreaded automatic spending cuts known as sequestration.

Allowing sequestration to take effect would be a “national disgrace” that would jeopardize thousands of jobs, Sen. Lindsey Graham, R-S.C., said in August following a six-city tour to dramatize the risks. The tour included an appearance during a fact-finding visit from Deputy Defense Secretary Ashton B. Carter.

Republican Gov. Nikki Haley told the Columbia, S.C., State, “I’m killing myself trying to create jobs in the private sector every day . . . and we’re watching Congress turn around and undo everything I’m trying to do.”

But for many in the Palmetto State’s contracting community, there is both hope for avoiding the blows from a budget ax and acceptance of the need for long-term adjustments to new defense spending realities.

“Employees are concerned but calm,” Hank Taylor, vice president of global business development for the Charleston Regional Development Alliance told Government Executive. “The message from folks in the defense community is one of diversification in the customer base, to work not just for DoD, but with other agencies that would not be hit as hard with sequestration.”

South Carolina is not among the states likely to lose the most jobs -- California and Virginia are at the top of the list, according to a July study for the Aerospace Industries Association by George Mason University economist Stephen Fuller. But South Carolina does stand to shed 14,732 defense and 15,623 nondefense jobs, the report found. And South Carolina’s unemployment rate of 9.6 percent is the nation’s sixth highest, according to the Bureau of Labor Statistics, which adds to its vulnerability.

The federal impact is strongest in the area around Charleston, home to Joint Base Charleston and its 24,000 active-duty troops, reserves and civilian employees, as well as many military and government retirees with technology skills and security clearance. Especially important is the Space and Naval Warfare Systems Center Atlantic, known as SPAWAR.

Also enhancing local employment are facilities from the Energy, Justice and State departments and the National Oceanic and Atmospheric Administration. Hundreds of contractors work in the region, among them Science Applications International Corp., Scientific Research Corp. and BAE Systems. “We have a contracts ceiling in excess of $500 million,” said Kris Busch, vice president and general manager of support for maritime and defense solutions at BAE. Of that company’s 2,000 employees, 450 are in Charleston, providing professional and technical services to the Navy for combat weapons, security and law enforcement as well as security and automation-related services to other agencies.

“Companies throughout the defense and aerospace industries have been bracing for cuts for quite a while,” Busch said. “They’ve been making cuts to infrastructure out of business preparations.” In areas such as information technology and in corporate funding for recruitment and improved education in the fields of science, technology, engineering and mathematics, “the impacts are already occurring in local communities,” he said.

The military’s presence in Charleston “is an important factor in our overall regional economic development strategy,” Taylor said. In fields such as advanced security and IT, planners are looking for commercial applications of items originally delivered to the government. “Companies in IT are quick to point out that they can bring efficiencies to customers, so as budget realities fit in, they would continue to look at opportunities to make agencies more efficient with their products and services,” he said.

As a community, he added, “we are focusing on technical skills in workforce development, engineering skills at the universities aligned behind economic development. We continue to look long term.”

Hence, Taylor said, “our political leaders are on point on this.”

Within BAE, Busch said, “our senior leaders continue to advocate with military officials and industry executives on sequestration, helping try to identify solutions that carefully and thoughtfully reduce defense spending, after considering strategic consideration that may affect national security.” The company also has legislative affairs staff lobbying Congress.

“But there’s no clear vision what the Defense Department is going to do,” he said. “Workforce planning has become very difficult because everything has slowed to a halt, and there’s a lot of confusion as to what’s actually going to be impacted. We would hope the leaders in Washington can come to some agreement very soon.”

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