The Security Economy Soars
Research developments in security and defense initiatives are applicable in other sectors.
By Mark Kleszczewski
National trends in the aerospace, aviation, and defense industries have been positive throughout the last decade, though with the wars in Iraq and Afghanistan winding down and increasing concern about federal deficits, defense spending is declining in certain areas. However, even more than a decade after the 9/11 terrorist attacks, strong support continues for optimizing the U.S. military’s deterrent capabilities and for ongoing research in technologies designed to protect U.S. borders from terrorist and high-tech criminal threats. From upgrades in police training to cutting-edge simulations and breakthroughs in materials science, activity and funding in the homeland security and defense economy and its many subsectors is on the upswing.
According to the Congressional Budget Office, overall Department of Defense (DoD) discretionary funding is projected to grow 1.8 percent annually between 2010 and 2015 based on current policy priorities. But the homeland security niche, according to analysts at financial services firm Morgan Keegan, is expected to grow 12 percent annually through 2013. Security screening in particular is expected to grow 10 percent to 15 percent annually in coming years, as screening of air and sea cargo at ports of entry increases. The industry also features opportunities for OEMs, such as those involved in infrared cameras used to protect critical buildings, a fast-growing market slated to expand 20 percent annually.
Strengthening Community Ties
As security technology and services grow, traditional military bases in the post-BRAC era are redefining their missions and pursuing new ways of working with their surrounding communities.
In western Illinois and eastern Iowa, the Quad Cities region is pursuing a growth strategy which taps into opportunities stemming from the Rock Island Arsenal, which recently celebrated its 150th anniversary as a leading center of military manufacturing and logistics. The arsenal, also home to the U.S. Army’s Sustainment Command, will manage the Army’s new EAGLE program, which stands for Enhanced Army Global Logistics Enterprise.
“The capability that Rock Island brings is much more than just a factory,” says retired Maj. Gen. Yves Fontaine, CEO, Fontaine Consulting LLC. “It’s a huge business with global reach that few know about. The EAGLE program is also a new way of doing business for the Army. It saves money and synchronizes operations by consolidating the contracting of civilian business capability in support of our Army’s requirements around the world.”
Expenditures under the program — worth $23.8 billion during the next five years — will provide for logistical support to prepare forces for deployment, sustainment and redeployment primarily in three categories: materiel maintenance, retail/wholesale supply and transportation support. Under EAGLE, Fontaine explains, the Army is earmarking many of the contracts for small businesses, giving them a chance to bid on substantial projects, many of which tie into the region’s target industries and extensive industrial capabilities.
More than 500 local companies have ties to the arsenal and have worked on more than 6,000 contracts worth $1.7 billion during the last 10 years, notes Paul Rumler, executive vice president, Quad Cities Chamber of Commerce. EAGLE contracts between $1 million to $35 million are specifically set aside for small businesses and can be fulfilled through partnerships between large and small companies. “We see a vast potential for government contracting as a whole and want to make sure that as many of our businesses as possible are competing for that,” Rumler says.
In other regions, prominent military bases continue to attract traditional defense contractors and suppliers, but are also driving the growth of new businesses and infrastructure. For example, in Indiana, the $2 billion Naval Surface Warfare Center (NSWC Crane) is the third-largest naval installation in the world, yet surrounding communities are able to take advantage of related DoD opportunities and attract original equipment manufacturers, while capitalizing on the construction of the Interstate 69 highway through the region.
“The base is not just about defense, they also support technology transfer and economic development,” says R.J. Reynolds, president and CEO, Radius Indiana. “There’s a regional approach here and a strong effort from the base to build business locally, so it’s a growth opportunity for us.”
Reynolds’ group maintains a base office and relationships with Crane officials at WestGate@Crane Technology Park, which has generated approximately $20 million in investments since its inception. The facility features commercial defense giants EG&G, SAIC and ITT, as well as a growing cluster of defense-related Fortune 500 companies and small businesses serving NSWC/NSA contracts. Nearby, the East Gate Business and Technology Center opened in the former Visteon facility in 2009 and is now home to employers such as Tri-Star Engineering, which provides engineering and other management services for defense and other clients. The new Interstate 69 “Innovation Highway,” scheduled to have all sections fully open to traffic by the end of 2014, is already fostering local educational and business opportunities while improving regional access to NSWC Crane.
Down in Florida, researchers are combining academic prowess with federal and state funding to accelerate discoveries useful to homeland security and beyond. “We pursued two parallel applications to develop porphyrin-based threat sensors that detect chemical nerve agents, blister agents and choking agents, but could also be used for subsequent decontamination,” says Dr. Randy Larsen, professor and chair, University of South Florida-Department of Chemistry.
The research team’s work, awarded $100,000 with an additional 1:1 match from the Florida High Tech Corridor, isn’t just applicable to security or defense-related needs. “We’ve created materials that we didn’t think were going to be possible before we started,” Larsen continues. “The funding of this project has led to a lot of new tentacles of research, so the investment in basic research really pays off.”
While politicians wrangle over legislative efforts such as the Cyber Intelligence Sharing and Protection Act, cybersecurity remains an area with substantial growth prospects, with Texas a leading center of activity in this subsector. San Antonio in particular has a large concentration of military and other national intelligence personnel conducting operations in the online world, and more than 80 private-sector information security companies in the San Antonio Defense Technology Cluster.
“Civic leadership is promoting a vision of ‘Cyber City’ in San Antonio, which boasts one of our nation’s largest military contingents with significant focus on cybersecurity,” says Dr. Gregory White, director, Center for Infrastructure Assurance and Security-The University of Texas at San Antonio (UTSA). “Combine the strong defense interest, public and private partnerships and diverse academic programs at all levels and you have the resources for an emerging and vital industry.”
Local collaborations illustrate how to further magnify the strength of an existing industry cluster while working together to solve common challenges.
“There’s a critical mass of companies and talent here that realistically make it the No. 2 cybersecurity node outside of the D.C. area — certainly on the services side,” says John Dickson, principal, Denim Group Ltd. “We’ve got the strong foundation of a good business climate and a very reasonable cost of living, but what’s interesting is how in the last few years we’ve stepped up information sharing that didn’t used to happen. Today this cross-pollination between the local commercial sector, UTSA and the military is having a big impact, especially on our workforce. We suspect there will be even more companies that will want to relocate or organically grow here.”
Leading For The Long Term
Homeland security companies and defense initiatives are busy developing solutions to secure our borders and ports, detect biological or chemical contaminants, enhance cybersecurity, ensure a rapid response in the wake of emergency or attack, and design other products related to national security. Business in all of these areas is certainly on the rise today, but communities and site selectors can also benefit from both industries’ multiplier effects in the long term.
“We’ve made some really innovative discoveries that we can leverage into other areas,” Larsen says. “The funding we got from the DoD isn’t just impacting homeland security and defense; it’s going to impact advanced catalytic chemistry, carbon sequestration, alternative fuels and solar energy. The visibility of MacDill Air Force Base here and the companies that evolved with the space industry, along with federal funding matched by Florida, have made this a rich environment for these kinds of projects.”
Mark Kleszczewski is president and CEO of GoBusiness Group LLC and a freelance writer on critical business topics. He can be reached at email@example.com.
For complete details on the organizations featured in this article, visit:
Center for Infrastructure Assurance and Security (CIAS)
Denim Group Ltd.
Quad Cities Chamber of Commerce
University of South Florida, Chemistry