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Defense in an Era of Budget Uncertainties 

defense budget article summer 2014

By Rachel Duran

Industry members fortify defense clusters to ensure economic stability.

As of this writing, the U.S. Congress is debating the nation’s defense budget and where to make cuts, working with a proposed budget of $496 billion. One factor in the decision-making process includes the fact that military engagements to support two wars in the Middle East are winding down. And, in early May, the U.S. Department of Defense asked Congress to authorize another round of Base Realignments and Closures (BRAC) for 2017.

These budget uncertainties, and the possibility of being put on the chopping block, tend to put defense industry companies and the communities that support them in a holding pattern. Members of defense industry clusters, however, are mounting innovative solutions to move forward and keep their economies steady despite the unknowns.

Efforts include partnering with other states in regard to research efforts to support emerging technologies, such as unmanned systems; and developing alternative approaches to technology transfer to move research into revenue streams.

In Maryland, the defense industry cluster includes strengths in emerging areas, such as with cybersecurity and unmanned systems, which bode well for the long term. The state also has a history in the areas of chemical, biological and nuclear defense, partnering not only with the military but also with several federal agencies. Leading installations in the state include Fort Meade (Army Cyber Command); the Aberdeen Proving Ground (Army R&D and Engineering Command); and Fort Detrick (Army Medical Command).

“The jury is still out as we go forward,” says Brig. Gen. Mike Hayes, USMC (Ret.), referring to the defense budget. Hayes is the program director for the Office of Military Affairs for the Maryland Department of Business & Economic Development. “I am perhaps over simplifying but the impact was not as severe as forecast; but there is much to play out. The Marine Corps to some extent, and the Army specifically, have major decisions that are still underway in regard to not only what their end strength will be, not only the number, but  how it will be configured and supported.”

Hayes says with or without sequestration, through time, defense budget challenges will have a dampening affect across the nation, and Maryland will be included to some extent, though not to the extent as communities that lose major brigades. “The workforce in Maryland is second to none, and we have an extraordinary quality of life,” Hayes says. “Even as the defense budget is being is cut and continues to be cut, we have relative stability in some areas and continue to have, almost unique to the rest of the nation, significant growth going on at Fort Meade relative to cyber and IT.”

“Every time there is a BRAC round, the bases in the Northwest do well, not only because they are well run but also geographically they are positioned for where the challenges of the world are, and are going.” – Dave Hunt, executive director, Pacific Northwest Defense Coalition

Naval Air Station Patuxent River has 21,000 people supporting the mission. Hayes says there is an up and down cycle to systems support such as major aircraft and the systems associated with the aircraft. As some of the engagements around the world lessen, he still believes system-related activities will remain a catalyst for the economy. Hayes says unofficial results from a study find the activities have a $7.7 billion impact on the state’s economy, which will plateau as systems begin maturing.

Moving from the Mid-Atlantic coast to the Pacific Northwest coast, officials there believe the so-called Asia-Pacific Pivot, in terms of national security, present unique opportunities for companies in the region to expand. “Every time there is a BRAC round, the bases in the Northwest do well, not only because they are well run but also geographically they are positioned for where the challenges of the world are, and are going,” says Dave Hunt, executive director, Pacific Northwest Defense Coalition (PNDC). The coalition focuses on promoting the defense and security industry in the Northwest; with members predominately located in Oregon and Washington.

“We are still dealing with some of the effects of sequestration,” Hunt says. “The budget deal passed in January ameliorated most of the biggest negatives of sequestration, making a positive impact by establishing a two-year budget instead of no budget or a 30-day continuing resolution.

“One of the unknown areas is what is going to happen in terms of the balance between the troop levels in regular services compared to the number of reserves and guards,” Hunt continues. Depending on what happens, there may be new business opportunities in the Pacific Northwest if reserve and/or guard units are enhanced due to the number of units based in the region.

One of the ways the PNDC is strengthening the defense industry cluster in the region is through the Northwest Connectory, www.nwconnectory.com, a database of suppliers. There are 4,600 companies in the database, all manufacturing from the Pacific Northwest.

Beyond Budgets

Defense industry stakeholders are making the most of the presence of military installations, federal agencies, and research assets to foster resilient economies. This includes contributing to emerging defense-related technologies in unmanned systems, and cybersecurity and IT.

Hunt says Oregon is home to three unmanned systems sites that will support the larger effort underway at six pilot test sites selected by the FAA to incorporate these systems into the national airspace. “In the Northwest there will be an opportunity to expand the R&D and commercialization of UAS for applications in local law enforcement and agriculture,” Hunt says.

Maryland has a history in developing the technology for the component pieces found in unmanned systems, such as with sensors, integration, micro computing, and nano materials. Extensive research in unmanned aerial systems has taken place at Naval Air Station Patuxent River. “Specifically toward the integration into the national airspace, some of the most enlightened research lately has been in the sensor research area and that consists of optical and other sensors,” says Matt Scassero, a retired Navy Captain who heads the University of Maryland’s UAS Test Site, located in the Clark School of Engineering.

The university conducts research in both flight and ground testing in regard to unmanned systems. Maryland’s research also goes beyond defense applications and extends to commercial applications in agriculture and aquaculture initiatives, as well as in public safety arenas.

The University of Maryland is a member of the Mid-Atlantic Aviation Partnership, along with Rutgers University and Virginia Tech. Additional players from these states include officials from general aviation airports, industry, and the state and federal governments.

“If you can imagine it, you can do it with an unmanned system, whether it is an air system, surface system, or subsurface system. You just have to get with hardware and software people to determine what makes it viable and economical. That is the thing people forget about. There is a lot of stuff we can do, and probably do better with unmanned systems, but is it economically viable?” – Matt Scassero, head of the UAS test site, University of Maryland

Scassero says the three universities are taking part in developing the national airspace for unmanned systems. Virginia Tech was named as one of six awardees under the FAA’s pilot program. “One of the cool things of this three-state partnership is the technology spread we have, covering the full gamut of technology,” he says. “As far as size, we are doing from fly-sized micro vehicles all the way up to one of the largest systems, a 20-foot wing span Talon 240 from UAV Solutions Inc., which is based in Jessup, Md. It is a great vehicle for getting other systems airborne as payload and demonstrate what they are capable of.”

Officials in the state of Maryland are also exploring various methods to commercialize defense-related technologies. “Basically, traditional technology transfer has gone from the government out,” Scassero says. “The government would like to see a three way tech transfer between government, industry and university, sharing their technologies, with appropriate IP protections, so they all benefit and move the area forward faster.”

Other assets in Maryland include the seven alliances that are associated with a major military installation in the state. “What is unique to Maryland is what we do locally to make sure people are aware of opportunities and can leverage those opportunities,” Hayes says. “We have a continuum of back and forth relative to opportunities going forward, networking and so forth. A significant factor in our state through the years has been these alliances.”

Scassero says the University of Maryland continues to be successful in regard to the creation of new companies, turning research into revenue. “If you can imagine it, you can do it with an unmanned system, whether it is an air system, surface system, or subsurface system,” he says. “You just have to get with hardware and software people to determine what makes it viable and economical. That is the thing people forget about. There is a lot of stuff we can do, and probably do better with unmanned systems, but is it economically viable?”

Ready to Face the Coming Changes

Economic viability is projected to remain stable in regard to Maryland’s military installations. The Army’s Communications-Electronics Research, Development and Engineering Center moved to the Aberdeen Proving Ground as part of the 2005 BRAC decision, which added 8,000 jobs directly related to the decision. “The command’s procurement exceeded $20 billion during the two wars; and has diminished as the wars have happily drawn to conclusions,” Hayes says. “I want to say that current procurement numbers are in excess of $12 billion.”

Also from Aberdeen Proving Ground, the software associated with the systems that are employed not only through the Army but through intelligence agencies, is developed at a number of entities at the installation, Hayes notes. Also from the operation, counter systems, or in some cases, predictive systems in regard to chemical and biological warfare, are developed for not only the Army, but also Homeland Security, the FBI and other agencies.

In regard to cyber-related initiatives, Fort Meade is home to Cyber Command, which initially grew from personnel that were transferred from the National Security Agency. In 2005, the total number of government employees at Fort Meade was 31,000; today the number is 49,000 plus.

In the Pacific Northwest, cybersecurity, specifically relating to port security, “is an increased area of focus and need,” Hunt says. “One of the things about Northwest companies is there tends to be a deep commitment to quality and durability,” Hunt says. “I don’t think you find that in all parts of the country, and you certainly don’t find that in all parts of the world.”

Hunt adds that the quality of life in the Pacific Northwest is an attractive benefit for those serving the defense industry. “For those who are looking to invest or relocate from afar it is hard to beat the quality of life, which is why Oregon and Washington constantly show up in indicators as among the best places to live or the best places to move.”

For complete details about the organizations featured in this article, visit:

Maryland Department of Business and Economic Development

Pacific Northwest Defense Coalition

University of Maryland’s Clark School of Engineering

Illustration by jannoon028 at Free Digital Photo.net

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About the author: Rachel Duran

Rachel Duran is the editor in chief for Global Corporate Xpansion. Contact her at rduran@latitude3.com.

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