Military Round Table December 2012

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 Marching forward

The businesses in North Carolina’s military cluster find success by enlisting unparalleled preparation and support.

North Carolina has a storied military history, but it’s drafting a new chapter as a leader in military businesses. More than 416,000 people in the state were employed by the military or a military-supporting business in 2007, according to the N.C. Department of Commerce. By 2013, that number is predicted to swell by almost 50,000, and the gross state product is predicted to increase by $2.9 billion just from military growth. A panel of experts recently gathered to discuss how businesses in the state can continue harnessing the power of this sector. Participating were Peter Bishop, director of economic development for Currituck County; Lance DeSpain, executive director of the North Carolina Military Foundation; Scott Dorney, executive director of the North Carolina Military Business Center; J. Larry Keen, president of Fayetteville Technical Community College; and Greg Taylor, executive director of the Fort Bragg Regional Alliance. The round table was sponsored by Currituck County Economic Development Department and Fayetteville Technical Community College, which also hosted the discussion. It was moderated by Business North Carolina Publisher Ben Kinney. The following transcript has been edited for brevity and clarity.

Explain how your organizations help military-focused businesses grow?

DeSpain: The North Carolina Military Foundation focuses on what the military needs now and in the future in order to offer state-centric and command-centric solutions that give businesses a competitive advantage at the Pentagon and in Washington, D.C. It accepts no taxpayer dollars, which allows recently retired admirals and generals to sit on the foundation’s board alongside CEOs and presidents of some of the largest companies in North Carolina. That puts our focus on deals that benefit the state and our resident commands.

Dorney: The North Carolina Military Business Center is a component of the N.C. Community College System and headquartered at Fayetteville Technical Community College. It staffs 13 offices from Franklin in the west to Elizabeth City in the northeast. Its economic-development mission is to help businesses win more federal contracts, develop new defense contractors and transition military personnel into the state’s private workforce. It supports businesses in the federal marketplace, something that is unparalleled anywhere else in the country. I was in a meeting the other day, and somebody said, “You know, businesses don’t believe you if you knock on their doors and say, ‘Hey, I’m from the government, and I’m here to help.’” That’s not the case in North Carolina. Businesses are amazed by our proactive approach. It’s not just a pull; it’s a push. Our mission is to make this sector successful, and everybody is engaged in getting that message out to businesses.

Keen: The community-college system supports economic development through workforce development. Fayetteville Technical Community College, the fourth-largest school in the system, serves 40,000 people each year, including many veterans, military personnel and their families. We’ve helped a number of defense contractors with employee training. We helped the Army save $34 million a year in training and education because we were able to offer those classes here at the college.

Taylor: The Fort Bragg Regional Alliance, a partnership of the 11 counties and 73 municipalities around Fort Bragg, was formed in response to Defense Base Closure and Realignment Commission 2005. As more troops have moved to Fort Bragg, it has dealt with growth issues and served as a point of contact between the military and the community. It has helped the region take advantage of the growth the military has brought to its economy.

Bishop: Currituck County is just south of Hampton Roads, Va., and its more than 100,000 active-duty troops and 12 military installations. That’s an important connection for our state. Defense and aviation are target clusters for our community that we feel can create jobs, and we see opportunities for other targeted industries that we’re interested in connecting with the military. We have a major defense contractor in the county — Arlington, Va.-based Academi LLC — and they are looking to ramp up training operations for Special Forces and foreign nations. We also have several smaller contractors.

What’s behind the success of the state’s military cluster?

DeSpain: It’s important to remember that almost every organization in the state that works with the military was started after 2005. There are still a lot of people meeting for the first time today that you would have thought had been talking for 20 years. It’s important to put a time stamp on it, because I think that makes the partnerships that have blossomed that much more incredible. Everyone has limited resources, so if we don’t work together and understand our own jobs, then the whole thing will unravel. North Carolina has a history of understanding clusters and the collaboration needed between public, private, federal and state — just look at Research Triangle Park. There is a spirit, willingness and a precedent here that makes it all work.

Bishop: The partnership that makes the cluster work is not regional but statewide. The state has stepped up and taken advantage of opportunities coming down the pike. The local communities are offering training programs, getting the businesses and spreading the Military Business Center’s information. We are bringing our companies to the center, and we’re bringing the center into our communities to talk to our small businesses. The center has done a great job communicating its mission to us, and then in turn we’re able to help fill the classrooms and make sure that our businesses are aware of opportunities to grow. One example involves the U.S. Coast Guard station in Elizabeth City, which needed help training folks to work with sheet metal and repair aircraft power plants. Currituck County helped the community-college system put up a building to train not only Coast Guard personnel but residents in private ventures as well. 

Keen: I came here about 11 years ago, and I’ve been amazed at the courageous nature by which people look to the future, including in regard to the military sector. There is a willingness to assist, help and move forward together, and that sets us apart from so many places across the country, if not the world. For example, with ideas from others, the college is starting an airframe and power-plant license program for military personnel who maintain aviation equipment. They do a great job but don’t qualify for a civilian license. Our program helps them earn the license and qualify for civilian jobs.

 Taylor: BRAC 2005 opened a lot of eyes to the shortcomings around military bases. For example, deployments from Fort Bragg, one of the largest bases in the country, had to roll through Fayetteville to access the interstate. That’s being fixed, and by 2014 we will have troops from the “All-American” — 82nd Airborne Division —­ directly connected to the interstate. Now it looks as if we’re going into another round of base closures. But whether there is or not, in this constrained-resource environment the military has to do things more efficiently and effectively with less. We’re already identifying solutions for our military friends. We are well positioned this time around with the U.S. Army Reserve and Forces commands at Fort Bragg. We need to identify how we can leverage those for our industry cluster.

Dorney: During BRAC 2005, we knew that we needed infrastructure to protect our bases and leverage the existing military in the state for economic development and job creation. In 2004, we were developing great businesses, and we had great bases. BRAC forced the state to identify the missing pieces, including a connection between businesses and the military. That’s why the state created the Military Business Center. It’s a matter of key points — examining, improving and sustaining the infrastructure so that our future is brighter than our present.

How does the state’s commitment to workforce training help military-focused businesses?

Keen: Workforce training is typically the first or second most important determinant in why a company locates or expands in a particular place. Enhancing it will make North Carolina an even bigger player in business recruitment worldwide. Community colleges and universities have long been involved in making that happen, and now have taken it a step further for the military communities and the state as a whole. We work with the U.S. Army’s John F. Kennedy Special Warfare Center and School at Fort Bragg, and whether it’s the Green Berets, SEALs, Air Force or Marine Corps, they all come through the center at some point. They’ll tell you they are the best at what they do and that they need to be the best educated. We’ve worked for three years on a program that allows these personnel to earn credits based on their training and demonstrated competence. By the time they finish, they can earn their associate degree and transfer into a baccalaureate-degree program and beyond. The college offers personnel retiring or transitioning out of the military civilian-orientated courses that expand on what they learned in the military. That allows them to earn a degree and sit for licensure examinations so they are eligible for private-sector jobs in a particular field. We’re about to launch a much broader version of that program built on military occupational specialties — everything from intelligence to maintenance. It benefits them while they are in the military and during their transition out of the military. We also need to provide education and training opportunities to their families. If they decide to stay in our community or move to another part of the state, they can take those courses and skills with them.

Taylor: There are many examples of how the community-college system’s programs have eased the transition from the military side to the civilian side. Its role is vital because we want retiring military personnel in our workforce. They are highly trained and disciplined — attributes that are attractive to companies looking to locate in North Carolina’s military cluster.

DeSpain: I work hand in hand with the N.C. Department of Commerce, the governor and our congressional delegation on recruiting private-sector companies and commands, which both face the same challenges and need the same solutions. I increasingly hear commands ask for an environment where they can deal with the complexity of the challenges they face. That is the same conversation that we have with private companies such as Raytheon, BAE or L-3. They want a magic combination of workforce development, which the community-college system provides, along with direct involvement and private-sector involvement.

What’s needed to ensure the military cluster’s longevity? 

Dorney: Several pieces need to be in place to have a successful cluster. You need businesses that can do the work and somebody who wants to buy their products. We certainly have that in North Carolina, and it’s the envy of other states. We have great business capacity in this state, and that’s really a product of our entrepreneurs, our community colleges, our university system and the Small Business Technology Development Center with its 16 offices across the state. We have folks looking at what the government wants to buy and connecting those needs to businesses. The opportunities the Military Foundation uncovers become strategic goals and help identify the businesses needed in the cluster while also positioning current businesses.

Taylor: This cluster is prepared for success. We created the All American Defense Corridor marketing concept, which extends beyond the alliance into Research Triangle Park and speaks to businesses that work with the military. We also formed the Defense Business Association, which has produced contracts for North Carolina companies. We partnered with Fayetteville Technical Community College and Fayetteville State University to design a center focused on the cluster. Chancellor James A. Anderson ran with the ball, and now we have the Center for Defense and Homeland Security at Fayetteville State University. We partnered with Fayetteville Technical Community College on the All American Center for Workforce Innovation to make sure there is a workforce to support the cluster. We are already seeing the fruits of our labor with corporate relocations, our housing market and personal-income growth.

DeSpain: There are two sides to protecting and growing our cluster. The first is the defensive side. BRAC 2005 is a great example of North Carolinians coming together from all regions and levels to protect the bases. But we have to be vigilant because there are going to be more cuts. If our military customers say that encroachment on training spaces is an issue, North Carolina needs to stand up and protect those spaces. North Carolina has consistently met the military’s needs. That’s how the state keeps the bases. The other side is business development: putting deals on the table that make it hard for the commands to leave. Every state wants to grow this portion of the economy, but not every state is as focused on it as North Carolina.

Is sequestration affecting military-focused businesses?

 Taylor: Sequestration is in effect right now. If lawmakers don’t pass a balanced budget, then cuts to make it come into line go into effect. A third of the military’s budget is personnel, which the president shielded from the cuts, so training, maintenance and weapons acquisition will all take tremendous hits under sequestration. People seem to have the attitude that it doesn’t happen until January, so we don’t need to worry about it until then. But we’re feeling the effects right now as companies deal with the uncertainty by avoiding strategic business decisions. A decision detrimental to the military budget now would be better than wading through more uncertainty, because a company can deal with what they know. Unfortunately, it looks like it will be a last-second thing in December or January.

 Keen: All markets hate uncertainty. Historically, one thing that has set our country apart is a degree of certainty in its markets, which allows businesses to operate in a known environment. Uncertainty in the marketplace impacts everyone. It takes awhile to turn these things around because with that uncertainty, people are just not going to respond. It’s just like the proverbial battleship — you don’t turn it on a dime.

DeSpain: There are going to be significant defense cuts, and North Carolina will be adversely impacted if all the cuts fall on research and development. Sequestration handcuffs our commanders’ ability to run their organizations in a reasonable way, because typically half of cutbacks is being able to invest in priorities for where you’re headed tomorrow.

Bishop: There’s no plan or group of stakeholders deciding what’s going to be cut under sequestration. If we don’t know what’s going to be cut, we don’t know where we can lend assistance. As an on-the-ground economic developer, uncertainty makes it difficult to find
a decision-maker who will talk. Also, what does it mean for our existing installations? For example, the Coast Guard station at Elizabeth City retrofits aircraft. Are the cuts going to be a boon or a bust there? We have to make sure we are going to be reactive enough to deal with sequestration cuts.

Dorney: Clearly, the strategic issue is important. There will be $487 billion in defense cuts over the next 10 years, and the military understands that and is ready. The sequestration issue is an additional $500 billion if something is not done before Jan. 2. The businesses that we work with can’t forecast because the military doesn’t know what it can buy. If we’re successful in recruiting businesses to the cluster, and we’re connecting them with the opportunity to bid, they still have to succeed to grow in this market. If I was a small business, I would say sequestration is nice but my problem is winning a contract today to be a barber at Fort Bragg or to pick up the laundry or to build a building or to sell a weapons systems. Where you stand depends on where you sit.

What are some of the challenges of the military cluster?

DeSpain: The lack of big defense contractors headquartered in North Carolina is a challenge. Many of them are right outside the Pentagon, and they get most of the big contracts. We do have a large number of troops and important commands in the state, but they tend to be on the pointy tip of the spear — the war fighters. Other states have the commands that spend the dollars. It has been hard for many North Carolinians to process that even though Fort Bragg is here the decisions on contracts are not made inside those gates. It’s important to understand who can make a decision here and who can’t. The forces command has been an incredible partner, as has the Coast Guard, because they often make decisions at the local level. Those deals are easier to grow and are difficult to replicate in other places, thus helping to BRAC-proof the state. I think, on the private-sector side, defense is not the primary business for many of the companies. They are innovation hubs that make specialized products that we are working to get into the defense market.

Dorney: Other states have taken an interest in how North Carolina’s military cluster operates and its successes. Representatives from one such state were recently in my office and liked everything about the cluster. I told them they were where we want to be — they do about three times North Carolina’s $4 billion in prime defense contracting every year. They said they do get more revenue, but most of it ends up at one company in one town making one weapon system. The rest of that state gets nothing. Sometimes if we look at just the data, we get the wrong picture, because how the money is spread across businesses is as important as the total amount.

 Keen: With challenges come great opportunities. We have a lot of people who will leave the military for whatever reason, and they have great ideas. They start companies here in North Carolina that build opportunities to provide better products, services and jobs. We’re not resting on our laurels. We’re looking at what is today and what can be tomorrow. And we’re coming together with solutions that will fulfill those needs before they are actively demonstrated. And if we do that, then I think we have a strong competitive advantage.           

This article originally appeared in the December 2012 issue of Business North Carolina magazine.