Date: Jun 19, 2008 Author: Kevin Robinson-Avila Source: bizjournals (
click here to go to the source)
Bill Miera, president and CEO of Fiore Industries Inc. — which provides high technology engineering and information services — says his company has grown from four employees to 50 over the past 10 years, thanks in large part to defense contracts.
Without defense-related contracts, hundreds of small New Mexico businesses -- particularly those considered "disadvantaged" -- simply wouldn't survive.
John Woosley, Small Business Administration district director for New Mexico, says 152 local firms are currently certified under the SBA's "8-a" category of disadvantaged businesses that qualify for priority selection when bidding on defense and government contracts.
"That's a huge number of firms in that category -- much more than in many other states," Woosley said.
"And that's just the tip of the iceberg. For every 8-a company, there are many more small local businesses that are not certified as disadvantaged, but that are winning defense contracts."
It's nearly impossible to tally the total annual value of defense contracts for New Mexico companies, much less the amount captured by small businesses. That's because there are so many federal agencies inside and outside New Mexico that award contracts, with no central data base to record expenditures and contract recipients.
Taken together, the state's two national laboratories and four military installations -- which include White Sands Missile Range and Kirtland, Cannon and Holloman Air Force bases -- spent a combined total of more than $3 billion on contracts for products and services in fiscal year 2007. A substantial percentage of that went to New Mexico-based businesses.
Moreover, Army, Navy and Air Force agencies outside New Mexico award hundreds of millions of dollars to local businesses independently of state military installations. And, many large companies, such as Boeing Co. and Northrop Grumman, receive multi-billion dollar contracts and then subcontract with local firms.
Northrop Grumman, for example, won a $35 billion Air Force contract in March to build a new fleet of military refueling planes, leading to supply contracts with four local firms -- Honeywell in Albuquerque, GE Aircraft Engines, Sun Country Industries, and Mach2 Machining. Under the contract -- which could still be rolled back because of a protest by Boeing against the bidding process -- Northrop would pump about $40 million annually into New Mexico over the next decade, creating about 400 new jobs.
That kind of subcontracting is growing, encouraging more small New Mexico firms to tap the defense market, said Anna Muller, president of NEDA Business Consultants.
"Large prime contractors like Lockheed Martin and Boeing are generally required to subcontract, so they often rely on small local businesses," Muller said. "That offers major opportunities for up-and-coming New Mexico firms."
In fact, the national laboratories are channeling more money to small companies by including stipulations in contracts with large firms to partner with smaller businesses, Muller said.
"That was almost unheard of a number of years ago because most companies just viewed each other as competitors," Muller said. "Now many companies view each other as possible teammates, which means larger procurements are being set aside for small businesses."
And, the labs are making a concerted effort to directly contract small businesses when possible.
Of the $343 million that Sandia National Laboratories spent on contracts with New Mexico companies last year, 62 percent went to small firms, said Don Devoti, manager of Sandia's Small Business Utilization department.
"Our goal for 2008 is for 48 percent of contracts to be spent on small companies, but we're now at 57 percent," Devoti said.
Of the $415 million that Los Alamos National Laboratory spent last year on contracts with New Mexico companies, 35 percent went to small businesses, said spokesman Steve Sandoval.
"We try to engage our small business owners and operators in northern New Mexico as much as possible," Sandoval said. "We help them get certified to be eligible for contracts."
Many local companies have built their entire business around defense contracts.
Albuquerque-based Applied Technology Associates, for example, formed in 1975 to provide engineering and support services to what was then called the Airborne Laser Lab at Kirtland Air Force Base. The advanced optics and imaging work done there is now housed under the Air Force Research Laboratory's Directed Energy Directorate at Kirtland, and ATA still depends on that and on other defense contracts for all of its business, said President and CEO Anthony Tenorio.
"We've had continuous contracts with Kirtland and other federal agencies for 33 years," Tenorio said. "All our work is defense related. We've been growing at 20 to 25 percent annually in the past six to seven years."
The company earned $15 million in revenue and had 200 employees last year. And, in March, it won a five-year, $110 million contract in partnership with two other companies to provide support services for testing at White Sands Missile Range.
Some firms, such as Management Sciences Inc., started out in the commercial world but then transitioned into defense contracting to sustain their business (see story on page 9).
Other firms started out wholly dependent on defense spending and then used the technology and expertise they developed under those contracts to branch out into new markets.
That's the case with Albuquerque-based Fiore Industries Inc., which provides high-tech engineering and information technology services. The company grew from four employees 10 years ago to 50 now, thanks largely to defense contracts, said President and CEO Bill Miera. But with the wars in Iraq and Afghanistan bleeding military funding away from research and development, Fiore has branched out into non-defense contracts.
"We've gone from about 90 percent dependence on defense contracts to about 50 percent this year," Miera said. "But defense spending remains critical to the life of our company."
