8 Tips for 2008 - Embracing the Defense Market
Industry Overview: The new fiscal year for the Department of Defense (DoD) is well underway, with over $515 billion targeted for defense spending, and an additional $70 billion in funding for ongoing war operations. The presidential campaign is heating up, the economy appears increasingly imbalanced, and the Global War on Terror is continuing unabated. As a result, the rhetoric surrounding the future of defense spending will become heated, and projections regarding future business will be increasingly difficult to make.
In general terms, the Defense Alliance believes that defense spending will remain at current levels at least for the next two years, regardless of the election’s outcome. An eventual decline, if it comes, will likely be in the neighborhood of a percentage point or two at most, beginning in fiscal year 2010 or 2011, for two reasons. First, DoD spending is at about 4% of Gross Domestic Product – high, but not exorbitantly so by historic standards; and, while an Iraq (and Afghanistan) withdrawal is likely over time, it will be a phased withdrawal in the context of global conflicts unlikely to abate in the near term. Second, a fatigued military is already seeing the need for “re-set” and replacement of equipment, both low-tech and hi-tech, with the concomitant growing realization that new acquisition programs must have solid sustainability technologies “built in.”
Most important for businesses interested in maintaining or growing their defense portfolio, will be following the budget regarding key acquisition programs and the subcontracts that go with them. An example is the high profile Mine Resistant Ambush Protected (MRAP) program; a high priority for DoD late last year. Its luke-warm response by commanders now fielding the vehicle will likely slow the overall program. Other examples are programs that use unmanned and network-centric systems, both of which are technologies in greater demand.
Finally, a general industry trend worth noting is the political debate over “earmark funding.” Thanks to earmarked projects of limited value that have received high press interest as “wasteful,” this type of funding has sharply declined. Once the election is over, however, earmarks will remain (though to a lesser degree than in previous years), for two reasons. First, this is the only real discretionary spending power that Congress has above and beyond the president’s budget; and second, earmark funding has, in fact, created real value for the military and for small businesses over the years.
Eight Tips for 2008
While Minnesota and the upper Midwest generally made modest gains during 2007 across the board in terms of industry contributions to our warfighters, we continue to lag behind states and regions with similar capacity and potential. What can your business do to help reverse that trend, and win more defense-related business? Here are 8 tips for 2008…
One: Know the Market… age-old advice for any business, but advice that is often not well heeded by companies who perceive the defense business differently: “It’s government… it’s too hard… there’s too many requirements…” are common responses from those who have tried and failed. Not entirely untrue, of course, but then things have changed in many ways, for the better, in recent years. Government agencies are finding ways to “subvert” their own acquisition processes, and are putting out calls to “not the usual suspects,” in order to find innovations for defense needs. One example is the Defense Sustainment Consortium (DSC), which now has a center of excellence in the Twin Cities – the Midwest Center for Defense Sustainment.
How does one get more engaged in understanding what DoD needs, and how to go about answering those needs? One way is to seek out more access to the customer, for trends and design inputs by:
- Joining one or more service or industry organizations
- Getting connected to trade groups, business alliances and state and federal resources
- Connecting with a consultant – yes, the dreaded consultant… the Defense Alliance can refer you to experts in government contract writing, venture-capital funding, accounting and lobbying
- Finding out about DoD trends, and connecting to agencies that procure technology and services for the DoD by exploring their websites… you can begin the search for links at www.defenselink.mil. The FedBizOpps website has a “Forecast” section as well
Two: Get to Know the Prime DoD Contractors… there are some right here in Minnesota, including BAE Systems, Lockheed Martin, Alliant Techsystems, General Dynamics and even 3M. They are not as unapproachable as you might imagine, and are often looking for partnerships or “teaming” arrangements with small and medium-sized businesses – particularly those that might have the added attraction of being in a “hubzone,” or are a disadvantaged, minority-owned, woman-owned or Veteran-owned company. Persistence and researching the needs of the prime contractors is the real key to success. The Defense Alliance website includes links to our members, including the state’s prime defense contractors. These companies have Small Business Liaison Officers and sourcing divisions that can begin a relationship.
Three: “Force Your Way” into DoD Agencies that Might Benefit From Your Technology… This is not easy. There is research, persistence, travel, repeat performances and heavy marketing involved, but it can pay off, particularly if your homework has revealed an urgent need by a particular agency. Hesitations come from a lack of understanding of the DoD hierarchy, getting the run-around on the phone, clearance requirements and lack of “experience.” But as in any other market, those in acquisition for DoD agencies can be “sold,” too, if the right product or technology is dragged in front of them.
Four: Consider Research Funding… through one of the federal programs that mandate 2.5% of 11 federal agency budgets (of which DoD is one) go to small businesses (<500 employees) for research. These programs include the SBIR and STTR programs, and Broad Agency Announcements (BAA). Even the search involved with these grants can offer some very revealing information about the market, and what level of technology the DoD agencies are looking for now, and into the future. You can search from among the many participating agencies through “key word” searches at various websites, including:
Five: Follow Up on Rejections… whether it’s rejection on a contract, a research grant, or some other opportunity, the follow up process can be tremendously revealing, and often provides invaluable lessons learned to help in maturing your approach to the defense market. Examples abound of companies that were “plugged in” to other opportunities, by following up with busy civil servants that initially rejected their bid in another area… and there are countless examples of companies that gave up after one or more rejections.
Six: Market Yourself and Your Company Well… again, age-old advice for business, but very commonly ignored when DoD is involved. If anything, acquisition professionals within DoD need extra attention when it comes to marketing a technology for their needs. Civilian companies not used to selling to the DoD often don’t know the “language” of defense well, and therefore don’t make the bridge in terms of applying their particular technology to a DoD-specific need – even if the application appears obvious. Be transparent, be professional, and be “obvious.” Take the extra effort to tell a story that illustrates potential savings, or effectiveness… take the effort to depict your product on a HUMVEE, on a Soldier, or aboard a ship. Selling is visual, and probably more so to someone in defense. And by the way… the “language of DoD?” Sure, it’s military speak, and acronyms… but more fundamentally, it’s about cost-saving, efficiency, effectiveness for the mission, ease of use, lower weight and higher quality. Market those things!
Seven: Stay Connected Politically… know your local and national elected representatives, particularly in your district. Schedule a time when they’re in town to tell them about your product or service, about how the growth of your business as it relates to the defense market means jobs, high-tech infrastructure, intellectual property – or all of the above – for the state of Minnesota… challenge them to market your business, and market our state’s vast potential to do more for our warfighters – and for our Veterans and military families as well. It’s election time… find out what candidates understand the potential the defense market represents if it was more robustly embraced by all concerned… find out which candidates are pro-business, supportive of lower corporate taxes and higher incentives, pro-Veteran, pro-economic development, and get out the vote for them… It’s all connected.
Eight: Join the Defense Alliance and Attend its Meetings… the alliance is an expanding, eclectic group from business, government and academia. The price of membership is free – with one exception. As a member, if you are approached to share your knowledge of the defense market, you are obligated to do so! Figured out how to get on the GSA Schedule? Know how to write an effective grant proposal for R&D funding? Made a useful connection in a DoD agency? Share that knowledge. Defense Alliance members should hold equal goals of improving their company’s bottom line, contributing to our nation’s defense, and helping to secure the high-technology future of this region. Jump in the game!
The Defense Alliance is an independent organization whose mission is to network and expand Minnesota ’s defense and homeland security industries, to create and retain high quality jobs, and to further promote the state’s important contributions to our men and women of the armed forces. Information on ongoing issues and future events can be found at the Alliance website, www.defensealliance.com.
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