Charleston Contractors Show Optimism in Face of Budget Cuts

Charleston, S.C. — Breaking from the dire warnings coming from Washington, defense industry executives here said they are prepared for looming austerity.
Buoyed by nearby military facilities and an increased focus on commercial contracts, some Charleston-based executives insist business might pick up even as Defense Department spending ramps down.
At the Scientific Research Corporation (SRC), an engineering firm, Gary Durante, vice president of communications and network engineering, said the company is prepared for a downturn. “We’re not like the large companies that build ships or planes or tanks,” said Durante. “We’re selling our customers the inherent capabilities of our workforce including system engineers, information assurance specialists, test engineers and computer scientists.”
While the nearby Space and Naval Warfare Systems Command (SPAWAR) is SRC’s largest customer, the company has also provided services to the Marine Corps, the Coast Guard and the Department of Veterans Affairs.
In response to potential defense cuts, SRC is seeking contracts with federal, state and local agencies rather than diversifying to the commercial market, Durante said. The company is marketing services to the U.S. Mint, the U.S. Treasury and the Federal Aviation Administration, among others.
At UEC Electronics, Vice President Philip Ufkes said he worries about shrinking defense dollars, but the company’s niche in hybrid energy and resetting military vehicles will help it navigate through lean times.
“From a position standpoint, we think we’re in a good place,” he said. “Our two main programs are in hybrid energy and energy distribution … and resetting vehicles and lifecycle extension. Those two areas, we believe, are very strong areas to be in right now.”
One of UEC Electronics' largest projects is resetting light-armored vehicles with new electrical systems for the Marine Corps, Ufkes said. There are opportunities to be had in refurbishing existing military equipment, he added.
“In a situation where you don’t have enough money or money is tight, what are you going to do? You’re not going to buy new toys, you’re going to fix your old toys,” said Ufkes. “We’re in a pretty safe place. So, if anything, I think we’re in a better position" than other defense firms.
Diversification of UEC Electronics products is also keeping the company strong, Ufkes said. While the company works with the Defense Department, it also does business with other defense contractors, hospitals and commercial companies.
“From the first day we started business [we knew] that we needed to get diversified. We started spreading out immediately because you just have to. You can’t be a one-trick pony as a small business,” Ufkes said. “We’re trying to keep our designs as dual-use and flexible and modular as we can.”
An executive at SPARC, which focuses on software development, said its cost-saving products will help keep money flowing despite shrinking budgets.
“The majority of the work that we do is on making systems more efficient,” said Eric Bowman, SPARC’s chief executive officer. The company, which was established in 2009, deals largely with defense contracts, but has sought other customers. “I think by nature what we do is diversification. We’re doing a significant amount of work for both the DoD and various federal agencies, and at the same time we do develop [products] for commercial customers,” said Bowman.
Even with across-the-board defense cuts still a possibility, it is business as usual at the Charleston office of the Science Applications International Corporation (SAIC).
“If you ask me, ‘Are we doing anything in preparation for defense cuts and sequestration? Are we moving from a defense perspective into a commercial side?’ My answer today would be ‘No,’ and that’s because we are still able to grow by supporting SPAWAR Systems Center Charleston,” said Doug Jimenez, operations manager for the Charleston office, which focuses on cybersecurity.
If there comes a time when SAIC’s Charleston office isn’t meeting its revenue goals, then it would reevaluate strategy, Jimenez said. For now, the future looks promising, he added.
“We are still able to meet our growth margins and thrive in the Charleston area and get some good growth every year,” said Jimenez. “Right now, we are totally focused on SPAWAR Systems Center Charleston.”
Tracey McCormick, senior vice president and business unit director of operations at SAIC, said there will always be pressure on the defense budget. With that knowledge, SAIC began preparations for diversifying its products years ago.
“Nobody wants to see sequestration. We all hope it doesn’t happen,” said McCormick. “I mean, there’s pressure on everyone’s budget — so, quite a few years back they [SAIC] started to diversify out from a strict DoD focus.”
The company has moved into other markets such as energy and healthcare, as well as “more resilient pieces of the DoD market” such as counterinsurgency and cyber-operations, McCormick said. This diversification will help SAIC weather budget cuts, McCormick said.
Photo Credit: Navy

Topics: Business Trends, Business Development, Doing Business with the Government, Defense Contracting, Defense Department, DOD Budget, Defense Contracting