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Pinellas' Defense Sector: It's a Whole New Ball Game
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Scott Talcott
Business Development Manager
stalcott@pinellascounty.org
(727) 464-7353  -- Bio –

 

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2016 Pinellas Defense and Homeland Security Industry Briefing,
please submit your email address and we'll add you to the invitation list.

April 2016: Pinellas County's Defense Sector: It's a Whole New Ball Game 

It’s no secret that the defense sector has been facing declining numbers due to a long laundry list of uncertainties. Military budgets have been cut, and contracts have been lost due to contractors bringing things in-house instead of using subcontractors. The new key word is “affordability”.

What does that mean for industry in Pinellas County? Simply put, it means that in order for companies to succeed, they are going to have to reduce costs. How does this affect existing companies? Some may have to reduce their workforce; others may have to reduce their manufacturing processes. 

Is there a bright side? Believe it or not, there is. This new focus on affordability will force contractors to deliver goods in a timely manner. In other words, they’ll have to deliver on target – both on pricing and deadlines. Competition will be on the rise and those that deliver will survive! Instead of looking outward for growth, focus will undoubtedly be directed inward on the company’s core strengths. The new dilemma may be that because of this internal focus and a need to save and even downsize, will companies be able to hire the new talent that the changing technology requires?

These are all just some of the questions that have been posed – we know there are many more – that we wanted answers to along with a barometer of the state of the defense sector. Things like online marketing, co-working facilities, available financial resources and targeted business education are viable solutions that could make a big difference.

We asked Tucker/Hall to conduct research on the defense industry in Pinellas County for the purpose of identifying the existing employers, for understanding how the recent reductions in federal defense spending has impacted the local industry, and for developing a prioritized list of strategies to effectively help Pinellas defense companies compete, expand and grow.  They spoke to almost two-dozen defense company owners and executives, and learned a lot about how the local market has responded and how we can work together to win more contracts.

Following are Tucker/Hall’s research findings: 

   
  State of the Sector – Where are We Today?
      by Guy Hagan, Vice President, Tucker Hall

Between 2009 and 2014, we identified more than 15,500 defense awards to 451 Pinellas companies totaling more than $4.2 billion.  Three quarters of these contracts were awarded to only five companies (General Dynamics, Raytheon, Alliant Techsystems, GE Aviation Systems, Honeywell International).  Local defense contracts peaked in 2011 and 2012, but then declined rapidly due to Federal cutbacks to roughly $600 million in 2014. 

Defense contract activity in Pinellas County has dropped to nearly half its levels of only a few years ago.  While most of the loss was experienced by a handful of large prime contractors, many small companies experienced much greater impact on their ability to stay in business.  Many of the companies who have not been able to adapt to the new environment have already gone out of business or left the defense sector; however there are still local companies who may succeed or fail based upon how well they perform over the next 12 months. Fortunately, many of the surviving companies in Pinellas County have adapted to become more competitive overall, and the county is home to many unique resources that can be leveraged to help local defense companies grow and compete more successfully.

The Game Has Changed
Beyond the continuing effects of sequestration, the very nature of defense sector business has changed.  Defense companies are getting used to much longer payment cycles.  Federal contract scoping, review, award, and protest resolution processes are becoming slower and more likely to be eventually cancelled before final award.  Major prime contractors are more likely to bring business “in-house”, not only using fewer subcontractors but actually competing with them on smaller contracts.  Margins are tighter than ever. An awarded contract is less of a guarantee of actual funding than ever; even awarded contracts tied to critical technology lists are being left unfunded long enough that the original technologies can become obsolete.  For most companies, this means more risk and uncertainty, fewer opportunities for small businesses to carve out market niches, and higher competition for fewer federal dollars.  Companies offering non-specialized manufacturing or engineering services have been among the hardest hit.

All Is Not Grim
Doing business with the Department of Defense has unquestionably become more difficult and risky, and recent events have definitely taken their toll on local companies.  There are certainly local companies whose continued existence will be determined by how well they succeed in the next 12 months.  However, many of the companies that remain have made drastic changes to improve margins, increase efficiency, and implement new technologies and are not only optimistic about the future but are growing rapidly.  For these companies, the pressures of the defense cutbacks forced them to embrace fundamental “close to the bone” changes and to focus deeply on their core strengths and relationships, and as a result have transformed them into operations that compete better and run more profitably.  Local companies are more willing to collaborate, partner, and share their knowledge than ever before, and Pinellas is increasingly home to a valuable pool of world-class experience and expertise.

What Assistance Local Companies Need The Most
While our interviews with local defense company owners and executives revealed both good news and bad news, they also revealed some areas in which collective efforts could be undertaken to make the local industry more competitive. At the top of our list, the following topics should be priorities for helping Pinellas become even more of a leader in the US defense sector:

1) Online marketing.  Doing business with the Federal government is unlike any other market; it requires close relationships with a small number of procurement and contracting officers, and ideally being positioned to help craft new solicitations at the beginning.  Unfortunately, this has created a mindset in many defense executives that dismisses the importance of digital marketing, while simultaneously many executives claim they suffer from how difficult it is to be found and recognized for their specialized expertise.  Together, the Pinellas defense community should explore ways that online marketing can be used effectively for business development.  Further, there is strong support for an online Pinellas directory of defense companies, especially if it supports listing of arbitrary specializations, multiple company contacts, and some way to demonstrate successful performance on past federal projects (especially for subcontractors).

2) NFSTC joint SCIF facility.  The National Forensic Science Technology Center (NFSTC) shared Sensitive Compartmented Information Facility (SCIF) facility has been recognized by many local companies as being a unique and interesting local resource, but one whose potential has not really been yet sufficiently explored. There is value in marketing it (and helping to expand it) as an attractor for business from MacDill and companies outside of the state.  This facility may also have value as flex space for local companies; although it has been recently reduced in capacity, it can still currently be leased hourly, daily, weekly or monthly along with leased temporary space.  It is particularly suited for RDE (research, design, and engineering) activities. Specifically, the facility should be marketed to out-of-state prime contractors as temporary and flexible local work/office space for accessing Pinellas’ large primes (General Dynamics, Raytheon, Alliant Techsystems, GE Aviation Systems, Honeywell International) and for doing business with MacDill Air Force Base. 

3) Financial resources.  Small and medium sized defense companies, as well as startups, have even greater need for banking resources that are knowledgeable about the defense industry than they used to.  Defense companies have unique needs regarding the management of cash flow, lines of credit, and greater accounts receivable cycles not to mention investment for developing new technologies and expanding facilities and production capabilities.  By building a pool of local banks interested in working with defense companies and federal contractors, it will be possible to educate the banks to be more effective partners, to significantly reduce wasted time and effort by defense executives in pursuing banks who ultimately aren’t interested in defense industry lending / investing, and to educate local companies how to be more effective at pitching banks.

4) Targeted business education resources.  There is a wealth of hard-won defense industry expertise in Pinellas County, but also many knowledge gaps which local business leaders have consistently identified.  In our conversations with local business executives, we’ve identified more than two dozen topics spanning competitor intelligence, workforce recruitment and retention, import and export restrictions, growth sustainability and dozens of other management, business development and operations subjects that would be perfect for roundtables, workshops, and other education structures.  Local business leaders can share their knowledge and help each other on these topics, and Pinellas County can serve as an important partner for coordinating and resourcing education on these topics on an ongoing basis.

 

These findings have stirred up conversations and put in place plans to find resources and implement change. 

What are our plans? We intend to roll out new educational events and articles on important subjects. In short, we will work overtime to market Pinellas County as one of the leading defense clusters in the United States.

What do you think, and what did we miss?  Please email Scott Talcott at stalcott@pinellascounty.org to share your thoughts.


 

January 2016: Advantages and Opportunities to Expand Your Business With SBIR/STTR Grants

Small businesses have always been at the core of innovation, where development thrives. So, it’s no surprise that small businesses, especially start-ups are busy. Busy trying to cover all of the bases and very possibly overlooking a very important “base” that could make a huge difference in their company – SBIR/STTR grants. 

These are grants that require no equity and don’t have to be paid back. Sounds almost too good to be true, doesn’t it? But it is true and it’s underutilized! Let’s get the word out and change that. There are significant opportunities for growth via the Small Business Innovation Research (SBIR) and the Small Business Technology Transfer (STTR) Research Grants.

  • What exactly are the SBIR and STTR programs?
  • How do they stimulate growth? How do I get one?

In short, both the SBIR and STTR’s main goal is to promote technological innovation in small businesses by granting research funds. These programs are “golden” sources for businesses seeking early-stage funding and annually award
over $2 billion in grants or contracts.

About The SBIR/STTR Grant Program

SBIR: The SBIR program targets the entrepreneurial sector and encourages small businesses to enter the Federal Research and Development program to works towards commercialization of a technology or product. The program supports scientific and technological innovation in order to stimulate innovation and increase small business commercialization by awarding funding. It’s a three Phase program where Phase I is to establish the merit and commercial potential. Phase II continues the research & development (R&D) efforts initiated in Phase I. Funding is based on the results achieved in Phase I. Phase III’s objective is to pursue commercialization.

STTR: STTR’s mission is to support and stimulate scientific and technological innovation by investing federal research funds. This program encourages R&D between small businesses and research institutions for the purpose of increasing the commercialization of innovations. Unique to this program is the requirement for small businesses to collaborate with a research institution in both Phase I and Phase II. This action combines the strengths of both parties and brings technologies and products from the laboratory to market. STTR bridges the gap between the basic science and the commercialization of the resulting innovations. Phase III is the stage where the business pursues commercialization resulting from Phases I and II.

The Phase awards are:

  • Phase I: “Proof of Concept Phase” - Awards are granted up to $150,000
  • Phase II: “Testing Phase” - Awards are granted up to $1,000,000 over a period of two years
  • Phase III: “Contracts Phase” - No awards, but $$ is received from the government agency who has purchased the technology


CME, Recipient of Multiple SBIR/STTR Grant Awards 
Dr. Nancy Crews is CEO and Founding Owner of Custom Manufacturing and Engineering (CME), founded in 1997 and headquartered in Pinellas Park, FL. CME has applied for and received numerous grants from the SBIR/STTR grants program since its inception. According to Dr. Crews, these grants have been beneficial in CME’s continued growth, positioning them as a robust company that has a strong potential for becoming a legacy business. 

When asked how these grants can make a difference, Crews replied that these grants are especially important in start-ups as they offer the advantage of telling the company what they need or what their issues are. “It gives the new start-up a leg-up. It’s not like a cold call where you have to guess what this customer needs or what that customer wants. The SBIR program puts all of the issues out for everyone to see and to then determine if they can find the solution.”

Crews said that the Department of Defense (DoD) puts the technology grant offers out four times a year. Some other agencies may accept unsolicited proposals, but those usually fall under the DoD in the BAA (Broad Agency Announcements). The advantage of defense-related grants is that the government receives technology that meets a certain requirement and the company gets introduced to the government. And, since some of the proposals are rated on their commercialization strategy, the applicant must have a clear picture of the commercialization potential.

Dr. Crews added that one of the most important things her company discovered in the early days was the importance of talking with and gaining the approval of the grant’s technical person who evaluates your proposal in Phase 1. There is a limited amount of time in Phase I where you have access to a technical person. “Get that technical person on your side, make him or her your champion. They will be the one who evaluates and 
rates your proposal for technical content for entry into Phase II. 


Help When You Need It: The Florida Small Business Development Center (FSBDC)
The FSBDC has a strong presence in Pinellas County and is anchored by Wayne Brass, a Certified Business Technology Consultant for the FSBDC. For the past nine years, Brass has designed, promoted and been the lead consultant for the SBIR/STTR grant program in the 10-county area on the West Coast of Florida. Brass was honored this past June in a White House ceremony with the Tibbets Award. The award, named for the late Roland Tibbetts who is widely accepted as the “father” of the SBIR/STTR programs, is presented to leaders who have been instrumental in supporting the success of SBIR/STTR programs.

Brass has been a long-time supporter of the SBIR grant program and states that “The SBIR grant program is a powerful tool for small businesses to respond to a government agency’s need...hence an opportunity is created with the agency for a contract plus commercialization of the product.”

Brass stresses the importance of getting help throughout the process. The FSBDC offers free help from navigating through the program requirements to the preparation of the proposal. Over the past several years, he has provided more than 400 hours of no-cost consulting services to over 30 companies interested in the SBIR/STTR grants. In Florida, the Enterprise Florida SBIR/STTR Phase 0 grant program was established as a result of the underutilized SBIR/STTR grants. Brass is one of the founding members and is still active in the Enterprise Florida SBIR/STTR Phase 0 grant Steering Committee. In the nine years since its inception, approximately 90 companies have applied for the Phase 0 grant funding, resulting in 72 awards, 21 of which were clients of Brass.

Facts About The SBIR/STTR Grant Program
       Provided By The Pinellas SBDC

  • On average, one out of every ten Phase I proposals are funded

  • Phase I proposals are open competitions

  • Phase II proposals are by invitation only from the agency that awarded the Phase I Grant

  • Since the awards are grants or contracts, the money does NOT have to paid back and no equity is taken by the government

  • The small business owns the rights to the intellectual property

 Benefits Of The SBIR/STTR Grant Program

  • Technology development funding

  • Can lead to additional funding sources

  • Facilitates development of partnerships

  • No interest or equity required

  • Forces discipline and focus in development

  • Forces focus on commercialization

  • Becomes an immediate customer

  • Establishes sole source position

Words of Wisdom
Both FSBDC’s Wayne Brass and CME’s Dr. Nancy Crews agree that new start-ups, or businesses new to the grant process, should seek the free advice available from the FSBDC. The agency can walk you through the proposal process from what should go into the proposal, to how to work and present their company. At the very least, hire a grant writer or editor to help. The key word is to get help!

How can SBIR/STTR help my company expand?  

Call Wayne Brass at Pinellas County Economic Development, (727) 453-7200, to learn more.

To expand your Defense and Homeland security business in Pinellas call Scott Talcott at Pinellas County Economic Development, (727) 464-7353.


2016 Pinellas Defense and Homeland Security Industry Briefing,
please submit your email address here and we will add you to the invitation list.


 

Industry Overview

Pinellas County is home to four major military installations - US Coast Guard Air Station, US Army Reserve MEDEVAC, Florida National Guard 48th WMD CST, Army National Guard 53rd Infantry Brigade Combat Team – Only miles from MacDill Air Force Base (6th Air Mobility Wing for airlift and refueling) which also hosts U.S. Central Command and U.S. Special Operations Command.  


Workforce

  • 40,000 direct and indirect jobs are related to Pinellas’ defense sector employment

  • 100,000 veterans call Pinellas County home

  • Pinellas is the largest manufacturing employee base among eight Tampa Bay counties, and is the second largest manufacturing employee base in the State of Florida.

  • Workforce training is available through Pinellas Technical College and St. Petersburg College, including CNC machining, welding, mechatronics, and supply chain management. Coming soon: the German apprenticeship model.

 


The United States Coast Guard Air Station at Clearwater is the largest and busiest air station in the Coast Guard.   

  

Contracts Awarded to Employers with a Pinellas County location (2014)

  • 2,074  prime U.S. Dept. of Defense (DoD) contracts
  • $531.6 million in contracts awarded 
  • 36% of the region’s DoD awards

    Subcontractor Awards
  • 31 contracts, totalling $ 602,257
  • 74% of the region’s subcontractor awards


Unclassified Test Bed - Pinellas County

National Interest Security Company (NISC) maintains an Unclassified Test Bed (UTB) in St. Petersburg, a type of Research and Development (R&D) lab where new Information Technology (IT) products can be rapidly evaluated, matured, and integrated into existing systems for use by operational forces. The UTB provides an environment for the testing of hardware and software in a laboratory setting. 


Industry Support

Pinellas County’s Defense and Homeland Security industries include companies specializing in aviation, aerospace, electronics, advanced radar, radio frequency systems, space defense systems, satellites, ordnance, tactical intelligence, surveillance, specialty vehicles, explosive prevention/protection, protective apparel, military forensics and geospatial intelligence.

 

Lockheed Martin Solar Carport Project

Lockheed Martin in partnership with Advanced Green Technologies broke ground to establish Florida's Largest Private, Non-Utility Solar Array. This project will create 151,400 sq. ft. of protected parking for 534 cars sheltered by 7,260 solar modules.

Defense and Homeland Security Industry Cluster 

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