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Clustered or not, homeland security thriving locally
By Dan McCue
Staff Writer
Editor’s note: This is part three of a six-part series
examining the AngleouEconomics Report and the five cluster industries the report recommended economic developers to pursue.
The tri-county region is fast becoming a nexus of the nation’s burgeoning homeland security industry, according to contractors and state and local law enforcement officials.
Currently, according to Pennie Bingham, director of the Charleston Metro Chamber of Commerce’s ThinkTEC program, nearly $40 billion is being spent in the Charleston area on a wide range of homeland security initiatives. That local investment has nearly tripled in the five years since the Sept. 11, 2001 terrorist attacks on New York and Washington, D.C., she said.
But to automatically assume that 9/11, or even the continuing threat of terrorism in one of the nation’s largest port and tourism cities, is the principal catalyst behind that trend would be wrong, according to the experts.
“The real change in the region’s direction, in terms of the work we do, was the result of the Base Realignment and Closure Act of 1993,” said Fred L. McCarthy, a member of the Charleston Defense Contractors Association’s board of directors.
“With that BRAC and its closure of the Charleston Naval Base, the local industry was dramatically transformed,” he said. “In the years since, defense contracting has evolved from shipbuilding and a heavier kind of industry to more of a high tech, engineering-based cluster.”
Recognizing that profound change, AngelouEconomics, a consultant hired to map out an economic development strategy, recommended fostering what it terms “advanced security” as a lynchpin for the region’s future.
But homeland security, with its classified projects and defense and legal community underpinnings, is a difficult industry for economic developers to gain much headway.
While the growth of homeland security initiatives in the Lowcountry has been rapid, it appears to be occurring purely as a result of the industry’s internal momentum rather than as the result of civic boosterism or finely honed incentive packages.
This appears to hold true whether the companies in question are household names such as defense contractors Raytheon and Honeywell, or entrepreneurial ventures such as Rotomotion of Mount Pleasant, a manufacturer of robot surveillance helicopters.
A changing industry
Pres. George W. Bush acknowledged the areas high profile role in homeland security during a February 2004 visit to the Union Street Terminal. He described the port as an “important hub of commerce.”
Bush vowed that the administration would “make sure that not only is the port strong for economic reasons … we will make sure that the port defends the people (and) is ready to defend against the threats of a new era; that this port is secure and safe.”
In the wake of those comments, a lucrative marketplace for companies with homeland security-related products and solutions continues to grow. Recent federal allocations continue to invigorate the contracting climate.
In short, the emphasis on homeland security is revolutionizing the partnership between public and private entities in the defense industry, “both through transformation and fusion,” said Robert Stewart, South Carolina’s counter-terrorism chief.
“I think that’s absolutely the case. I could spend all day doing nothing but talking to vendors if I allowed it to happen. I’m seeing a lot of activity, particularly from newcomers to the industry, in the areas of public safety, criminal justice and information technology. In fact, information technology is huge. There isn’t a day that goes by that someone isn’t proposing some new way to configure our databases.”
U.S. Immigration and Customs Enforcement has also seen a marked increase in the number of companies offering their services, products and equipment to agencies engaged in the fight against terrorism.
“It’s definitely a huge growth industry for these companies,” said Zachary Mann, a customs special agent. “First of all, just in terms of our own department, we try to make all port operations as uniform as possible in terms of the facilitation of commerce and the enforcement of law. As a result, if a product is tested and works well in Miami, we’re going to want to deploy it in Charleston, Savannah (Ga.), Jacksonville (Fla.) and all of the other 311 ports of entry.”
Homeland security microcosm
The tri-county region is a microcosm of the needs—and the opportunities—presented by homeland security.
It’s not just about protecting the port, but also the region’s transportation infrastructure, the local historic or symbolic properties, and a wide range of military and government buildings and facilities.
Each of these targets needs to be protected from all forms of catastrophic threats, including chemical and biological weapons attacks, nuclear attacks and other explosions, malfeasance in cyberspace, and even natural events such as hurricanes, tornados and earthquakes.
For every category, there are products and services required for protection, detection and response. Given the enormous variation in these categories, there are enormous opportunities for private companies wishing to serve the homeland security market.
The question then becomes how to get these companies to open a facility in Charleston or, better, to move their headquarters here. To most local contractors, and already there are 50 that are members of the Charleston Defense Contractor’s Association, the answer is to have an anchor agency.
The SPAWAR factor
For the vast majority of active homeland security contractors in the Charleston area, that anchor is the Space and Naval Warfare Systems Command, the government-sponsored information technology that was created by the Navy to provide sailors and Marines in combat with every possible electronic advantage.
Four years ago, Booz Allen Hamilton, the defense-industry consulting firm, was asked by the Navy to perform an analysis of the effectiveness and efficiency of its various materials suppliers around the country.
The report found that SPAWAR Charleston was the Navy’s most cost-efficient engineering organization when measured by factors such as workload in relation to overhead expenses.
That ranking kept Charleston going from a defense-industry perspective according to contractors.
“Historically, when the Navy base was here, it was a different organizational structure,” McCarthy said. “People talk about the jobs lost with the Navy base closure, but in reality, there has been a net gain in labor—it’s just a completely different kind of labor force.”
“Prior to 1993, the sponsorship of our industry here in Charleston primarily came from the U.S. Navy,” said Mike Resler, spokesman for the CDCA. “Today, there is a good deal of dispersal, with contracts coming from Homeland Security and other federal agencies, the U.S. Marine Corps, Army, Air Force and others.”
Today, SPAWAR employs 2,500 individuals directly, while contractors employ an additional 10,000 locally. The average salary of these workers is $78,000, Resler said.
The hallmark of the community, as illustrated by their close proximity in the Aviation Business Park near Charleston International Airport, is a willingness to work together on projects.
“What you’ll find is that few if any of our companies seek publicity. We don’t want it,” said Jack Hogan, another member of the CDCA board. “We’re all about supporting the war fighter.”
But in the absence of the Navy base, that commitment is inextricably tied to SPAWAR Charleston. With few exceptions, the companies that serve as contractors for SPAWAR are headquartered elsewhere. Most are in Northern Virginia.
“The continuing partnership with SPAWAR is critical to our industry,” Resler said.
Another contractor, who did not want to be identified, put it this way: “If our primary customer goes away, we go away.”
Dan McCue is a staff writer for the Business Journal. E-mail him at dmccue@charlestonbusiness.com.
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