Source Gazette.net – by Lindsey Robbins | Staff Writer
Small military contractors specialize to grab federal dollars.
Congress has authorized nearly $700 billion in military spending this year, and much of that will go to giant contractors such as Lockheed Martin and Northrop Grumman for high-tech aircraft and missile systems. But a significant portion will also be spent in Maryland, on an eclectic range of goods and services from musical instruments and phonographs to Arabic role players.
Yet as the economy slowly recovers and private-sector opportunities remain relatively scarce, the small contractors in Maryland that supply these products to the Pentagon face growing competition.
Small businesses often provide the goods that meet the military’s more mundane needs, such as the packaging for system components and even the storage bags that protect equipment from the elements.
The federal government, through the Small Business Administration, has a goal of 23 percent of its agency contracts going to small businesses. Although agencies have not met this goal since 2005, many Maryland businesses are trying to push themselves onto the Pentagon’s contracting officers’ radar screen.
“Ever since last August, we have had more businesses coming to our door who have never done business with the government ever before,” said Archie Cardwell, deputy associate director of Fort Detrick’s Office of Small Business Programs in Frederick.
A quick check of recent Defense Department contracts going to Maryland businesses includes $36,472 for musical instruments and phonographs from the Washington Music Sales Center in Wheaton; $36,750 to rent event barricades from Sonco Worldwide in Bladensburg; $206,040 for Arabic and English role players from Valbin Corp. in Silver Spring; $527,535 for herbicides to clear waterways for the Army Corps of Engineers from Vetcorp in Frederick; and $20.32 million for fuel from Fraga Group USA in Greenbelt.
Most small businesses pursue their contracts in smaller chunks instead of going after major prime projects, which require “deep pockets” if something goes wrong and a great deal of continuous research, said Paul Weisbrich, senior managing director for McGladrey Capital Markets, a military and aerospace analyst in California.
“The biggest advantage to small businesses contracting with defense agencies is the SBA requirement. If you can get that first contract, you have a good shot of getting a second one,” said Jacques S. Gansler of the University of Maryland Center for Public Policy and Private Enterprise.
‘They always pay’
“The best benefit of working with the military is that they always pay. You don’t have to worry about that,” said Bill Tilghman, general manager for Compass Languages in Crofton.
Compass Languages has an Army contract to translate Afghanistan reconstruction reports for presentation to the Afghan government and a Navy deal to provide interpreters for the Naval Medical Center in San Diego. The company won $28,000 from the Defense Logistics Agency in March for sign-language interpretation services.
Working with a full-time staff of eight, Compass might manage 2,500 linguists at any given time, soliciting local speakers through multiple channels, Tilghman said.
“The biggest challenge with the military is clearance. You have to have clearance and a contract, and you can’t get one without the other. It takes some work to figure it out,” he said. “But once you learn the processes, it’s fairly predictable work.”
Mukesh Sethi, owner of Phoenix Trading in Rockville, is unlikely to call his work predictable, as he works with 1,300 different vendors to supply systems parts, including those for Mine Resistant Ambush Protection vehicles. The company won $274,200 this month from the Defense Logistics Agency for axle assemblies.
Phoenix Trading, with 18 employees, specializes in military packaging and has been federally certified in the practice.
The company has already seen changes in Pentagon spending, Sethi said, as the government has gone from buying 3,000 units of an item at once in 2007 to 1,000 units now.
“Indirectly, the recession brought in more competition,” Sethi said. “A lot of new companies are coming in, bidding at low cost and thinking they can outbid me, but it’s impossible to do quality work at those costs.” He estimates he competes with 45,000 vendors.
“It will take its toll because a lot will see it’s not easy to work with the government. They want everything to be packed as per their need,” Sethi said.
‘Not a lot of instant gratification’
In figuring out what the customer wants, it helps to have some educational background in the field, said Bob Lasser, president of Imperium, an imaging company in Beltsville, where he works with his father. He said his bachelor’s degrees in science and math helps reassure prospective customers about the company’s ultrasound camera.
Imperium’s patented Acoustocam technology uses a remote wireless connection to transfer real-time, recorded data about the scanned material’s structural integrity to users far away. The technology can detect potentially serious internal damage to a vehicle or air transport that was in a seemingly minor collision with a truck that left only a surface dent or two. Imperium provides such technology to the Navy’s Patuxent River Naval Air Station and Edwards Air Force Base in California.
But while doing business with the Pentagon has helped Imperium triple in size last year — with an additional doubling in sales anticipated this year — it also has its challenges, including the time it takes the 15-employee company to pursue contracts, Lasser said.
“There’s not a lot of instant gratification in this world,” he said.
Belfort Instrument in Baltimore also provides technology to the Navy and Coast Guard, in the form of meteorological sensors.
Ralph Petragnani, vice president of sales and marketing for Belfort, described its main products as small airplanes without wings that provide detailed assessments on the wind.
The 45-employee company, with $10 million in annual sales, won $461,748 from the Navy in April for wind transmitters. Belfort will also be reproducing the design for the wind system it initially built for the Empire State Building in 1939, intended to help blimps dock.
Unlike some Pentagon contractors, Belfort is not too concerned about the future of the military budget, Petragnani said.
“Because we don’t make armament or anything for the wars, we don’t see it as much of a hit. These could be on merchant ships,” he said of the wind instruments.
Sewing up contracts
Avalon Industries also remains unfazed by potential military budget changes.
The Baltimore custom sewing house provides the military with items like gun covers, landing nets and shower curtains. The 35-employee company won $299,471 from the Defense Logistics Agency in April for infrared equipment cases.
“The biggest problem we run into are outdated standards,” said Steve Manlove, president of Avalon, explaining how Avalon sometimes must update its orders to give customers the best possible product.
Avalon turned more to Pentagon contracts when the recession hit its commercial business, forcing one of its suppliers to Taiwan, Manlove said.
“It’s its own jobs program. The things we make are disposable, so they’ll always need to be replaced,” he said. “It’s not just for the U.S. either; these things are resold to our allies.”
He also spoke of the increasing competition for contracts, saying sometimes Avalon will not bother bidding because it is impossible to beat companies bidding at a loss.
“We tend to cherry-pick,” Manlove said.
‘Faced with different regulations’
Tom Crawford, director of business development at MaTech in Salisbury, said his manufacturing company is just keeping an eye on things for now.
MaTech, which employs 215, produces close-tolerance machined and sheet metal parts and assemblies, including M4 carbine sightings, mortar fins and components for the Stryker Armored Vehicle.
In January, the company won an Army contract for $475,524 for 30mm guns.
The key to federal contracting is developing relationships, Crawford said, emphasizing the multitude of organizations companies must work with, from contracting and administration to getting paid.
“A lot of times they don’t talk to each other, and you can be faced with different regulations from each that can be challenging to resolve,” Crawford said. “There’s a lot of cross-organizational conference calls.”
Maintaining MaTech’s high standards is equally important, he said.
“Regardless how you feel about the [war] contracts [the country is] engaged in, the people on the front lines deserve the best equipment we can possibly get to them,” Crawford said. “We build things every soldier is going to use.”
Whether companies should stick to their guns, so to speak, and continue focusing on military contracting or start shifting back toward more private-sector deals is debatable.
“My advice would be to ride this out and just don’t spread yourself thin through multiple agencies,” said Cardwell, at Fort Detrick.
But Weisbrich, the McGladrey analyst, argues that the military industry expects its private-sector side to go up 15 percent in the coming years.
Contractors should consider a major shift in the Pentagon’s mindset, he said. In the past, military agencies wanted products to perform more than what was needed, even if that meant longer production times. Now, the agencies want products faster, even if they don’t perform above standards.
“Three years ago, the government was looking for a 140 percent solution at several years,” Weisbrich said. “Now, it’s looking for an 80 percent solution in several months. The supplier base isn’t used to this.”