• WisBusiness

Monday, June 28, 2010

Defense-less no more: Wisconsin firms competing for, and winning, military contracts


By Tom Still
For decades, Wisconsin lagged most of the 50 states when it came to federal defense spending. The lack of a major military base explained Wisconsin’s poor return on its tax dollars – at least, in part – but a dearth of defense-related contracts seemed harder to justify given the state’s manufacturing and research know-how.

That trend appears to be changing, perhaps even dramatically, as Wisconsin firms find themselves fulfilling defense orders ranging from a new class of U.S. Navy warships to mine-resistant vehicles to health preparations for reservists and National Guard troops heading overseas.

Familiar examples include Oshkosh Corp., which has been awarded more than $5 billion in contracts to build specially armored All-Terrain Vehicles for use in places such as Iraq and Afghanistan, and Logistics Health Inc. in La Crosse, which helps the Department of Defense ensure that soldiers receive necessary physical examinations, vaccinations and more.

Another company moving up rapidly on the defense contract radar screen is Marinette Marine, a firm that could rapidly become the state’s largest military supplier if it wins a Navy contract to build more of its next-generation combat ships.

Word could come as soon as July on whether Marinette Marine, the American arm of Italian-based Fincantieri Marine Group, wins a contract to build 10 “littoral combat ships” for the Navy. These high-speed ships are designed to work in shallow coastal waters but pack all the punch that might be expected of a warship that is nearly 400-feet long and equipped with the latest high-tech systems.

Marinette Marine has already built one such ship, the U.S.S. Freedom, which is operating successfully at sea, and a second ship – the U.S.S. Fort Worth – has reached the halfway point in its construction. Building 10 more ships would take five years, adding more than 1,000 people to Marinette’s payroll and providing jobs for 7,000 other suppliers and vendors.

Eventually the Navy wants about 55 of the ships, which could create 20 years of work at Marinette – should the company receive all the contract awards.

That would make it the largest shipbuilding contract in Wisconsin since World Ward II, when submarines were built in Manitowoc.

Of course, neither the 10-ship contract nor those that might follow are a foregone conclusion. Marinette Marine is competing with General Dynamics and its Australian partner to build a similar design in Mobile, Ala. Both ships appear to meet the Navy’s basic specifications so it will likely come down to cost and a sense that one team or the other can better accomplish the job.

Marinette Marine’s case has been helped by a $49-million package of state incentives, mostly tax credits and training dollars that would help it quickly gear up for the job. The company also enjoys credibility beyond its work on the Freedom and the Fort Worth. It was recently awarded a $193 million contract to build nine more Response Boats-Medium for the U.S. Coast Guard, which has been a recurring customer.

Marinette Marine’s shipyards about 45 miles northeast of Green Bay have been modernized over time and more work is planned to allow LCS construction to take place entirely under roof. The company is well-positioned tap Wisconsin’s supply of manufacturing talent, which can compete favorably with skilled labor in any state.

If Marinette Marine wins the Navy contract, it would continue a decade-long streak of expanded defense spending in Wisconsin. Ten years ago, defense contracts in the state totaled $768 million, according to GovernmentContractsWon.com, which reviews federal figures. That was second to last among seven Midwest states – the other six being Illinois, Iowa, Indiana, Michigan, Minnesota and Ohio. In 2009, the website reported, Wisconsin had $8.05 billion in defense contracts, about $1.4 billion ahead of its nearest Midwest competitor.

There are many reasons why Wisconsin companies have won more contracts, but getting things done on time and on budget is no small part of it.

Marinette Marine and other defense-related contractors are symbolic of Wisconsin’s ability to meet federal needs for goods and services. At a time when all federal dollars must be stretched, state businesses offer Washington an effective and sustainable alternative.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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