Nearly 120 business professionals in the defense industry attended a unique briefing developed specifically for members of the Hampton Roads Chamber of Commerce on June 19, which spelled out the likely impact the defense budget will have on the local economy.
The forum, “From Macro to Micro: The 2015 Defense Budget and Beyond” was held at the Chesapeake Conference Center, and provided the most up-to-date information and current trends for the U.S defense spending from content experts as it impacts not only the national, but state and local economy.
The Chamber’s partner in this endeavor, the Hampton Roads Military and Federal Facilities Alliance, was key to bringing the Roosevelt Group to the region. A bipartisan Washington, DC-based government relations consulting firm, the Roosevelt Group has clients in a variety of fields including defense, homeland security and intelligence industries.
The comprehensive brief covered topics that have monopolized the news for years, namely staying within defense budget goals while meeting obligations to defend the country at home and abroad.
The Roosevelt Group acknowledged the dependence the local economy has on defense spending is sobering, but added there is also a great deal of opportunity locally.
Founders John Simmons and Christopher Goode say that while much of the sequestration threat has been temporarily abated, it’s far from being entirely avoided. “We actually expected a full sequestration, about $50 million,” said Simmons. “But (Congress) actually struck a deal.” This eases the sequestration’s hold on defense budget FY14 and FY15, gives more predictability, certainty, time and flexibility, and allows Department of Defense to address near-term readiness challenges. Yet it still has “kicked the can” into FY16.
Bumps in spending caps might have extended sequestration, however citing a Gallup poll, Simmons shared that public opinion shows a belief that too much money is being spent on defense. Under current plans, the region will see defense spending accounting for less than 10% of the overall U.S. budget. By comparison, the budget last year for defense was 18%. Even with this pronouncement, he believes the region has seen worst of the impact, with things beginning to ease up.
The Roosevelt Group shared statistics on government contractors’ impression of the previous year, with 77% reporting flat or declining sales and 61% saying they suffered moderate to significant sales decline. Sequestration, with the Federal government shut down for 16 days, did much to shake confidence, hurting small businesses in the region most of all.
Budget cuts will still to impact the defense industry in Hampton Roads, according to the Roosevelt Group, who predicts contractors will continue to face longer procurement cycle delays and an “invest to play” requirement, as well as pricing challenges, insourcing and aggressive government negotiations.
However, with growing demands around the globe, and with the time running out before a FY15 budget must be passed, the Roosevelt Group anticipates that extended Continuing Resolutions will affect the defense industry and the regional economy. Keeping pace with the many priorities of national security while delivering a smart budget strategy has yielded many scenarios, but one may prove as beneficial to the region.
Simmons and Goode suggested that a Base Realignment and Closure Commission, or BRAC, is not something to fear, but instead embrace. The region has weathered BRAC threats in the past and will actually stand to gain assets from a BRAC commission.
The briefing covered much detail on ideal force structure, modernizing platforms and weapons systems, and military construction, as well as focus on disciplines that are most likely to see growth under future defense spending, such as cyber warfare, foreign military sales and unmanned systems.
“I thought the briefing was timely and covered great information and a different industry perspectives as well as areas for industry to focus on,” said Eileen Gwaltney, a member of the Tidewater Association of Service Contractors. “Hearing from a group who works on Capitol Hill is a great resource for the Chamber.” For the entire Roosevelt Group briefing, click here.
Also speaking at the special event was John C. Harvey, Jr., Virginia’s Secretary of Veterans Affairs and Homeland Security. Familiar to the region as former command of U.S. Fleet Forces Command, Governor Terry McAuliffe tapped Harvey to manage veterans’ issues. For more on his presentation, click here.
The Chamber would like to thank our special partner sponsor of today’s briefing, the Hampton Roads Military and Federal Facilities Alliance; and our silver sponsor, the Small Business Development Center of Hampton Roads as well as the table sponsors, program sponsor and exhibitor.