Monday, November 12, 2007

MEDC shoots for more defense dollars

cross posted at Michigan Messenger

The Michigan Economic Development Corporation wants to break Michigan's dependence on the auto industry. State officials hope the new Defense Contract Coordination Center (DC3) will help businesses reposition themselves to win military contracts.

"I proposed creating an organization in state government to bring defense jobs to Michigan," said state Sen. Valde Garcia (R-Dist. 22). "During World War II, we were known as the Arsenal of Democracy. Given our history, manufacturing capacity and our trained work force, I thought it would be a natural fit and a great way to transition from where we are with the auto industry to diversifying the economy."

Garcia imagines Michigan companies bringing factories to full production to replace equipment lost in the Iraq war. This could include anything from vehicles to body armor.

After an MEDC study found Garcia's concept viable, legislation signed in 2006 made the DC3 a reality. MEDC will administer the center through the 21st Century Jobs Fund -- Gov. Jennifer Granholm's $2 billion economic development initiative -- with a one-time $10 million appropriation.

Garcia expects the DC3 to fill immediate employment needs in Michigan. "It will take years to diversify the economy with biotech, advanced automotive and alternative energy. In the meantime we needed to come up with something that will put people to work. This is likely to employ people right away," Garcia said.

While that might hold in the short term, a new study -- from the Political Economy Research Institute at the University of Massachusetts Amherst -- finds defense spending inferior to other public investments in creating jobs. "What I can tell you from the study is that the employment impact of putting money into education is going to be larger than the employment impact of putting it into military procurement contracts," said professor Robert Pollin, lead author of the study, "The Employment Effects of Downsizing the U.S. Military."

Even so, in the context of Michigan's desperately struggling economy, Pollin allows that competing for defense contracts makes sense. "In a state like Michigan, where you do have a problem with job creation and there are these contracts for military procurement, of course you should compete aggressively to get them. Why shouldn't Michigan get them as opposed to Minnesota or Iowa or someplace else?" he said.

Retired Marine Maj. Gen. Bradley Lott assumed leadership of DC3 in June. While advocating government contract procurement, Lott advises businesses to cultivate a diverse client base. "I never recommend anybody become just a defense or homeland security kind of supplier. We want to diversify our industrial base," Lott said. He wants to help Michigan's economy, but has encountered resistance to defense and government contracting across the state.

In his first months on the job, Lott traveled the state listening to potential constituents and making the case for pursuing government contracts. He said people at every presentation questioned doing business with the federal government and pursuing defense contracts in the midst of an unpopular war.

Lott said if people don't like defense contracts, there are other things they can sell to the federal government, such as baled hay or soap.

Lott's core strategy is to get Michigan companies involved early in the contracting process. "If you are reacting to a contract when it is published, you are considered a Johnny-come-lately," Lott said. His goal is to teach companies about the entire contracting process -- which can take two to three years -- so that they can participate in working groups at the earliest stages. These working groups actually help shape contract requirements.

The DC3 will also train Michigan's 12 Procurement Technical Assistance Centers (PTACs) to act earlier in the contracting process. PTACs -- nonprofits funded by the Defense Logistics Agency, the MEDC and local partners -- connect businesses with contracting opportunities.

Over the next three months, Lott will staff the organization and create a curriculum and training materials. After that, DC3 staff will begin to train personnel at PTACs and businesses around the state.

With $10 million in seed money, 34 years of service in the Marines, support of the Legislature, a vast array of engineering and manufacturing capacity at the ready, and a commitment to help the state, Lott is set to complete his mission.

"We are initially going to increase contracts, which is dollars, which is jobs. But in my heart, I want to see the state of Michigan regain recognition as the Arsenal of Democracy," Lott said.