www.angeloueconomics.com rollout presentation june 2005 military business and resource gap analysis

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ROLLOUT PRESENTATION

June 2005

Military Business andResource Gap Analysis

Military Business & Resource Gap Analysis 2

The Consulting Team

AngelouEconomics (Lead Consultant) The largest independent economic development

consulting firm in the US Experts on Technology DevelopmentJane’s Information Group Leading authority on military and intelligence matters World’s commercial intelligence Service

THE PROJECT

Military Business and Resource Gap Analysis


Why this Study?

North Carolina Value Rank

Gross State Product $300 billion 12th

% of workforce in manufacturing 19% 6th

Military Personnel 113,000 4th

As a % of Employment 4% 6th

Total Military Procurement 2004 $2.2 billion 23rd

Goods Procurement 2004 $750 million 28th

Military Procurement as a % of GSP 0.74% 39th

Procurement Growth '01 to '04 49% 25th

SBIRs Awarded $33 million 38th

% of Base Work Performed in State 59% 25th

R&D Performed in State 2004 0.4% 25th

Small Business Procurement 1.7% 18th

University R&D Procurement 1.6% 10th

North Carolina Large, diverse

economy Significant research

assets Major military

presence Low comparable

levels of military contracting


CORE PROJECT GOALS

1. Identify defense-related companies that can be recruited to North Carolina

2. Identify future procurement opportunities for North Carolina’s existing businesses

3. Identify strategies to improve North Carolina’s competitiveness and success in the defense sector


4-MONTH PROCESS

TASK ONE: Project Set Up

TASK TWO:Analyze national and North Carolina

defense industry

TASK THREE: Compare North Carolina resources to

recruitment needs

TASK FOUR:Identify target audiences for

marketing

TASK FIVE: Create a business recruitment

strategy

Input Process Dozens of focus groups and interviews Visited each major military installation

and multiple regions:Raleigh, Fayetteville, Piedmont Triad, Charlotte, Hickory, Asheville, many more

Online survey of NC businessesReports

1. National Defense Trends2. NC Resource Analysis3. Targets & Recommendations

ASSESSMENT & FINDINGS

Military Business and Resource Gap Analysis


Shift in Security Assessment

New global security threats are causing a major transformation in the organization and tactics of the U.S. military.

War on Terrorism and War in Iraq ‘Rapid Decisive Operations’ – fast and flexible force

dependent on precision weapons and a high-technology network-centric approach

Base reconfiguration More bases in non-traditional locations

Restructuring of the Army More units, more troops, more flexibility


Shift in Future Weapons

Mobile military will require significant new equipment and systems to support it. Jane’s identified 5 new systems that will be the basis for future weapons procurement:

Network-Centric Communications Systems Unmanned Aerial Vehicles Space Systems Future Combat Systems Land Warrior System


Research Funding

Research funds for advanced weapon systems is a high growth line-item.

S o u rc e : A n g e lo u E c o n o m ic s ; D IO R ; v a lu e s in b i l l io n s

$10

$12

$14

$16

$18

$20

'01 '02 '03 '04

7 0 % G ro w th

R E S E A R C H F U N D I N G

DoD Research Funding Total from 2001 to 2004

U.S. North Carolina % of U.S.R&D Funding $111,200 $350 0.3%SBIR Funding $4,800 $33 0.4%University R&D Funding $3,500 $43 1.2%

Source: AngelouEconomics; DIOR; Values in millions; R&D as classified by the product service description


More on NC Procurement

North Carolina’s largest “capture” of DoD procurement is in apparel and textiles, construction, food, and furniture.

North Carolina Procurement Strengths

NAICS Description National

Procurement '04North Carolina

SuppliedNorth Carolina %

of Total

316 Leather and Allied Product Manufacturing $384 $91 23.7%233 Building, Developing, and General Contracting $992 $130 13.1%722 Food Services and Drinking Places $872 $97 11.2%314 Textile Product Mills $974 $88 9.0%315 Apparel Manufacturing $1,249 $60 4.8%235 Special Trade Contractors $7,496 $338 4.5%335 Electrical Equipment, Appliance, and Component Manufacturing$1,745 $77 4.4%326 Plastics and Rubber Products Manufacturing $365 $16 4.3%

Total $230,657 $2,213 1.0%

Source: DoD; AngelouEconomics; Values In millions


Procurement Trends

More than 50% of the DoD budget is sourced to private sector contractors. This % will expand to 60% by 2010.

Significant expansion in outsourcing of non-core functions and personnel is planned for 2006 to 2009.

$145

$171

$231$209

$100

$200

$300

'01 '02 '03 '04

In te r n al Do D

Co n tr acte d

Source: O M B, D IO R; AngelouEconom ics; values in billions

P R O C U R E M EN T T R E N D S


North Carolina Assessment

AngelouEconomics examined 20+ site selection criteria as they relate to defense contractors

Workforce Labor Force Availability Educational Attainment Secondary Education Availability of Technical Grads

Infrastructure Site and Building Availability Real Estate Costs Transportation Utilities

Business Climate Economic Growth Labor Costs Tax Burden Incentives University Research Venture Capital Entrepreneurship

Quality of Life Income Level Cost of Living Housing

Quality of Life High Tech Image Business Image Economic

development efforts


NC Procurement Gap

AngelouEconomics identified industries that were under-selling to the military but show strength in the state.

NAICS Description North Cluster Emp

Cluster % of National Procurement

% of NC Base Performed NC

% of NC Base Performed HQ

233 General Contracting 1.1 13.1% 98% 49%234 Heavy Construction 1.2 2.0% 97% 7%235 Special Trade Contractors 1.1 4.5% 96% 37%311 Food Mftg 1.2 0.0% 68% 59%314 Textile Product Mills 2.8 9.0% 4% 3%325 Chemical Mftg 1.8 0.3% 41% 27%327 Nonmetallic Mineral Product Mftg 1.2 0.1% 28% 27%332 Fabricated Metal Product Mftg 0.9 0.4% 10% 3%333 Machinery Mftg 0.9 1.5% 22% 11%334 Computer and Electronic Product Mftg 1.0 0.7% 8% 4%335 Electrical Equipment Mftg 2.1 4.4% 17% 15%

Industry STATE OPPORTUNITY

Strong State Employment Cluster

With low U.S. or North Carolina base procurement


Target Selection

Series of 10 filters were used to identify specific 2- and 3-digit industries that are good defense targets for North Carolina:

AngelouEconomics identified both recruitment and expansion targets for the state.

National Competitive bidding Subcontracting / small biz Long-term growth

State Industry Clusters Procurement Gap Assets in Workforce, Research,

Business Climate, Infrastructure


Target Selection

333 Machinery Mftg 311 Food Mftg

334 Computer and Electronic Mftg 312 Bev erage Product Mftg

335 Electrical Equipment Mftg 313 Tex tile Mills

336 Transportation Equipment Mftg 314 Tex tile Product Mills

541 Technical Sv cs 315 Apparel Mftg

927 Space Research 316 Leather and Allied Product Mftg

541 Professional and Technical Sv cs 323 Printing

551 Management Sv cs 493 Warehousing and Storage

233 General Contracting 561 Administrativ e and Support Sv cs

234 Heav y Construction 722 Food Sv cs

235 Special Trade Contractors 811 Repair and Maintenance

812 Personal and Laundry Sv cs

Base Construction

Defense Consumables

Textiles, Food, Printing, & Distribution

Base Support Services

Defense Technologies

(Manufacturing, Research, and Services)


Recommendations

AngelouEconomics has prepared 23 specific recommendations for North Carolina in support of this Plan.

5 main headings:

1. Information

2. Marketing

3. Entrepreneurship / Research

4. Infrastructure

5. Organization


1. INFORMATION

1. The NCMBC should develop an information portal

2. Create and support a defense enterprise team within the Department of Commerce

3. Establish an annual defense contracting conference

4. Perform a State Defense Asset Inventory


2. MARKETING

1. Expand external marketing campaigns

2. Make marketing website improvements to the Commerce website

3. Attend national defense conferences

4. Marketing and informational visits to defense clusters

5. Market development trips to defense contractors

6. Include foreign defense companies as top targets


3. Entrepreneurs / Research

1. Launch an annual North Carolina SBIR conference

2. Create an SBIR matching fund

3. Create a North Carolina defense technology fund

4. Fund a defense technology commercialization fellowship program


4. INFRASTRUCTURE

1. Support existing state defense assets

1. Army Research Office

2. Centennial Campus Research Park

3. Military Business Center

4. Global Transpark

5. Institute of Aeronautical Tech


5. ORGANIZATION

1. Designate “Defense” as an NC target industry Integrate this study into the ED plan for the State

2. Designate a defense cluster specialist

3. Integrate local economic development efforts

4. Existing state contractor annual visits

5. Create targeted incentives for defense contractors

6. Create a marketing funds 401c6 for NCMBC

7. Expand and coordinate federal lobbying efforts


Key to Success

North Carolina has a clear opportunity to “close the gap” between the defense industry and its military assets.

This effort will require:

1. A new official focus

2. Collaboration between state, local e.d & federal

3. Marketing Investment

4. Staff time

5. University participationEach is critical to the success of this effort.

representatives


Economic Impact of Success

Success will come from expansion of DoD procurement by existing or relocating companies.

New Jobs, New Income, New Tax Revenue

What does $100 million in new DoD contracts for NC mean?

1,800 new jobs, $70 million in new payroll, $14 million in new state/local tax revenue

30,000 more jobs in 2010 …and about $150 million more in annual state and local tax revenue…

…than you would have had at a 1% DoD capture

If North Carolina can grow its defense capture from 1% today to 1.5% in 2010, the

state would gain $1.7 billion in new annual DoD contracts by 2010.


Thanks!

Find out more at the NCMBC website!

www.ncmbc.us

www.angeloueconomics.com rollout presentation june 2005 military business and resource gap analysis

Documents

resource gap analysis

project military business

nc resource analysis

major military installation

flexibility slide

future weapons mobile

defense sector slide

new systems