Central New York's war economy

The Post-Standard - Syracuse, New York

By: Charley Hannagan, Staff writer
November 12, 2006

Over the past six years, the federal government has spent $1.8 billion on defense contracts with companies in Cayuga, Madison, Onondaga and Oswego counties.

It's a chunk of change that ripples through Central New York companies.

The exact impact defense spending has on the area is anybody's guess. No one keeps track of how many local businesses serve the industry, or how many people those businesses employ.

"People don't pay a lot of attention to it. It's bigger than anybody thought," said Michael Wasylenko, senior associate dean of the Maxwell School of Citizenship and Public Affairs at Syracuse University.

Companies such as Lockheed Martin Corp., Syracuse Research Corp. and Sensis Corp. are well-known defense contractors.

But few people know about Precision Systems Mfg. Inc., which employs 75 workers who make parts for Lockheed Martin and ship 400 Humvee bumpers a week to the Army.

Or Indian Springs Specialty Products, a Baldwinsville company with 18 employees that makes chlorine leak kits used by the military at water treatment facilities in Iraq. The post-9/11 emphasis on homeland defense poured money into American fire departments, which bought the kits in case terrorists attacked local water treatment plants.

Or Northeastern Electronics Co. Inc., which makes cables for portable radars and devices that jam roadside bombs.

Yet they and hundreds of other companies have reaped the benefits of a 55 percent increase in defense procurement spending in Onondaga, Oswego, Madison and Cayuga counties between 1999 and 2004, based on figures from the U.S. Census Bureau's Consolidated Federal Funds Report.

Nationally, defense procurement contracts grew 62 percent over the same time period, to $211.5 billion. New York's share of those contracts grew 57 percent to $5 billion.

The report shows that federal defense contracts for 1999 before the Iraq war began totaled $256 million in the Syracuse metropolitan area. The amount has fluctuated over the years, and in 2004, the last year available, reached $397.9 million.

Many companies have benefited from the increased spending. They've hired more workers to meet the increased workload and increased wages. Some companies are thinking about building larger plants to handle the demand, and that means more work for the construction industry.

Before the mid-1990s, Syracuse Research was a not-for-profit company that performed research for the military and commercial businesses.

In 1995, the company decided it needed to develop a military product that it could manufacture to provide steady revenue that, in turn, could be reinvested in the business, said Robert U. Roberts, president and chief executive officer.

At the U.S. Army's request, the Cicero company in 2000 developed a radar so small two special forces soldiers can carry the snap-together pieces in backpacks. The military uses the lightweight counter mortar radars in Afghanistan and Iraq.

More recently, the military awarded the company a five-year, $550 million contract to make thousands of devices that detect and jam roadside bombs, a leading cause of casualties in Iraq.

Syracuse Research won't say how many radars and jammers it will make because it doesn't want to tip off the enemy.

The company and its manufacturing division, SRC Tec Inc., can't do the work alone. It hires subcontractors to make the parts it assembles. Local businesses make many of those parts.

"The direction I gave the guys was, wherever possible, do it locally," Roberts said. "I wanted to reinforce it when we got these major programs. Let's make it local. It really does add jobs to the community."

Syracuse Research has added jobs, as well. The number of jobs at the company's Central New York offices has grown 98 percent, from 228 in 2002 to 452 in 2006.

In its fiscal year ending Sept. 30, Syracuse Research spent $86 million with local businesses. The money paid for the construction of a new building behind the main office on Running Ridge Road. It bought office supplies and cables. It paid for hotel rooms for company visitors and picked up their tabs at local restaurants.

"Dinosaur Bar-B-Q is on everybody's agenda" when they visit, Roberts said.

One of the company's subcontractors is Northeastern Electronics, a small company in a one-story brick building on Route 5, in Elbridge.

Six years ago, Northeastern added military projects to its business of making specialty cable and wire.

Since then, the military work has grown 400 percent, and now makes up about half of the company's business, said company owner Steve Peltz.

"It's been pretty dramatic, a lot of 20-hour days six, seven days a week," he said.

The company makes cable assemblies for Syracuse Research's jammers and portable radars.

Northeastern has increased its staff from 25 to 70. It hired four engineers. Workers upgraded their skills, and wages across the company have gone up, Peltz said.

If the defense work continues to grow, the company might consider building a larger plant, Peltz said. Constructing a new building will depend on getting contracts that last for several years, he said.

Over the past two years, Lockheed Martin in Salina has spent $48 million on 227 suppliers in eight surrounding counties, said Ellen Mitchell, speaking for the company. Most of that spending has been in Onondaga County, she said.

The company has spent several million dollars over the past few years upgrading its facilities in Electronics Park in Salina, Mitchell said.

The corporation encourages its facilities to buy locally, especially from women- and minority-owned businesses, she said.

One of the companies it buys from, Precision Systems Mfg. Inc., is just a mile from Lockheed's campus.

"We consider it a mutually beneficial partnership," said David O. Parker, Precision's president.

Precision is a custom metal fabrication, machining and specialty machine company. The work it does for Lockheed is high-tolerance, complex machining and fabrication, Parker said.

"It's very, very exacting work," he said.

Location is one of the advantages the company offers Lockheed, Parker said. Precision is so close to Lockheed's offices that its engineers often drop by the factory to work out problems, he said.

Lockheed isn't the company's only military customer. The Army also hired Precision to make Humvee bumpers, Parker said.

Military sales represent about 53 percent of the private company's business, he said.

"I don't see any end in sight. Our pace right now looks like its going to continue as far as we can look in '07," Parker said.

In terms of number of contracts awarded, JGB Enterprises Inc. in Salina is the king of the area's defense contractors.

The company processes thousands of military contracts each year for hoses, said Vice President Stephon Starrantino. Although the number is large, the dollar amount of each contract is relatively small, he said.

Its largest military contract so far is for a $40 million project to make a water system that can be used in the combat theater, he said.

Even though the military contributes about $50 million a year in sales, compared with $20 million for civilian customers, Starrantino said the company doesn't want to depend solely on government contracts.

"We realize we should keep diversifying our market," said Robert Walsh, vice president of operations at Allred & Associates Inc. in Auburn. The company makes carbon fiber parts for Syracuse Research's lightweight radar.

Allred has gotten tax breaks from Onondaga County and the promise of a $100,000 grant for equipment and building from Empire State Development to move to a new building in Elbridge.

It's likely the small company employing 30 people would have grown without the defense business, said J.B. Allred, the company's owner and president. "The defense component has made it happen faster," he said.

Some might say that local defense companies are profiting from the world's problems.

Syracuse Research and other companies don't see it that way.

"Our LCMR (radar) and our counter IED (roadside bomb jammer) is in defense," said Lisa Mondello, speaking for the company. "We're trying to protect the people who have to go over there."

"The fact is there are conflicts going on and there have been since man has been on this Earth, and they won't go away," Roberts added.

"If war goes away, we'd love it," Mondello said. "We have so many technologies that could be used right here for homeland security."