When we last visited this discussion, it was to report on the new contracting opportunities the stimulus promises to provide. This time, we discuss the state of defense contracts, which seemed like a sure bet to continue to grow...until yesterday, that is.
What happened yesterday, you ask? Yesterday, Secretary of Defense Robert Gates--who, recall, is actually a holdover from the final two years of the Bush administration--released his budget proposal. The plan has generally received plaudits among centrist and liberal defense policy wonks; over at our sister site Slate, Fred Kaplan calls it"remarkable" (in a good way).
But what we care about is its impact on contracting. And, according to the Washington Post (also a sister publication of ours), which has in mind the perspective of the D.C. metropolitan area, which has benefited tremendously in recent years from increased military spending, "The recent surge in the Washington area's defense-contracting workforce would begin to ebb under Defense Secretary Robert M. Gates's latest budget proposal as the Pentagon moves to replace legions of private workers with full-time civil servants."
Specifically, private contractors currently constitute 39% of the Pentagon, and Gates proposed reducing that to the pre-9/11 26% level. A hit for the D.C. area, to be sure; but also a hit for the myriad small businesses among them that rely on DoD contracts for their livelihoods.
And there are numerous such small businesses, as is made cleary by a New York Times article from last week with the now-ironic headline, "There's Safety in Military Contracts". This might seem counterintuitive: when you think defense contractors, you tend to think Boeing, Lockheed Martin, Northrup Grumman, and some of the other biggest corporations on earth. But in fact, from typically military assignments to more unusual ones--the article profiles the Houston small business that landed a $1.5 million sports-bra contract from the Pentagon--small businesses are all over defense contracting, and should continue to be: "They have an agility and flexibility that gives them an advantage over bigger companies," says a Pentagon small-business procurement director.
So in conclusion: DoD contracts are a safe bet for small businesses...as long as they remain a safe bet for everyone else. How that latter issue is trending is still unknown.