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Defense industry brainstorms ways to beat budget cuts

San Diego leaders hashed out the top issues facing the county's defense sector at an interactive public conference hosted by Rep. Duncan D. Hunter on Tuesday morning.

The event, called "San Diego and National Defense: Protecting our Future," was held at the University of California, San Diego.

Hunter cut to the chase, saying he wanted the conference to result in specific solutions he can report back to his colleagues in Congress.

“Here’s what this is not this morning. We are not going to get together to talk about the ideological 40,000-foot view on how sequestration’s going to work or what the military and defense relationship is in San Diego,” he said.

That key relationship has already been spelled out for the local defense industry. Some 311,000 jobs, or one out of every four jobs in San Diego, are tied to the military sector, according to the San Diego Military Advisory Council’s 2012 San Diego Military Economic Impact Study released in June.

Those employees have a combined income of $17.7 billion and work in wildly different industries, like engineering, real estate, health care, investment, ship building, financial services and food services.

Different breakout sections on Tuesday focused on national defense topics affecting the San Diego region, including sequestration, acquisition, small business, housing and education.

"The goal is to spread the message on what San Diego means to the nation, defense-wise, and what defense means to San Diego," Hunter said.

That means articulating why San Diego's key defense players, such as Space and Naval Warfare Systems Command (SPAWAR), should stay put.

“If we can back up what we say with facts and figures, we can win,” said Hunter, who's planning to brief the Armed Services Committee on Tuesday's discussion.

Panels were directed by business, industry and community leaders.

President Barack Obama's defense budget proposal for fiscal 2013, starting Oct. 1, calls for defense spending over the next 10 years that is $487 billion lower than previously planned.

The sequestration provision of the Budget Control Act of 2011 requires up to $600 billion of additional cuts starting Jan. 1, 2013, because Congress failed to agree on a $1.2 trillion reduction in the federal budget deficit.

The combined budget cuts will be harsh on both local and nationwide employment figures.

Some 1 million private sector jobs across the country, including 130,000 manufacturing jobs, would be lost in 2014, according to a report on defense spending cuts from the National Association of Manufacturers. In all, the job losses would increase the unemployment rate by 0.7 percent.

California can expect to feel the largest job losses in 2014 (148,000), followed by Virginia (115,000) and Texas (109,000).

Certain industries will be hit particularly hard, with the aerospace industry losing 3.4 percent of its jobs, the ship and boating industry cutting 3.3 percent of its jobs and the search and navigation industry shedding 9.3 percent of its jobs.

UCSD, built on the former marine base Camp Matthews, was a perfect backdrop for the conference. One of the topics addressed during the education panel was how to better prepare service men and women who are transitioning into the work force.

“A lot of high-tech stuff being done in military is done by contractors," Hunter said.

The negative of that is the young sailors and Marines may use software installed on ships, for example, but every time there is a glitch, the contractors are sent out to fix the problem.

"So why not train the active duty folks more so when they get out they don’t have to go through a four-year degree process because they don’t really need it?" he said.

Instead, they could get certified in the specializations they've mastered while in the military.

Attendees also brainstormed ways small businesses can fairly compete for contracts. The acquisitions and procurement world has complex barriers of entry that larger government players can easily break down.

“Northrop [Grumman] has 2,000 consultants and 500 attorneys. They can get through any kind of window or hoops that Congress or the DoD sets up in the acquisitions process. Trust me. That’s what those people are hired for. If you’re a small business starting out, you have no chance because you have to get through those same hoops," Hunter said.

There needs to be a way to differentiate between small, medium, large and super large businesses in order to remove some of those obstacles for the smaller players, he pointed out.

Despite the fact the nation’s key strategic interests are shifting in San Diego's favor, toward the Asia Pacific, the local community still needs to brace for being on the defense spending chopping block. Hunter explained why.

“One, because bureaucrats and DoD don’t always see things in a common sense way. Number two, you always have to be prepared. You just don’t know who has more influence politically than we do," he said.

Bureaucracy can also stand in the way of making San Diego more business friendly, he said. He told the group that it's up to county and city officials to boost the local defense sector in such areas as aerospace.

“There’s not much I can do to change city’s zoning regulations or make the city want to have companies that employ highly-skilled workers here in the city or county,” he said. “You hear stories about governors and mayors calling companies, saying 'come to my state, 10 years tax free, and we already have a business campus set up for you.' In San Diego, 'we have the ocean and great weather' is not cutting it anymore.”

California ranked first with 148,400 expected job losses in 2014 because of cuts in defense spending. While job losses will spread among a wide range of manufacturing industries, many of these jobs tend to be at the direct and indirect suppliers of defense equipment and supplies. The largest job losses will be in the large nondurables (food, textiles, chemicals and fuels) and transport equipment sectors, according to a report by the National Association of Manufacturers. Source: National Association of Manufacturers | Compiled by: Jenny Ross

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Northrop Grumman

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Northrop Grumman Executive(s):

John Pettitt

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