Centre County’s Top Defense Contractors – 2000-2008

by Suzan Erem

Centre County is home to 118 defense contractors that have accounted for almost $1.2 billion dollars of federal monies brought back into the community from 2000 to 2008, according to data tracked by the Federal Procurement Data System, a U.S. government Web site that monitors 12 million federal contracts in real time.

But many local contractors are a far cry from Blackwater operatives shooting Iraqis in the middle of a war zone. One is a caterer; another a mechanical bull manufacturer and even a municipal garbage hauler makes the list.

Penn State University won the bulk of defense contracts, to the tune of $1.06 billion over that time, according to Government Contracts Won, a company that aggregates defense contract data and makes it searchable. The university won its contracts listing itself under a variety of categories including “minority institution,” “other educational institution,” “other small business operating in the United States,” “small disadvantaged business,” “other nonprofit institution” and “large business operating in the United States.” No Penn State administrators, including those in the Office of Sponsored Programs in charge of such grants, would make themselves available for an interview. The only information Voices could obtain from the university was funneled through Penn State’s Office of Public Information, whose staff was unfamiliar with specifics of the grants.

Other local contractors are a mix of household names and obscure acronyms. Minitab doesn’t even make the top 10 and Raytheon itself is closer to the bottom 10 though Raytheon’s subsidiary, HRB Systems, Inc., listed separately, brought in $20 million over the past eight years. HRB, like many of the high tech contractors, was founded by a former Penn State researcher.

Other top defense contractors include TRS Ceramics Inc. and RLW Inc. Combined, the two companies won more than $30 million in defense contracts in the last eight years. TRS Ceramics received nearly $16 million making it the third largest defense contractor in Centre County. The company, founded by Penn State professor Tom Shrout, manufactures material for acoustic and vibration sensing devices, “creating the soundwave in an MRI so the doctors can see the image,” President Wes Hackenberger told Voices. But the technology is also used for navy sonar and a wide range of other applications, primarily in medicine, the military and industry.

Eleven of the 118 contractors claim to be women-owned businesses. Two boast that they are officially certified by third-party organizations. A number are small businesses.  But FBS Inc., which ranks eleventh with $3.9 million in contracts, lists only men for its top five officers, two of those being the primary authors of the company’s research publications. A person answering the phone at FBS referred a caller to the Web site as the best source of information about the company. Yet a woman-owned business is defined as “at least 51% owned by [one or more] women, and management and daily business operations controlled by [one or more] women,” according to the Office of Small Business Programs of the Department of Defense. FBS did not respond to requests for interviews.

Two of the top 10 companies list themselves as “small disadvantaged businesses” – Valley Technologies and Technology Decisions and Solutions. Each received more than $10 million in defense contracts alone from 2000 to 2008. By the Department of Defense’s definition, these are “small business, unconditionally owned & controlled by [one or more] 1 socially & economically disadvantaged individuals who are of good character & citizens of the U.S., AND SBA-certified.”

But businesses located in Historically Underutilized Business Zones, or HUB Zones, also qualify and that’s where Valley Technologies comes in. Valley’s corporate office is in Tamaqua, Pa., and the entire county of Schuykill, where Tamaqua is located, is a designated HUB Zone.

“You have to actually transplant in a lot of ways, or link, the non-technological areas like us to areas like State College,” explained Valley Technology President Jerry Petrole. “Tamaqua is kind of like a partner with State College.” Petrole said he built his high tech business on the same land his father, a high school drop-out, ran a successful drive-in movie theater for many years.

The majority of companies are software engineering or small manufacturing firms but the list also includes a window tinting company, a real estate appraiser, caterers and hotels, architects, software publishers and retailers, canvas and heavy metal manufacturers, a flight trainer and a waste management firm among others. One unusual contractor is Mechanical Bull Sales, Inc. where the Department of Defense spent $20,000 in 2007 and $14,000 in 2008.

“They train [soldiers] on mechanical bulls for strength and balance,” explained Mechanical Bull Sales Owner Gracienne Myers. “They make them work hard even when they think they’re having fun,” she said, chuckling. Myers, who owns three businesses including a shoe store in downtown State College, said her mechanical bull sales are up 300 percent since last year, and it’s the one business that hasn’t been hurt by the recession. She said she employs 15 people locally to manufacture mechanical bulls that sell around the world. 

Creating jobs?
Military spending in Centre County creates good jobs, and $1 billion of it creates more than 8,555 of them averaging $65,000 per year according to the Bureau of Economic Analysis, an agency of the U.S. Department of Commerce.

But a 2007 study published by the Institute for Policy Studies shows that $1 billion applied to other, non-military sectors of the economy could actually produce more high paying jobs.

“We have shown that spending on personal consumption, health care, education, mass transit, and construction for home weatherization and infrastructure repair all create more jobs per $1 billon in expenditures relative to military spending,” conclude economist Robert Pollin and Ph.D. student Heidi Garrett-Peltier of the University of Massachusetts.

Their analysis showed that the same $1 billion applied to health care would create almost 13,000 jobs that paid more than $56,000 per year, or it could create almost 18,000 education jobs paying $74,000 per year. The only option that would not produce more jobs or revenue than military would be personal consumption through tax cuts. While tax cuts would create almost 11,000 jobs, those jobs would pay significantly less resulting in 10 percent lower compensation in the total economy, the authors report. The same amount of money can go further because these other sectors are more labor intensive, such as education, or more of the wages from those jobs are spent in the United States.

“There’s a lot of money getting spent in Afghanistan and Iraq right now,” Pollin told Voices in an interview. Those are resources not creating jobs in the United States.

So why don’t policymakers opt for domestic program spending? “The real world story is, the government says, ‘Here’s the contract for the military – you don’t want it? We’ll go somewhere else,’” explained Pollin. “It’s not as if you can choose. At the level where the action takes place it’s that take-it-or-leave-it and that’s why people take it.”

The most recent figures show that while military spending creates 11 jobs per million, domestic spending creates 17, said Pollin. That translates into 11,000 jobs versus 17,000 jobs that could have been created in Centre County from 2000 to 2008. Voices was unable to ascertain how many jobs were created by Penn State’s receipt of more than $1 billion in defense funds from 2000 to 2008, due to the limits of Pennsylvania open records laws. Penn State spokeswoman Annemarie Mountz said the university’s Applied Research Laboratory employs between 1,100 and 1,200 people but those numbers were not independently verifiable, and defense research conducted in other areas of the university also creates jobs.

The university’s total research expenditures came to $700 million in 2008, according to Mountz. Of that, $180 million were defense dollars, according to Department of Defense records, making defense account for 26 percent of the research budget. Based on Penn State economic impact figures, that would account for estimated 4,500 jobs. Based on economist Robert Pollin’s research, it would create 1,980 jobs.

Local private contractors were very open to discussing jobs. Locally, TRS Ceramics, the third largest contractor bringing in nearly $16 million over eight years, supported half of the 40 jobs at the company with defense contract income, explained TRS’s Hackenberger.

“A scientist here can top out around $100,000 per year, unless they’re in management,” Hackenberger said. “Our manufacturing is fairly highly skilled, so they make in the $30,000 to $35,000 range.” Valley Technology’s State College office houses five engineers, company president Petrole said, with salaries ranging from $50,000 to more than $100,000 depending on experience and costing the company an estimated $125,000 to $150,000 with overhead.

From 2000 to 2008 the company averaged a total of 15 employees supported by the $10.9 million in Navy and Air Force contracts it won, Petrole said. He added that while he hasn’t seen a new contract since April, the software his company has developed with those resources is helping him market his products to commercial enterprises now and letting him retain his workforce.

Remcom, the area’s sixth largest defense contractor, attributes a third of its 50 professional staff plus support staff to defense contracts, explained President Stephen Fast. Professional salaries range from $45,000 to around $125,000, Fast said. Remcom, which develops software used in the design of cell phones and other transmitters, received $11.3 million from 2000 to 2008.

Pollin’s research shows similar results at the national level.

“It is true that jobs generated by military spending tend to pay relatively well, which is part of the reason that fewer jobs are created per dollar of expenditure than through alternative spending targets,” the authors write in their conclusion. But, they continue, $1 billion spent for education generates more than twice the jobs at higher pay. Spending on health care, mass transit, and home weatherization/infrastructure creates more jobs than military spending, and ones that on average still pay more than military ones. Their threshold for “minimally decent income” is $32,000 per year. Most jobs generated through a health care, mass transit or construction expansion pay more than that, most between $32,000 and $64,000.

Asked about the fact that military spending in Centre County would be money spent locally and not overseas, Pollin made an educated guess that the figures would change from 11 jobs to 13 jobs created per million dollars, still much fewer than the 17 created by spending in other sectors.

But in fact, not all the research dollars flowing into Penn State, for example, are spent locally. While the vast majority of Penn State’s 318 contracts for 2008 were performed locally, 21 of them were performed out of state, from Monterrey Calif. to Austin, Texas to Arlington, Va. Spokeswoman Mountz called these “research subcontractors” who offer a specific expertise.

Penn State lobbying machine
Penn State can be credited with much of the lobbying that brings defense funds to Centre County, particularly in the form of the defense authorization acts that come up each year in Congress.

From 2000 to 2008, Penn State lobbyists have included those acts and similar ones in their ongoing efforts on Capitol Hill. In 2000, Penn State spent $120,000 on lobbying in part for “overall basic and applied research in DOD” and “Navy, Marine Corps and Army Research in particular,” according to the 2000 lobbying report filed by Penn State Assistant to the President for Public Affairs Richard DiEugenio with the U.S. Senate Feb. 14, 2001. Reports also list lobbying for agricultural research and extension, energy research, student aid, medical teaching professions, transportation appropriations, veterans affairs, National Institutes of Health and National Science  Foundation funding, higher education for disadvantaged students and National Aeronautics and Space Administration research but do not show the amount spent on each. DiEugenio referred media calls to the Office of Public Information.

In 2002, those efforts expanded to Penn State’s “nonlethal weapons research.” Some reports indicate Penn State’s research in this area has more than “nonlethal” ramifications and is being tested on American civilians (see Voices Sept. 2008).

By 2007, the university’s lobbying efforts had grown to $240,000 and included Department of Homeland Security issues as well as Department of Energy initiatives and Poison Control Centers.

By 2008, the university’s lobbying budget expanded to $520,000 to lobby for these programs plus the American Recovery and Reinvestment Act and, under the Department of Defense, the Advanced Force Protection Technology. That lobbying paid off when Penn State received, among other federal government largess, more than $51 million in stimulus funds as of Sept. 9, according to university reports.

National level defense contractors with subsidiaries or subcontractors in Centre County helped draw federal monies to the area as well. The defense industry contributed an estimated $89 million to federal campaigns from 2000 to 2008, according to campaign finance watchdog Center for Responsive Politics. Approximately $54 million of that went to Republicans during a time when Pennsylvania was represented by two Republican U.S. senators and a House delegation dominated by Republicans, though Democrats did not suffer much, with only slightly less going to them. In fact, the majority of lobbying funds shifted to Democrats in the 2008 elections.

In Pennsylvania, healthcare interests contribute more to support the election of Pennsylvania’s federal legislators than defense industry interests. But defense funds flow across different lines regularly, for example from defense contractors to Penn State in the form of contract work and student scholarships. “From recruiting to research, this relationship has grown to include contract support of over $2.6 million and philanthropic investments of over $1.25 million,” reads an October 2003 press release from Penn State boasting of a contribution from Raytheon.

The Matrix
Contemporary muckraker Nick Turse uses his fictional character “Rick” to describe what impact defense contractors have on people’s everyday lives in his article, “The Real Matrix: The Pentagon Invades Your Life” published on the Web site Tom Dispatch. Rick’s Sony alarm clock, his wife’s Danskin fitness gear, New Balance sneakers, and Hanes underwear and True Fitness treadmill are all made by Department of Defense contactors.

“Rick drags himself to the bathroom (fixtures by Pentagon contractor Kohler, purchased at defense contractor Home Depot). There, he squeezes the Charmin, brushes with Crest toothpaste, washes his face with Noxzema; then, hopping into the shower, he lathers up with Zest and chooses Donna’s Herbal Essences over Head & Shoulders — ‘What the hell,’ he mutters, ‘I deserve an organic experience.’ (The manufacturer of each of these products, Procter & Gamble, is among the top 100 defense contractors and raked in a cool $362,461,808 from the Pentagon in 2006,)” Turse tells readers.

If “Rick” lived in Centre County, he could finish his week with a ride on the mechanical bull at the Grange Fair (provided by a local defense contractor) and then catch the Penn State ($179 million in defense contracts in 2008) football game. 

Did you like this article? Would you like to support this kind of independent journalism? You can!

Donate to VOICES to help us bring you more independent local journalism, and to make sure your voice is heard!

You can also help by telling our advertisers, "I saw your ad in VOICES".

And we always need volunteers, too! Have fun, help the community, and meet interesting people!