City rides defense spending wave

0 Comments | Gazette, The (Colorado Springs), Jan 23, 2005 | by PAUL BEEBE THE GAZETTE

Billions of defense dollars have flowed into Colorado Springs since Sept. 11, 2001, helping the city bounce back from recession.

The flood of money shows no sign of easing, despite record federal deficits.

The value of Pentagon contracts awarded to defense firms operating in this military-focused city exploded from fiscal 2001 to 2003, as the government responded to terrorist attacks, launched wars in Afghanistan and Iraq, and embraced networktric computer technology to fight future conflicts.

Spending on everything from security fences and fire stations to global positioning technology and satellite surveillance systems pushed defense expenditures in Colorado Springs from $1 billion in the fiscal year that ended Sept. 30, 2001, to $1.5 billion two years later.

What's more, the share of dollars doled out by the Pentagon in Colorado is increasingly going to the Colorado Springs area, which has five military facilities -- Fort Carson, Peterson Air Force Base, Schriever Air Force Base, the Air Force Academy and the Cheyenne Mountain Air Force Station.

In 2001, 44 percent of the department's spending on defense contracts in Colorado went to El Paso County. Two years later, the figure had jumped to 61 percent, according to Defense Department figures.

A preliminary tally shows that 2004 spending totaled $1.5 billion, rivaling the previous year. And fiscal 2005, which began Oct. 1, shows little sign of easing, even though the Pentagon may be facing $30 billion in budget cuts during the next six years.

The growing defense sector helped Colorado Springs wrestle its way out of recession, although other economic engines -- technology, manufacturing and tourism -- have not rebounded.

"2005 looks like a very good year for SI International in Colorado Springs," said Alan Hill, a spokesman for the Reston, Va.-based information technology services company.

In March, SI landed an $800 million contract to modernize land and satellite communications systems for the Air Force, as well as install intelligence and surveillance networks around the world. Most of the work will be done in Colorado Springs.

In October, the Pentagon chose SI to compete against three other companies to bid for an additional $610 million worth of military work.

The company said last week that it plans to build two office buildings on 11 acres near Powers Boulevard and Aeroplaza Drive, near Peterson Air Force Base.

"When you're talking about the potential from $1.4 billion in new contracts that we won, it means growth for the company and more employees. And that's good for Colorado Springs," Hill said.

The Pentagon has poured more than $5 billion into Colorado Springs through defense contracts since 2001.

How much of the money stayed here or was channeled to other parts of the country is difficult to say, because many contractors are national companies.

It's a safe bet, however, that most of the money goes to the salaries of civilian defense workers, the bulk of whom are highly educated and well-paid.

Aerospace companies and their suppliers provide jobs to more than 12,000 people in the city, according to the Greater Colorado Springs Economic Development Corp.

"You may think war is wrong, defense spending is wrong, this war (in Iraq) is wrong. That's an ethical issue," said Tucker Hart Adams, U.S. Bank's chief economist for the Rocky Mountain Region.

"Aside from that, these are good jobs that have been created here that provide families a better standard of living. And that's a good thing," Adams said.

Much of the roughly $349 million Lockheed Martin Corp. brought in last year from five Air Force contracts will support its 2,400 Colorado Springs employees, spokesman Matt Kramer said. About 1,200 live in El Paso County.

In October, the nation's No. 1 defense contractor leased an additional 70,000 square feet of office space in Colorado Springs, bringing the space it inhabits here to 539,000 square feet, an area roughly half the size of The Citadel mall.

"2005 has more opportunities for us than 2004 did," said Wes Colburn, vice president for business development at Lockheed Martin's department of defense systems.

Likewise, much of SI's $800 million contract will pay the salaries of its 400 local workers, as well as any subcontractors who may be brought in to help. SI also plans to hire more employees, although it hasn't said when.

Northrop Grumman's local contracts, which average about $700 million a year, are managed in Colorado Springs, but much of the work is done at other sites around the country, said Tim McMahon, the company's lead executive in the city.

Even so, the Los Angelesbased defense giant expects that 2005 will be a strong year in Colorado Springs. It expects to expand its 1,200- person work force by 10 percent to 20 percent, McMahon said.

"We are looking for growth opportunities in this fiscal year, locally. I can safely say we are looking for double-digit growth," McMahon said.

Not all defense work was related to high technology.

Bryan Construction Co., which was awarded four defense contracts last year worth roughly $20 million, built 17 miles of fencing at Fort Carson and a visitor center and gates at Schriever.