The Department of Defense is undoubtedly the largest spender of the federal government—but very little of it flows into Oregon. Some trade groups are seeking to increase these numbers.

Shane Steinke moved to Bend with a mission last year: to obtain more funding from the Department of Defense for companies in Oregon.

Last year, the Oregon Manufacturing Promotion Partnership-a non-profit organization funded by federal, state, and private funds-hired Tank as its chief consultant to allow more Oregon manufacturers to enter the defense supply chain.

According to an analysis of military spending by state by the Federal Office of Economic Adjustment, less than 1% of Oregon’s GDP comes from Department of Defense contracts. According to this standard, Oregon ranks 40th from the bottom among all U.S. states and 40th in terms of the state's Department of Defense spending.

This is not surprising in many ways. After the closure of the Umatilla chemical weapons depot in eastern Oregon in 2012, the state did not have any active military bases or facilities. Except for Boeing, which opened a factory in Gresham in 2012, the largest contractors in the Department of Defense are located elsewhere.

"There must be some kind of ecosystem in some places," said Tank, who served in the Air Force for 23 years before being hired by OMEP. "A place like Norfolk, Virginia, and its surroundings have a huge ecosystem-a lot of shipbuilding, a lot of subcontractors, a lot of bases. These places will naturally attract many companies that eventually enter or are adjacent to defense manufacturing. "

Tank said his job was not to lobby the Department of Defense on behalf of contractors in Oregon. Instead, he said he worked directly with companies and connected them with resources that would help them obtain more federal contracts.

For example, the Defense Logistics Agency has a series of procurement technical assistance centers across the country, and sometimes OMEP recommends customers to these centers to understand the first step.

"In other cases, our company may already be in the [defense] supply chain and will work with them through our standard service portfolio to make them a better supplier, increase their profits, help them increase efficiency or Productivity so they can achieve their goals or achieve their goals with greater profit," Steinke said. "Frankly, this is what they are looking for. They are looking for some impact on their bottom line."

Rick Evans, executive director of the Economic Initiative’s Government Contract Assistance Program, points out that not everyone will say that lack of funding for the Oregon Department of Defense is a bad thing.

Evans’ non-profit organization was established in 1986, driven by politics at the time to make defense contracts more competitive and easier to provide services to small businesses. He pointed out that in the past he had organized conferences on military contracting-but met with protests.

But Evans said there are more defense contractors in the state than many Oregonians realize.

The Pentagon is by far the largest spender in the federal government. Even though Oregon receives less military spending than other states, it still receives a lot, with $1.7 billion in military spending flowing into Oregon every year.

Most are subcontractors, working with the support of larger defense industry players. Most, Evans said, "just do their work quietly."

But the state's defense industry also includes some large companies, such as McMinnville's Northwest UAV. The company makes propulsion systems for unmanned aerial vehicles-better known as aerial drones.

Jeff Ratcliffe, the company's senior director of business development services, said that NWUAV is the world's largest manufacturer of drone propulsion systems and has shipped more than 18,000 systems.

Jeff Ratcliffe, chief technology officer of Northwest UAV Propulsion Systems in McMinnville, holds a hydrogen fuel cell stack in his hand. Photo: Jason E. Kaplan

The company's customer is the "Who's Who in the Defense Aircraft Industry," he said, although the only thing he mentioned was Boeing Insitu. (Before being acquired by Boeing in 2009, Ratcliffe also worked at Insitu in 2005.)

Kate Kanapeaux, vice president and acting executive director of the Pacific Northwest Defense Alliance, pointed out that most military contractors in the state produce defense and civilian products — and the Pentagon has traditionally been a major investor in new product development.

"50% of the R&D funding directly from the US government goes through the Department of Defense. From tape to the Internet, these are funded through the Department of Defense," Kanapeaux said.

Dale Neubauer's Bend-based company Blue Moon Designs sells HeliLadders, a ladder designed for helicopter mechanics, to customers including hospitals, fire departments and the National Guard. The company has just signed a $1.6 million agreement with the Navy and Marine Corps.

Kanapeaux's organization-a trade association funded by membership fees-was founded in 2006 by a handful of companies working in the defense sector.

Neubauer's advice to manufacturers hoping to obtain government contracts?

"I don't want to talk about entering cautiously, but entering with a feeling that you have a lot to learn," Neubauer said. For example, the Navy’s initial contract was a two-year fixed-term transaction-due to the rapid changes in the supply chain and material prices, this did not work for his company.

"I stepped back and said,'No, I can't give you two years. Things seem too strange. So I gave them 12 months," Neubauer said.

The complexity of dealing with government contracts is exactly where Steinke hopes to help.

"In some ways, talking about bureaucracy is an art," Tank said. "This is natural to me."

Kanapeaux's organization aims to bring together existing Northwest defense contractors.

Kanapeaux said: "In fact, some companies are aware that the defense-supporting industry is indeed booming, and there is a huge opportunity to come together and learn from each other."

For example, her organization recently brought together two companies that produce similar but slightly different products to jointly seek contracts. PNDC also sent Northwest companies to participate in defense-specific trade shows, such as the U.S. Army Trade Show Association in Washington, DC in mid-October.

Ratcliffe said that this kind of friendship is also the key to helping the drone industry in the region to flourish. He has been the chairman of the Cascade chapter of the International Association of Unmanned Vehicle Systems (AUVSI) until 2020 and is now the honorary chairman of Cascade. Chapters and AUVSI’s Board of Directors.

"For small drone manufacturers and component manufacturers, this area is really zero base," Ratcliffe said. "In the past, the president of Insitu [Steve Sliwa] used it as part of the strategy,'I don't just want to build a great company, I want to build a great ecosystem for this industry.' He is very successful in this regard. "

Tank knows very well that his interest is not to move large defense contractors to Oregon — but to help companies here.

Both he and Kanapeaux pointed out that the stress factors of the global supply chain in the past two years have brought renewed attention to various domestic manufacturing-and defense manufacturers that must be located in the United States can play a key role.

"Really, this is an exciting time. The Department of Defense is focusing on innovation and shifting to a more U.S.-based supply chain and manufacturing infrastructure in the Northwest. I see an opportunity to change needles," Kanapeaux said .

Editor's note: This story has been corrected from an earlier version. The previous version referred to the Oregon Manufacturing Expansion Partnership under the wrong name. This edition also clarifies the role of Jeff Ratcliffe in Insitu and Unmanned Vehicle Systems International (AUVSI). Oregon Business regrets these errors.

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