When surveyed, members of San Diego's defense and aerospace industry were non-committal on the economic outlook for their industry in 2001.
Only one company returned the 11th Annual San Diego Business Journal/Deloitte & Touche Economic Outlook Survey.
But upon interviewing several industry sources, the local firms that develop information technology, unmanned reconnaissance vehicles, satellites, underwater surveillance systems, and combat training software should fare well in the coming year.
The Navy's Space and Naval Warfare Systems Command (Spawar), the Navy's largest provider of military contracts, will enter 2001 with a budget 65 percent larger than last year. Spawar will award 80 percent of the $6.3 billion budget to contractors, said Navy spokesman, Lt. Cmdr. Greg Geisen.
Spawar contracts focus primarily on information technology and IT is the reason for the increased budget.
"The fact the defense budget has remained either flat-lined or decreasing across the board is resulting in an increased reliance on information technology" to monitor operations, Geisen said.
By freeing up available man-hours, the Navy can allocate service personnel for military missions, he said.
Local Firms Involved
And although the San Diego operation is not required to work with local firms, it prefers to "because it's easier to do business with people you can meet with," he said.
Almost all contracts awarded through Spawar call for at least a portion of the projects to be completed by a small or independent contractor. One organization in East County hopes to fill that niche here.
Beset by the defense cuts of the early 1990s, the San Diego Defense and Space Technology Consortium banded small contractors together to prevent all contracts from being awarded to large, single entities.
"The projects we put together do include some of the larger (firms) too, but our focus is trying to gain as much work as we can for small to mid-sized companies," said Tom Sheffer, consortium CEO and president.
Currently, the consortium is working on the Automated Communications Management System. The $150 million project supervised by Spawar is a part of the Milstar satellite communications system for the Department of Defense.
The consortium built a 28,640-square-foot software engineering office last January.
Sheffer said demands for satellites has picked up and should remain steady through 2001.
"It promises a lot of potential for the future because (the Department of) Defense spends about $9 billion a year on satellite communications," he said.
Heavy Reliance On IT
Sheffer echoed the comments of Geisen at Spawar, saying the United States will rely more on technology than on service personnel.
"If you don't have the people on the ground then you need them in the air to monitor what's going on," he said.
Local defense contractors are also offering their products to other countries' military services.
Last year, San Diego-based Cubic Corp. provided combat training software to 10 other countries, including the United Kingdom, South Korea and Australia.
Cubic specializes in software for simulated infantry combat maneuvers. The firm's technology can be replayed after the exercise to identify mistakes.
Gerry Dinkel, corporate vice president and CEO of the defense portion of the firm, projects a "stable" 2001.
The defense portion of the firm accounted for 42 percent of total business in 1999 and $219.5 million in total revenue. Cubic's other business is transportation.
Dinkel expects defense software firms will prosper under the Bush administration as the military stresses combat readiness.
"We're not going to go back to the same level of forces , number of ships, number of planes, number of soldiers , we had five or six years ago, but there's a trend to make the most effective use of the forces we do have," he said.