WASHINGTON —In the last 10 years, the federal Defense Department has issued grants and paid contractors working in Hawaii nearly $23 billion, according to a new analysis of spending data. And that’s on top of the roughly $6 billion a year the government spent on paychecks and personnel costs for military stationed in the islands.

In 2015 alone, the most recent year for which complete data is available, defense spending in Hawaii added up to about $7.8 billion.

The state was second only to Virginia in terms of how much money the military was funneling into the state as a share of its total economy, according to the federal Office of Economic Adjustment.

The U.S. military spends billions of dollars in Hawaii every year, but state officials haven’t really done a good job of tracking it until now.

Anthony Quintano/Civil Beat

While well-known defense contractors like BAE Systems top the list of local companies profiting from defense dollars, it turns out the University of Hawaii has also been one of the chief beneficiaries of the military’s spending in the state.

Data from a relatively new website that tracks the flow of defense dollars into Hawaii, HawaiiDefenseEconomy.org, shows that UH has received more than $435 million through federal defense contracts and grants since fiscal year 2008. 

Much of the money has gone to study climate change, resilience and alternative energy.

About The Data

But the university system has also seen an uptick in military investment in cybersecurity, according to Vassilis Syrmos, the vice president for research and innovation for the University of Hawaii. 

HawaiiDefenseEconomy.org was developed about a year ago when the Chamber of Commerce Hawaii helped the state secure an $850,000 federal grant to launch a new website to help follow the money.

The site pulls together data from USAspending.gov and others to provide a broad view of how the Department of Defense spends federal appropriations, including looking at local spending and companies receiving the contracts.

Syrmos says Hawaii is one of four states with a National Security Agency Cryptologic Center based outside of NSA headquarters in Fort Meade, Maryland. The NSA recently designated three University of Hawaii schools, including the flagship campus at Manoa, as institutions of excellence in cyber research and education. Syrmos said he believes that will bring even more funding to the state for research and investment.

“That’s an area that we’re building up, especially at West Oahu and our other communities colleges,” Syrmos said.

He noted that defense spending is deeply ingrained in higher education. The 186-foot research vessel, the Kilo Moana — which helps UH maintain its status as one of the best oceanographic institutions in the country — was built by the Navy and is owned by the U.S. government.

The Pan STARRS telescope on Haleakela that keeps an eye out for potentially dangerous asteroids, he said, also provides data to the Maui High Performance Computing Center, a military research facility that contracts with the university.

 

Honolulu is a defense economy hotspot, both in terms of personnel expenditures and contracting.

But not everything is as sexy as climate change, cybersecurity and planet-killing asteroids. Defense money can also fund the obscure.

For instance, federal spending data shows the U.S. Air Force once gave money to UH to research the “physical and genetic mechanism guiding the evolution and development of dendritic, flapping-insect wings.”

Funding has also been allocated for research into the “diet composition of pilot whales, dwarf sperm whales and pygmy sperm whales in the North Pacific.”

“Without this money the university would not be such a premier institution,” Syrmos said.

“What people don’t always understand is that you can’t do ‘Big Science’ on a shoestring budget. It costs a lot of money. So these funds provide the infrastructure for that science.”

The Big Picture

While tourism now is Hawaii’s biggest economic driver — 9 million visitors brought in about $17 billion in 2017 — military spending contributes a healthy boost to the state economy.

The $7.8 billion in military spending in 2015 accounted for nearly 9.8 percent of the state’s gross domestic product — the total value of goods and services produced in Hawaii.

Still, the state’s portion of overall military spending is relatively small — about 2 percent of the whole — in comparison to the more than $408 billion the federal Office of Economic Adjustment reports was spent nationwide in 2015.

Much of the Hawaii money — about $6 billion a year — goes toward personnel costs. 

In 2015, the OEA reported that the federal government spent about $5.7 billion to pay for more than 73,000 active duty and civilian personnel on the islands. That includes National Guard and reserves.

The remaining funds go to defense contractors who build barracks, repair ships and provide the base-run commissaries with fresh produce.

Research and development makes up a smaller share of spending when compared to construction, supplies and other services, such providing fuel, utilities and housekeeping.  

Over the past 10 years, the military has spent more than $800 million on R&D in Hawaii, which accounts for about 3 percent of total procurement spending.

Top Local Contractors

Some of the largest and most well-known defense contractors in the country have operations in Hawaii, including BAE Systems, Raytheon and Booz Allen Hamilton, which together have received more than $1.7 billion worth of contracts since 2008.

But a number of local companies have seen their fortunes rise due to Hawaii’s military might.

Manu Kai is a Native Hawaiian-owned business that provides support services to the Pacific Missile Range Facility on Kauai.

The company, which was founded in 2006 and is now a subsidiary of Harris Corp., a major defense contractor based in Virginia, has received $570 million in contracts since 2008. That ranks it among the top local private military contractors in Hawaii.

Other major contractors include Y. Hata & Co., a food distribution business that stocks the commissaries, ships and submarines, and Nan Inc., one of the largest construction companies in the state.

Since 2008, government data shows Y. Hata has received more than $213 million in military contracts while Nan has been awarded more than $485 million in contracts.

Nan — a major contractor on Honolulu’s $9 billion rail project — was able to obtain contracts through the federal government’s 8(a) Business Development Program that helps minority and women-owned businesses get work.

According to the data, these 8(a) companies including Nan have received nearly $3 billion worth of contracts.

Military spending is so prolific, that even the tiny island Niihau is benefitting from it.

Niihau Ranch has received $14 million worth of contracts over the past 10 years to help support military training exercises. Contracting data shows that much of the money goes toward providing helicopter and ground transportation for contractors on the island.

“The whole purpose of this grant was to identify what the supply chain looks like,” said Rona Suzuki, the former head of the Hawaii labor department’s Office of Community Services, who was in charge of developing the HawaiiDefenseEconomy.org database.

She said that while most officials, herself included, were aware that the military pumped billions of dollars into the economy, no one had made the effort to actually follow the dollars until now.

And while the site is a snapshot in time Suzuki said it can serve as a guide for government officials, academics and business owners who might want to get a better grasp on contracting trends, search for opportunities to snag a grant or contract, or connect with other companies already doing federal work.

“The breadth of services and what the military buys is far and wide — it hits every island,” Suzuki said. “And this is just on the contracting side. This doesn’t even expose the private expenditure of military personnel. It doesn’t show the impact on real estate or retail or any other sector of the economy.

“This is just about the U.S. Department of Defense as a business, showing what they buy and what they expend in terms of contracts.”

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