Hawaii officials want to form a new organization to get more local businesses in on lucrative defense contracts — and to find ways to use military money to grow other sectors of the state’s economy. Among the challenges the alliance would plan for is a potential decrease in military spending. 

The plan is based on analysis by the Department of Business, Economic Development and Tourism of the defense sector funded by a grant from the Office of Local Defense Community Cooperation.

An action plan DBEDT drafted calls for the “establishment of a Hawaii-focused, DoD industry-specific organization (Defense Sector Alliance) designed to identify current and future industry challenges and to develop solutions.”

State officials hopes to form an alliance of businesses with ties to the military to diversify Hawaii’s economy. Kevin Knodell/Civil Beat/2020

The new organization would bring together representatives from industries and business that work closely with the military and are most invested in defense spending.

It would be charged with looking for ways to expand contracting opportunities for local small businesses and to train cybersecurity specialists.

While state officials would help the organization get started with federal grants, they ultimately aim to stand back. “The alliance portion will be handled by a contractor who has experience dealing with sector partnerships and putting those type of alliances together,” said John Greene, the DBEDT’s defense industry specialist.

Hawaii ranks second in states that count defense spending as the highest percentage of their GDP, just behind Virginia. During the 2018 fiscal year, direct spending from the Department of Defense pumped $7.2 billion into Hawaii’s economy through contracting, making up about 7.7% of the state’s GDP.

“Overall DoD dependency is moderately high at an average of 46% across the firms surveyed,” the state’s action plan noted. “This indicates some degree of weakness with the potential of a threat in the event of a downturn in defense market spending.”

Greene said the alliance would increase the resiliency of local businesses by helping them to navigate the bureaucratic world of government contracting and to network with each other for non-military opportunities.

“We figured the best way to do that is to let the private sector take the lead on it, develop an alliance” said Greene. 

Jason Chung, Vice President of the Hawaii Military Affairs Council — a part of the Hawaii Chamber of Commerce — said that the pandemic has highlighted the state’s overreliance on tourism, pointing out that as the pandemic gutted the travel industry, military spending was one of the few constants in Hawaii.

“It’s such a great opportunity, especially now, when you look at the current state of the economy. Because this will allow us to kind of put the structure in place to kind of really develop the necessary relationships,” Chung said.

The alliance wouldn’t just be open to military contractors but a wide variety of businesses and institutions, including universities. Chung expects the Military Affairs Council will play a very active role in building and running the organization.

“We’re kind of the connective tissue that brings those folks together, where it’s the local officials, academia, industry, and the military,” he said.

The military already works closely with the University of Hawaii. The Air Force pays for UH’s Maui High Performance Computing Center and the Navy helped create its Applied Research Lab at UH Manoa.

The military is also looking for ways to support additional computer science and cybersecurity programs at the university, which it sees as a potential recruiting pool.

“The one that is really exciting is kind of this emerging industry that we’re seeing, which consists of information technology, cyber, data science, data analytics and the growing field of intelligence,” said Chung.

USS CG-62 USS Chancellorsville docked at Pearl Harbor. photograph Cory Lum/Civil Beat
In 2018 military spending made up 7.7% of Hawaii’s GDP, the second highest share of any state. Cory Lum/Civil Beat/2015

The Chinese and Russian governments have invested heavily in training hackers to spy on and disrupt the networks of rivals, including the United States.

The National Security Agency has quietly played a role in creating jobs for programmers and cybersecurity specialists in Hawaii. Chung said that organizations like the NSA and other new military bases help bring in talent as well as provide high paying jobs for tech savvy locals that didn’t exist before. 

Chung sees it as an opportunity to further grow the tech sector in Hawaii by making it an innovation hub benefiting from the large military footprint in the islands.

Oahu is home to the military’s Indo-Pacific Command, the nerve center of military operations in the Pentagon’s “top priority theater” amid increasing confrontation between the U.S. and China across the region.

However, cybersecurity also has posed challenges for local contractors in Hawaii who either lack technological know-how or can’t afford to pay those who have the expertise.

The defense department increasingly wants companies with which it works to protect their information from spies. Some worry that puts them at a disadvantage against larger mainland contractors.

“We certainly don’t want to lose contracts currently held by the local businesses simply because they don’t meet the cyber requirements that DOD put in place,” said Greene. He said the alliance and other initiatives will help them meet specifications.

Greene said that cybersecurity is increasingly something that businesses outside the world of national security need anyway and that this provides an opportunity to better inform Hawaii’s business community about the problem.

“Cybersecurity isn’t just a DOD requirement. It’s to protect your personal information, proprietary information of businesses,” he said.

But the military is limited in terms of room to build and expand. Conflict is increasingly frequent as the military tries to undertake new projects in proximity to communities that continue to grow.

While Hawaii’s reliance on military money also has been the source of criticism over the environmental impact of operations and complaints over noise and unexploded ordnance, the level of spending isn’t likely to decrease anytime soon.

Greene said it’s important to help local businesses take advantage of that in a way that helps them build skills that can be used in other sectors.

“I don’t want people to think that we’re trying to establish any kind of reliance upon DOD,” said Greene. “We’re hoping to use DOD and the requirements that they have to strengthen our local businesses, so they can work in non-DOD related fields.”

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