More military contracts could aid Hawaii economy

The federal government inked about $2.3 billion in defense contracts in Hawaii in 2019, with about $1.3 billion going to local businesses, an official with the Chamber of Commerce Hawaii said Tuesday.

That golden goose isn’t likely to disappear — even with the COVID-19 health and economic crisis.

Honolulu City Council member Kym Pine, chairwoman of the business, economic development and tourism committee, held a meeting Tuesday to discuss ways of putting more of those federal dollars into the pockets of local businesses as part of a revitalization of Oahu’s economy.

Pine said she’d like to see greater effort made to “break down these larger contracts into smaller contracts to allow our local contractors to take advantage of” the opportunities that are out there.

Jason Chung, vice president for military affairs with the chamber’s Military Affairs Council, said the Army alone awarded over $643 million this fiscal year in the state as of May 1 for building renovations, road paving and other projects.

Defense spending in 2019 in Hawaii included $780 million for construction and engineering, $208 million for ship repair and $117 million for support services.

“There is a lot of opportunity that is out there,” Chung told the committee. “And if you look at military spending, right, that is not expected to decrease. If anything, it’s very likely it’s going to increase this year.”

He noted that the National Defense Authorization Act includes the Pacific Deterrence Initiative with $1.4 billion in funding, and the Homeland Defense Radar-Hawaii was authorized for $133 million.

“That’s all opportunities that could go back into the local economy,” he said.

That’s the financial good news. Chung, a retired Army colonel who also worked for federal agencies and in the private sector, asked the rhetorical question: “If we know that the military, especially here in Hawaii, is a multibillion industry, why aren’t more companies actively pursuing it?”

“And the answer is quite simple, right, it’s not easy. It’s not simple. There are barriers to entry. You have to know how to navigate the federal contracting system.”

A simpler path to follow when the economy is doing well is the private sector, which is “much easier” to do business with.

“But in times of economic strife, right, federal spending and federal contracting usually remain stable because it’s linked to national security (and) national defense,” Chung said.

A smaller company’s proposal to do business with the Defense Department is graded on three things: technical ability, management approach and past performance, he said.

That last credential is sometimes hard to get, but Chung said it is possible by getting a subcontract with a bigger player who already has met that threshold “and then build out from there.”

Pine said later that one of the takeaways from the meeting was that “all branches of the military and the federal government set aside a percentage of their contracts to award to small businesses, and we will lead the effort to help them step up.”

Chung said the Chamber of Commerce Hawaii is working on a webinar format “so we can have a discussion (with the business community) about how do we do the down trace of these larger contracts into small local companies and kind of build up that industrial base?”

Prior to the coronavirus outbreak, the chamber had been planning a trip out to Pohakuloa Training Area on Hawaii island to have a workshop with Army leadership and the local community to look at different service, repair and maintenance contracts, he said.

Another such meeting was planned for the Navy’s Pacific Missile Range Facility on Kauai. Chung said renewed planning will look at proceeding with the meetings, probably in a virtual format, in the near future.