To date, few programs have allocated significant resources to identifying the special needs of defense-dependent firms. Defense conversion thus provides a good case study on how needs assessments might be conducted for a targeted industry group. At the strategic level, the primary need is to diversify products or make a transition to or enter commercial markets. This need involves all business facets, including marketing and sales, product development, production management and quality.

Regional needs assessments of the manufacturing population address questions such as "What is a defense-dependent firm?" "How many are there?" "What industry sectors do they dominate?" "Where are they located?"

Defense-dependent firms make shipments to agencies or facilities of the U.S. Department of Defense, agencies or facilities of the U.S. Department of Energy, and prime contractors or subcontractors to these agencies or facilities. Defense-dependent manufacturers can be divided into large prime contractors and various levels of subcontractors. Some subcontractors may also be prime contractors.

The Federal Procurement Data System is the main source of public information about defense-dependent manufacturers. It lists all awards over -,000 by state and ZIP code. This list contains much duplication because companies are listed by contract.

Most awards, however, are for less than -,000. These smaller awardees can be identified by requesting subcontractor bidder lists from the major prime contractors in the service area. Although this approach omits contractors from outside the service area, it can be helpful because subcontractors sometimes cluster geographically around a prime. Bidder lists are not always up to date due to time lags in removing inactive subcontractors and adding new contractors.

One difficulty in doing defense conversion assessments is that the federal government uses the Federal Supply Classification (FSC) to categorize firms by types of products rather than by types of industry (that is, by SICs). The FSC is very broad and not well-defined. Matching contractors with manufacturers directories, or other sources that use SICs, can help address this problem.

Once defense contractor information is matched with SICs, analysts can determine via geographic breakdown the extent to which the major industries in the service area are defense-dependent.

Surveys are another approach to determining the extent of defense-dependency in a service area, as well as ascertaining manufacturing respondents' opinions of their need to move into commercial markets.

The target population to be surveyed depends on the survey's specific objectives; this population could be:

• all manufacturers in the service area
• those in industries most adversely affected by defense cutbacks
• prime contractors, because there is a trickle-down effect when a project is cut
• subcontractors, because they tend to be among the first hit by defense cutbacks
• minority-owned businesses established as "8(a) contractors" since they will not receive the kind of preference the government accords them in commercial markets
• firms in areas with military base closures

The survey might include such questions as the following:

• Approximately what percent of your sales can you attribute to U.S. defense contracts?
• Are you a prime contractor, a subcontractor or both?
• Do you perceive your defense-related business to be growing, shrinking or remaining the same?
• What are your present commercial markets?
• In the past three years, have you taken any steps to increase your nondefense business?

Advisory/user groups can be helpful in determining needs. Large firms with defense and nondefense work can give ideas to small companies to help them assess their needs. Also, large prime contractors can use their mentor-protŽgŽ programs to help assist firms.

For More Information

1. Cann, Elyse, and Robert Forrant. "The Demise of the Massachusetts Defense Connection: Lost Manufacturing Jobs, Shrinking Markets, and the Future." Report prepared for the Massachusetts Industrial Service Program, Springfield. March 1993.

   Elyse Cann
   Machine Action Project
   1176 Main Street
   Springfield, MA 01103
   413-781-6900

2. Ernst &AMP Young. "The Long Island Defense Diversification Initiative: A Manual for Defense Diversification." New York State Department of Economic Development. 1993.

   Rupert Hopkins
   Long Island Regional Director of Economic Development
   45 Executive Drive
   Plainview, NY 11803
   516-349-1266

3. U.S. Air Force. Air Force Systems Command, Wright Laboratory. "Maturing, Integrating and Expanding the PRISSM Regional Infrastructure." Manufacturing Technology Directorate prepared by Lawrence Associates, Inc., Wright Patterson Air Force Base, Ohio. March 1993.

   Richard Allgeier
   Institute of Advanced Manufacturing Sciences
   1111 Edison Drive
   Cincinnati, OH 45216
   513-948-2000

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