With over 120,000 active-duty/reserve personnel and 23,000 civilian workers, North Carolina has the fourth-largest military footprint in the nation. But while the top three states – California, Virginia and Texas – also lead the nation in defense-contract spending, the Tar Heel state ranks 19th. 

That’s a number North Carolina officials are working to change and so far the efforts are paying off. A 2020 report (tinyurl.com/2p888j5a) found that, while Department of Defense contract spending in North Carolina has historically been modest, it now is among the fastest growing states in the nation for technology areas the DOD considers priorities.

The report – led by the private-nonprofit Defense Alliance of N.C. – recommends that the state better leverage its innovative companies and research organizations, along with its relationships with both uniformed and civilian leaders at North Carolina’s military installations.

“Looking at the broader needs of the DOD and focusing on the six technology areas the department is prioritizing ‘opens a world of opportunity’ for the state,” the report says.

Also leading the effort to boost defense-contract spending is the N.C. Military Business Center, a state agency based at Fayetteville Technical Community College.

When the Greater Fayetteville Business Journal recently caught up with NCMBC Executive Director Scott Dorney, he was at the Veterans Administration headquarters in Washington, D.C.

Dorney said that although NCMBC can help companies pursue any federal contract, DOD is by far the biggest target.

“In 2020, companies based in North Carolina as well as companies doing business here executed about $9.5 billion in federal contracts,” Dorney said. “About $7 billion of that was DOD. But a few billion from other agencies is pretty important, too.”

Dorney said that while the state’s counties with a large military presence – Cumberland, Onslow, Craven and Wayne – also are among the leaders in defense contracts, there’s significant DOD spending in counties not usually identified with the military.

“It's very surprising to people that one of the biggest counties for federal contracting in our state is Durham,” Dorney said. “That's because of Research Triangle Park. The EPA is there and we have large businesses – pharmaceutical businesses, medical related businesses – that do a lot of federal contracting. But your largest county for DOD almost always is Cumberland.”

Dorney, who finished 22 years of Army service as deputy garrison commander at Fort Bragg, did point out a recent anomaly.

“Onslow was ahead of Cumberland in 2020, really for one reason – all of the contracts that were awarded for the Hurricane Florence recovery work, which is about $1.5 billion.” 

With a renewed effort on growing defense contracts, there’s one message Dorney and other advocates want to spread: Although the aggregate numbers are in the billions and there certainly are many large firms in the business, there’s room for small companies, too.

“A lot of small businesses, particularly, think, ‘Oh, there's no opportunity for me. It's too big. I can't do it.’ They don't understand that 23% of contracts are set aside or targeted at small businesses.”

That’s where NCMBC comes into play. While major corporations do have entire departments searching for potential businesses, that’s a role NCMBC can play for smaller North Carolina companies.

“Our staff monitors the demand side. We're watching those contracts every day. That's what our business development team does,” Dorney said. “They're all assigned federal agencies. They're all assigned key industries. They get a feed of federal contracts every day, covering their agencies.”

Dorney said his staff is looking at those bids for proposals and saying, yes this is winnable. This one is not winnable. If it passes the test, NCMBC sends it out to businesses in North Carolina that are qualified to do that work.

“We’re basically the state’s business-development shop for federal contracts,” he said. “And we’re recruiting businesses to this market; particularly a lot of small businesses.”

Dorney said a key to North Carolina’s recent success is aligning business capacity in the state with what the DOD and other federal agencies need.

“What we realized is that before the Military Business Center opened, the state was developing great business capacity,” Dorney said. “That's wonderful, but that's only half of the game. If you think of procurement as a two-sided equation, it comes down to supply and demand.”

Dorney said North Carolina was building business capacity and adding other economic tools such as low corporate taxes, but that left the equation with a high missing part.

“What was happening is nobody was looking at what the government actually needed,” he said. “We had to better align our business capacity with those opportunities.”

So using such tools as the federal procurement data system, NCMBC began asking lots of basic questions: What does Fort Bragg want to buy? What does Camp Lejeune want to buy? Who buys uniforms? Who buys technology? Who buys what we make in North Carolina?

And when Dorney and other business-development advocates visit places such as VA headquarters in Washington, he believes they have a great story to tell, a story that officials bidding out works will want to sign off on.

“We meet with major companies who either have a presence in North Carolina or we want to recruit to the state,” Dorney said. “And our message is pretty straightforward – We've got the best business climate of any state in the country. We've got the best support infrastructure to help defense contractors get started and grow and secure supply chains. We've got a great workforce in North Carolina, transitioning military people and otherwise the best community college system and university system.”

Dorney said a lot of companies might not think of North Carolina as a center of innovation, but it is, notably in products and services the DOD needs. 

“We’ve got to match our talents with what DOD needs,” Dorney said. “We've got to help our businesses break into the market, get them engaged, get them registered and certified.”

Dorney said the NCMBC website is a good place for small businesses to start. It has an entire section devoted to small businesses interested in DOD and other federal contracting opportunities, which can be found at www.ncmbc.us/small-business-assistance-programs/.

“The NCMBC and its partners are finding out what the government is going to buy three years from now, or one year from now today,” Dorney said. “We then connect it to our businesses and provide the necessary technical assistance to help them win contracts.”

“Whether it's connecting companies to win large or small prime contracts, or whether it's connecting supply chain providers to a federal agency, that's what we do every day.”

And it works. “You can see it in the numbers,” he said. 

FY 2020 DOD contract spending

Onslow $2.4 billion

Cumberland $1.3 billion

Craven $855 million

Mecklenburg $518 million

Durham $384 million

Hoke $243 million

Guilford $214 million

Wake $184 million

Rockingham $86 million

Wayne $72 million

FY 2020 DOD personnel spending

Cumberland $4.0 billion

Onslow $1.6 billion

Craven $603 million

Wayne $354 million

Wake $181 million

Mecklenburg $127 million

Guilford $50 million

New Hanover $40 million

Durham $37 million

Caldwell $23 million

Note: Most personnel spending in counties without major installations is for Army National Guard.

Source: Office of Local Defense Community Cooperation