Nevada businesses fear defense cutbacks

Even the Las Vegas-Clark County Library District has a stake in defense contracts, $13,000 for computerized services with the Nellis library.

But that’s peanuts compared to the nearly $829 million that a Sparks-based company, Sierra Nevada Corp., was awarded last year by the Department of Defense for 74 contracts.

Those contracts included electronics and development of intelligence, surveillance and reconnaissance systems.

The automatic cuts, under what’s called "sequestration," would affect a cross-section of Nevada’s economy and possibly devastate some Southern Nevada companies that rely on defense contracts for their existence.

That’s the upshot from Southern Nevada business officials reacting to a study by the Coalition for the Common Defense. It was released last week by a nonprofit conservative think tank, The Center for Security Policy.

The current defense reduction policy "is a policy of uncertainty that creates risks internationally," said Christine Brim, a center spokeswoman, who described sequestration as "kind of a man-caused disaster."

"Businesses don’t know what to do. They don’t know whether to hire or whether to fire. They don’t know if they need to file bankruptcy," she said.

Many firms that count on millions of dollars per year from the Pentagon to employ hundreds of workers and pay subcontractors for defense-related work would be severely hindered, local company officials asserted in the wake of the center’s report.

"This is just one more blow to Southern Nevada," said Steve Brooke, executive vice president of Jaynes Corp.

The general contracting company built facilities for Unmanned Aerial Systems, or drones, at Creech Air Force Base at Indian Springs, 45 miles northwest of Las Vegas, and the Green Flag air combat training operations building at Nellis.

"Gaming is down. Housing is down. Now this. But we’ll survive somehow," Brooke said.

"We’re trying to diversify into other markets because we see this coming. It trickles down to suppliers, vendors, drivers, bankers and administrators," he said, noting that each project involves about 300 people.

"We’re builders but were also citizens. We have a fiscal responsibility, but at the same time, as citizens, we’re all concerned about our ability to defend our country."

Last year, Jaynes was awarded $7 million for one project. The company has received five Defense Department contracts over the past four years amounting to $40 million, or about $10 million per year for general contracting work at the Creech and Nellis bases.

The Obama administration is seeking 9 percent in defense cuts in its current budget, but deeper, across-the-board cuts of 18 percent loom under sequestration that would be triggered in January if Congress and President Barack Obama can’t agree on a pact to reduce the $16 trillion national debt.

Under sequestration the deficit-reduction burden would be split between national security and nonsecurity programs. That means the Department of Defense would be forced to lop an additional $492 billion from its expense accounts during the next 10 years.

The impacts would go far beyond the 1,672 active-duty military personnel who could lose their jobs along with 580 civilian Defense Department workers under mandatory cuts.

Given that Nevada contractors received more than $1.33 billion for defense work in 2011, cuts of 18 percent under sequestration translate to revenue losses of more than $239 million per year starting in 2013.

The ripple effect would result in 6,247 job losses or a $285 million decrease in gross state product, and $236 million in annual lost earnings, according to the national average cited by the Center for Security Policy.

The center’s report shows Clark County’s annual revenue would fall by $28.5 million annually under 9 percent cuts to defense programs from 2013 to 2021, or by $57.1 million per year under an 18 percent sequestration reduction.

For C. Martin Co. in North Las Vegas, which provides services at Creech, Nellis and the Tonopah Test Range, sequestration "would be devastating," company President Laura Craig said.

Last year, through competitive bids, C. Martin, received five contracts for a combined total of nearly $15.2 million. The company employs about 300 workers in Southern Nevada.

"Something like that would devastate C. Martin, not to mention 300 families would be without employment and health care," Craig said about the potential impacts.

"I’m not sure making those cuts in the competitive arena is the best way to conserve dollars. I think private sector contracting through conservative bidding gives the taxpayers the best bang for the buck."

The Air Force is still pursuing contracts for the Nellis and Creech bases. A Nellis spokeswoman reiterated the base’s position on sequestration, saying it would be premature to speculate on the effects of potential cuts since details of how they would be implemented have not yet been decided.

At Anderson Dairy, trucks deliver between $20,000 and more than $25,000 in dairy products per month to the Nellis commissary, said Dave Coon, the company’s vice president for sales. Last year, the demand for those products resulted in more than $300,000 awarded to the dairy from the Defense Department.

A reduction in personnel at the base could reduce the contract proportionately.

"We don’t know how it would impact us," Coon said. "If they still have employees, they’re still going to purchase food and milk. I would think they would still have to furnish the demand for the base.

"We’re hopeful that we have a contract that we’ll renew before next year."

Las Vegas-Clark County Library District spokeswoman Karen Bramwell said, "The whole community would lose out," if the Pentagon doesn’t provide roughly $13,000 for automated services shared by district branches with the Nellis base library.

Airmen would have to relinquish online access to the library district’s 2.5 million-volume collection, and the district wouldn’t have access to books and materials in the Nellis library. For example, the book, "Manhunt: The Ten-Year Search for Bin Laden — from 9/11 to Abbottabad," is currently available to the district only through the base library.

A number of Las Vegas resorts and casinos also could expect revenue losses if the Defense Department cancels functions and conferences.

Last year, Palace Station received nearly $49,600 from the Department of Defense, with Boulder Station drawing about $16,000.

Similarly, Harrah’s Las Vegas and MGM Grand received thousands of dollars from the Defense Department as did Tuscany Suites.

Station Casinos corporate spokeswoman Lori Nelson wrote in an email that "in the unlikely event sequestration occurs, we don’t view a decline in spending by the Department of Defense as a dramatic problem as tourism experts have forecasted an uptick in business that would help offset any potential reductions in business."

In a medical office complex off Smoke Ranch Road, a small group of employees works behind dark, tinted windows at Blaine Warren Advertising. Mounted high over one cubicle is a blown-up photograph of the nose of a C-17 Globemaster cargo plane: an image from the work Blaine Warren does for the U.S. Air Force Reserve, to the tune of $22.8 million last year.

While no one at Blaine Warren Advertising would talk about its Defense Department work, an Air Force Reserve Command Headquarters spokesman at Robins Air Force Base, Ga., released a 20-page draft work description. It spells out a national and local recruiting campaign that targets television, radio and newspapers with parts of the campaign directed at high school and college campuses.

The campaign has three primary objectives: generate leads for the recruiting sales force; "reconnect the Air Force Reserve with the American public; and "instill a sense of pride and accomplishment in the minds of current Air Force Reserve members," according to the work performance document.

In an email Friday, Air Force Reserve spokesman Philip Rhodes said the contract was offered for one year with four annual options. That means the total estimated cost of the contract was more than $56.6 million "if fully obligated over the five-year period."

But that’s a big "if" under sequestration, which would cut Blaine Warren’s five-year award by millions of dollars.

Contact reporter Keith Rogers at krogers@reviewjournal.com or 702-383-0308.