The Free Press, Mankato, MN

Local News

August 25, 2012

Pending defense spending cuts can reach local companies

By Tim Krohn Free Press Staff Writer

MANKATO — The military’s reach into the economy is long. And cities don’t have to be home to major military contractors to benefit.

“Military contracts account for 15 to 20 percent of our business,” said Sarah Richards, president and CEO of Jones Metal Products in Mankato. “We will feel the effects of military (budget) cuts.”

Minnesota businesses that supply goods or services to the U.S. Department of Defense are preparing for the fallout of massive federal budget cuts set to occur early next year if Congress does not agree on a plan to cut the federal deficit.

On Jan. 2, massive cuts to the Defense Department budget — $492 billion, spread out over nine years — are scheduled to start taking effect. The immediate effect of the cuts will be across-the­board cuts of roughly 10 per­cent to all Defense programs and projects.

Jones Metal is currently making steel battery cases that will go on nuclear submarines.

Don’t ask to take a look at them, however. New federal International Traffic in Arms regulations place tight requirements on all contractors and subcontractors.

“Everyone who works on the process or the drawings has to be a proven U.S. citizen or get special clearance,” Richards said.

Military contracts also bring extra paperwork and inspectors.

“There’s a lot more work up front. The specifications are a lot more intense. The military lost a (nuclear) sub in the ’60s, so they dot every i.”

Jones Metal has to assemble welding procedures for each item and send it in for approval. Once they build something, “destructive” testing is done to make sure the piece holds up.

“So if we need to make 20 items, we make 22 because two go in for destructive testing.”

Inspectors — who can’t be associated with Jones Metal — are also on hand to check projects at various stages of assembly.

“We’re a second-tier contractor. The primary contractor will have an inspector come in. They’ll be here for two or three weeks — they become a regular fixture.”

Despite some extra hoops to jump through, Richards is happy for the work.

“Our economy depends a great deal on the military and government in general. It definitely makes a difference,” she said.

“We have the advantage of being woman-owned and operated. Our customers need a certain percentage of their suppliers to be women or minority-owned or operated companies.”

Richards has been watching the debate over military spending more closely than most. “It’s amazing how quickly it affects the chain. It takes 10,000 people five years to build one nuclear sub. There’s a big impact from military spending.”

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