Your Friendly Neighborhood War Profiteer
Retired Army Officer Louise Morgan stands at a podium, flanked by six flags: one each for America, Minnesota, the Army, Navy, Air Force, and Marines.
Two large projection screens float on a wall above her head. She fiddles with a laptop, queuing up a short video promoting the missile launchers, big guns, and ammunition manufactured by BAE Systems, her employer in Fridley.
The video, accompanied by a pulsing and triumphant soundtrack, is a blitz-montage of computer-animated Navy guns firing, real-life missiles launching, and pictures of Baghdad burning. BAE, she narrates, makes the things that "make the big booms."
Morgan's audience is Minnesota's defense industry, and the occasion is a meeting of the Defense Alliance of Minnesota, a network of companies big and small, most of them obscure, that draw billions of dollars to the state each year through Defense Department contracts.
Democratic Sen. Amy Klobuchar is there, too. When she takes the podium she shares a laugh with the crowd about a Defense Alliance meeting she spoke at a year earlier. She enjoyed it, she says, "despite the protesters."
"I support the work you're doing," she tells the room full of charcoal sports jackets. "Our state hasn't gotten quite the portion of contracts" other states have enjoyed.
She's right about that. Minnesota ranks a lowly 34th among states in receiving defense allocations—just $1.5 billion in 2006 (the most recent data available), compared to $31 billion for first-place California. That Minnesota figure counts only big contracts to big contractors, the local divisions of defense giants who win the so-called prime contracts (over $5 million and often more than $100 million): names like Alliant Tech, Lockheed Martin, General Dynamics, BAE Systems, and even Hormel Foods, which gets tens of millions each year to keep the U.S. military fed.
But what those statistics don't show are the hundreds and maybe thousands of small and medium-sized companies who also make up Minnesota's defense industry. Across the state, from the Twin Cities to the smallest rural towns, are often-scrappy companies with a handful of employees who work contracts from the low thousands to the low millions.
"There is an incredible diversity of work being done in Minnesota," says Chip Laingen, a retired Navy officer who heads the Defense Alliance of Minnesota. Nearly 300 companies have joined the Alliance, which holds regular networking events and studies the state's defense industry. Laingen estimates there are 2,000 companies doing defense-related business in Minnesota.
Few of them do business directly with the Defense Department. They are small subcontractors, endlessly pitching their obscure innovations to the local giants. Or they may be entrepreneurs who work the civilian and military markets simultaneously—pushing adopted technologies at trade shows even as they try to elbow their way through the endless bureaucracy of the U.S. military.
They are nuts-and-bolts companies like Fastenall in Winona, with a $400,000 contract for "hardware and abrasives." Or Dodge Oil & Gas of Rochester, with a $100,000 contract for "fuels, lubricants, oils, and waxes." Or Winona-based Peerless Industrial Group, which has a $23,000 contract for "rope, cable, chain, and fittings." Or the Occupational Development Center of Thief River Falls, with a $6,000 contract for "textiles, leather, apparel, shoe findings, tents, and flags."
More intriguing are the small technology companies, which provide a window into what the Minnesota defense industry could be if it leveraged the enormous tech-industry infrastructure it is famous for. Sen. Norm Coleman has been a champion of tech startups looking to do business with the Pentagon, winning nearly $47 million in earmark money from the 2008 Defense Appropriations Act.
Minneapolis-based Phygen, for example, won $3 million to design a method of cold sterilization of medical instruments for war zone medics. Humanetics Pharmaceuticals of Eden Prairie got $3.8 million to develop a vaccine for radiation. Speechgear of Northfield won $1.8 million for its instant language translation systems. And Shield Technologies of Eagan got $1.6 million to develop a method for preventing corrosion of Navy weapons and deck equipment.
Funneling defense dollars into the state's fledgling economy is about more than munitions, says Defense Alliance's Laingen. "It's about protecting soldiers and their vehicles. It's about clothing, logistics, and training. These things are a far greater piece of the Department of Defense than the things that blow things up."
Here is a closer look at a few of the thousands of small Minnesota companies that have managed to infiltrate the labyrinthine world of defense contracting:
Last month, Recon Robotics CEO Alan Bignall flew to Paris with a black hard-shell suitcase. Inside was a small, durable, remote-controlled robot with a tiny surveillance camera built in.
His destination: a meeting of the special operations commanders for each of the 26 NATO member countries, where Bignall had been invited to demonstrate—and hoped to sell—his $6,500 robot.
The product started with a mid-'90s Pentagon challenge to create a surveillance robot that could be fired from a grenade launcher. Military planners were haunted by the ambush in Somalia—they wanted to see around corners and into buildings without sending a living, breathing scout.
The University of Minnesota took up the challenge. A grant from the Defense Advanced Research Projects Agency (DARPA) to the university's Center for Distributed Robotics in 1997 funded the work that gave life to what its student engineers would call the Scout Throwable Robot. All told, federal grants fed more than $6 million into the Scout.
Enter Bignall, a former executive at Fingerhut and American Express with no military background, who was tipped off to the Scout project by a "retired CIA-type." A professor and a handful of students at the university started Recon Robotics in 2005, but in-house production capacity was limited, and the students and their professor weren't wired for business ("Academics are not trained to take things to market," Bignall says). They hired Bignall in 2006, and he's drawn in hundreds of thousands of dollars in private investment, built an ambitious but cautious business plan, and manages the company's 11 employees.
The function of this lightweight, dumbbell-shaped robot is reconnaissance. The tiny video-eye transmits a black-and-white feed to a small screen on a handheld remote. It's a tool for the "over-cautious," says Bignall, a sort of canary in the coalmine to warn: "Whatever you do, don't come the hell in here."
At an Edina office park, the Scout is always on the clock—driven over the edge of tables, lobbed across a parking lot, and tossed onto a roof. There's no on/off switch—just pull a pin, like a grenade, and the video feed on the handheld control goes live.
Recon Robotics sold 100 Scouts in its first year, mostly to police and SWAT teams. Now they're fishing in military waters. Bignall's NATO trip was a success. "They called it 'le petit miracle,'" he says, laughing. Bignall and other Recon representatives are forever showing their robot. Last year they attended roughly one event or meeting every week. Homeland Security has added the Scout to its "approved equipment list," and a few have found their way to Iraq through reservists who got to know the Scout in their police or SWAT jobs.
At a trade show in Los Angeles, Bignall was standing with his robot when a man came by with a message: "I've used this thing. It saved my life in Iraq—saved my team." He disappeared into the crowd before Bignall could get his name.
Company: Primordial City: St. Paul Product: Ground Guidance System Funding: Private investment and $1.2 million in Army and R&D contracts
City: St. Paul
Product: Ground Guidance System
Funding: Private investment and $1.2 million in Army and R&D contracts
A presentation of Primordial's patented Ground Guidance System at a V-shaped conference table in St. Paul feels a bit like a top-secret briefing. CEO Randy Milbert's supercharged GPS system is built for hunters and hikers as much as the military, but the military function, added under contract with U.S. Special Forces, is the most compelling.
The concept is simple, but the execution is complex and confidential. He displays an aerial map of a swath of wooded terrain cubed by small roads. "Normally," he explains, "GPS would take you from point A to point B in a straight line, even if it took you through a lake. Or something like Google Maps would route you along local roads."
Primordial's technology, loaded onto heavy-duty laptops and handheld GPS devices, does something far more complex. Milbert presses a button and an animated, meandering line emerges fitfully. It's the "concealed route"—point A to point B through brush, forest, hills, or mountains. The route is calculated using what Milbert calls a "secret sauce" of satellite photos, topographical information, and the like.
Everything is taken into consideration: Are you on foot or driving a Special Forces all-terrain vehicle (Polaris, another Minnesota company, manufactures Special Forces ATVs)? If you are on foot, you can set your desired pace. If you are on wheels, Milbert's program factors the vehicle's maximum climbing rate so no incline on the route is too steep.
Next he pulls up an aerial map of Baghdad's Sadr City neighborhood, a site of frequent and fierce urban warfare. A feature called "intervisibility" shows you an aerial view of the spot where you're standing, with extraordinary detail, and maps out your line of sight in all directions—every alley, rooftop, and crevasse.
Everything you can see, of course, is a place from which you can be seen—by snipers, namely. This sensibility has no doubt been internalized by Special Forces soldiers—Milbert's technology serves as a sort of tactical idiot check.
Milbert first developed the idea as a student at MIT, when he attended a meeting of a student entrepreneurship club and learned about a government program that requires federal agencies to include businesses with 500 or fewer employees. Mind-wheels started to turn. Back home after graduating in 2000, Milbert (who was tutored as a high school student in Hopkins by Robert Stephens, later the founder of the computer-repair startup Geek Squad) launched a company called Soldier Vision from his parents' basement.
Today the company is called Primordial—the old name made civilian clients itchy—and Milbert has an office at the headquarters of Minnesota Defense, within spitting distance of Midway Stadium. Milbert employs 11 full-time software engineers.
Primordial shares office space with Minnesota Wire & Cable, whose defense division launched the Defense Alliance. Minnesota Defense, the defense contracting wing of the company, is an investor in Primordial, providing office space and equipment as part of the package.
Milbert learned early on to court the civilian market alongside the military. Last year he partnered with the leading manufacturer of civilian GPS devices, Magellan. When you're a small company in the defense industry, diversity is key to survival.
Another key: controversial congressional earmarks. "There are good earmarks and bad," Milbert says. "There are the 'bridge to nowhere' earmarks and then there are others, like the one Senator Coleman got us." He's referring to a $390,000 contract to fit the military's tactical ATVs with Primordial route-planning software. Earmarks are "just another tool," he says. "I wouldn't bet my business on it."
Company: Stanley Widmer Associates, Inc. City: Staples Product: Ultralight Boat Hull Funding: Private investment and $4.2 million in Navy and R&D contracts
Company: Stanley Widmer Associates, Inc.
Product: Ultralight Boat Hull
Funding: Private investment and $4.2 million in Navy and R&D contracts
The fading letters on the aging red water tower on the edge of a town nearly three hours northwest of the Twin Cities spell out, "Staples, MN: 100 Years of Progress."
There isn't much to Staples, but there is an airport—and there's Stanley Widmer, a 71-year-old engineer, inventor, boat builder, and former tank battalion commander for the U.S. Army. In his office, across a country road from airport land, a drafting table holds plans for the ultralight ship hull he has been pushing with an almost evangelical zeal in one form or another since 1969—as a racing boat, or a Coast Guard cruiser, or a Homeland Security shallow-water patrol boat. It was the Navy that finally put money into it, for an unmanned boat mounted with a device that tricks mines into thinking a big ship has arrived and triggers the explosion. A lighter boat is more likely to be sent skyward than shredded by the blast. Oh, and it can take a bullet. "This thing is lighter than water!" Widmer says. "You can shoot all kinds of holes in it and it's still gonna float." The material is a special polymer blend that has "memory." A bullet would merely push the material aside, not blow it apart, and the hole left behind would just close up when the bullet had passed through.
When the cautiously excitable Widmer describes all of this, his hands flutter in exclamation. Asked how many times in his career he's been laughed off as crazy, he leans back in his chair. "Many." Widmer built his first boat when he was 14 years old. He built speedboats in the '70s. He's designed tank parts, golf devices, soda machines, and fire engines. He wears a hearing aid in each ear, consequences of his tank commander days.
"I kind of wrote the guy off as a mad scientist," says the Defense Alliance's Laingen. "But he obviously learned how to market himself."
Sort of. The Office of Naval Research once invited him to fly east and present his idea to important people. He passed, saying he couldn't afford the flight. His company was on life support after a punishing dry spell, but he continued to work the phones, and it eventually paid off. He got Coleman's office on his side. The senator just wrote $3 million for Widmer into the 2008 Defense Appropriations Act. An earlier $1.2 million funded his move into a warehouse space, and he started hiring.
When the prototype boat is done, if the Navy still wants it, they'll have tooling rights, not the patent. That means they can order as many of Widmer's boats as they fancy, and he gets a royalty on each one.
The prototype hull is being molded in Wisconsin. At his Staples warehouse, a trailer waits to fetch the boat. An engine waits to be dropped in. Models and sketches of the boat lie about, and tossed-off blueprints are scattered, dusty and boot-printed, on the floor. In a separate room, two of Widmer's six employees sit at computers, where they draft components of the boat and test it using computer modeling. The real-world test won't happen for months. Once the molding is complete, Widmer will "put it in a lake somewhere and see how it works."
If the boat works well, there will likely be more millions, and he's already got those spent. Back at his desk he pulls out a map of the town's airport. He's drawn in a full start-to-finish manufacturing facility for his boats. And he's extended the runway to accommodate the C-130 military cargo planes that would come to load the boats into their cavernous bellies and ship them to whatever naval base required them. "I've had some Democrats out here," he says coyly. "And they say they know where to find the money for the expansion."
Then he chuckles a bit—acknowledging that persistence can only get you so far. "You never know," he says.
Company: Airborne Data Systems, Inc. City: Redwood Falls Product: Airborne remote sensing and surveillance gear Funding: $142,000 in 2007 Army contracts
Company: Airborne Data Systems, Inc.
City: Redwood Falls
Product: Airborne remote sensing and surveillance gear
Funding: $142,000 in 2007 Army contracts
David Fuhr flew aerial surveillance missions for the U.S. military in Vietnam. "All expenses paid," he jokes. A commercial pilot and aircraft mechanic when he was drafted, Fuhr came home from the war and flew agricultural planes—crop-dusters and the like—for 30 years. "I've always made my money with airplanes," he says.
He lives in Redwood Falls and runs Airborne Data Systems, a company specializing in surveillance gear that does real-time aerial mapping and heat-sensitive imaging. His equipment can "defeat" enemy camouflage—spotting bodies and equipment not visible to the eye—and can sense disturbed earth and other subtle changes to the environment, all of which can be used to identify military targets. Satellite surveillance can do all of this, but not in real time.
Fuhr got into the air-surveillance business with something called "precision agriculture" in mind. From the air, you can better assess the effectiveness of pesticides or an irrigation system, and he was looking to sell snapshots of farm fields to farmers and agricultural corporations. Beyond that, he thought maybe he could sell his imaging devices to the Minnesota Department of Natural Resources.
"But when you sell to a civilian program," Fuhr says, "you're only selling one at a time. The military is a different animal. You make a good presentation in the defense market and you might be outfitting a whole fleet."
Fuhr has no ambition to compete with the big contractors. Better to fill the holes they can't, he says. "If you build your program into the $10 million-plus zone, the big guys are going to take it from you," Fuhr says. "But they can't afford to turn on the switch for a $5 million project."
"We've technically never sold anything to the Defense Department," he says. "But the 'big eight'—Grumman, Boeing, Lockheed, and the rest—we've done them all."
What he's done is the numbing work of researching the military's needs and who is meeting them with what products. There are holes everywhere—technology the big companies don't have and must find to fulfill their contracts. Discovering those holes and convincing the right people you can fill them means scores of calls and meetings. Fuhr's systems are loaded onto planes and wired to work virtually off the shelf.
"The problem," says Fuhr, "is that it takes so much money and time to groom all these people, and you may get nothing out of it. That's how come there are $58 hammers—it's not the hammer's cost, it's that the company lost 10 contracts before they landed one."
Airborne had three systems ready for delivery in September 2001. The program was promptly canceled in the flurry of 9/11 priority shifts. "We got hung with the stuff," says Fuhr. "The thing is, the government has no obligation to anything that has not been delivered yet."
It can be a fickle bureaucracy, and everybody has an eye on national and international events. In the case of Iraq, Fuhr wins if the U.S. withdraws: "If we pull our ground forces, somebody will want to be watching this thing. Our market gets bigger."
READ MORE ON THIS: Minnesota's Thin Slice of the Military Pie
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