Patrick Peterson
Florida Today
Scott Lewit built a better boat with the help of the federal government.
The U.S. Navy spent $1 million to help him design and build the prototype of a utility boat that is 40 percent lighter, more fuel-efficient and less likely to injure its crew when it crashed into waves. The project kept him afloat during the recent recession and kept his nearly 40 employees working at the 24-year-old company.
The boat-building technology he developed eventually could be adopted commercially, creating a more-efficient and more-profitable recreational boating industry. But Congress’ inability to compromise threatens to stop progress on this project. It also threatens the huge part of the Brevard County economy that depends on funding from the Defense Department.
The threat is “sequestration,” and a lot of people are worried about its effect.
“You get the impression it’s going to wreak havoc across the whole system,” said Lewit, the president of Structural Composites in Melbourne. “It’s always disruptive if they stop efforts right in midstream.”
Lewit’s company is one of 1,600 in Brevard County that could be punished if Congress can’t restore the money sequestration will strip from the budget. The $109 billion in cuts nationwide from the defense budget likely would end thousands of jobs and cut short research that could provide the technology to create new industries. Brevard stands to lose about $300 million, officials say.
During the recession, Lewit’s company received $1 million in federal contracts to design and build the Navy’s upgraded boat. He’s now working to extend that research and win a $7 million contract to design a shock-absorbing boat for the Defense Advanced Research Projects Agency, which would reduce injuries to boat crews and save fuel.
“We’re at the point where we’re starting to gear back up, and we’re seeing a lot of opportunities,” Lewit said.
Lewit’s design uses lighter foam-core spars to strengthen the hull. Additionally, the techniques he developed for materials and construction methods for the Navy could be licensed soon by commercial boat companies, which are seeing their markets rebound from the recession.
“We can do the same thing to the boat you drive,” he said. “We can leverage our government research dollars and move technology to the commercial market.”
Receiving Defense Department research grants is crucial to technological advances in many industries, and the remaining options for funding are few.
“The banks aren’t going to give you a loan,” Lewit added. “You’re pretty much on your own.”
Innovation losses and brain drain
Sequestration is the plan Congress set up when it couldn’t agree on the budget in time to avoid a default on the federal debt. The threat of severe budget cuts was supposed to inspire lawmakers to work out a compromise.
“This has created a lot uncertainty,” said George Cecala, a spokesman for U.S. Rep. Bill Posey of Rockledge.
Cecala said Posey still hopes to avoid the drastic cuts, which would go into effect Jan. 2.
“An across-the-board cut is irresponsible,” Cecala said. “Congress still has time to act.”
Democrats and Republicans might reach an agreement after the November elections, but there is a good chance that gridlock will continue.
In Brevard, big government contractors, such as Harris Corp., Northrop Grumman and Lockheed Martin, stand to lose significant income from the cuts. Nationwide, some large contractors are threatening Congress and President Barack Obama with the release of layoff notices just before the Nov. 6 election. They believe layoff notices somehow will persuade Congress and the president to avoid the cuts.
Businesses, colleges and federal agencies that conduct research face the pain of lost funding. Defense Department spending in Brevard subject to sequestration totals at least $2 billion for more than 1,600 contracts, according to figures from The Center for Security Policy. The Economic Development Commission of Florida’s Space Coast estimates that the cuts could have a $300 million economic impact in Brevard.
Across Florida, the military and defense sector has a $60 billion economic impact and provides more than 686,181 direct and indirect jobs, according to Enterprise Florida.
And nationwide, the cuts could drain $109 billion from the economy at the start of the new year, according to a White House report issued last week. The across-the-board cuts could be “deeply destructive” to the military and core government responsibilities like patrolling U.S. borders and air traffic control, the White House said.
But a large share of the pain could be suffered by research projects, like the program that paid Lewit’s company $1 million and like the research that supported Florida Tech with $6.2 million this year. Government funded research routinely creates new technologies for commercial businesses and can spawn industries that create jobs.
By some estimates, sequestration could cut nearly 20 percent of that funding. Federal cuts likely will fall the heaviest on research, because of its indirect payoff and the ability to stop a program on short notice by ending its funding. However, the long-term damage caused by reducing the research and development budget is rarely calculated.
Government funding, in many cases, has laid the foundation for major economic growth. In the 1970s, for example, government funding helped develop a computer network for sharing data that was eventually called the World Wide Web.
“One of the concerns we have is how these cuts might adversely affect research funding,” said Frank Kinney, vice president for research at Florida Tech.
The small university in Melbourne is scheduled to receive $6.271 million this year for research on 22 Defense Department projects. Losing that funding would be felt keenly.
“Brevard received more (federal) funding than most counties,” Kinney said.
Space industry downturn
Federal budget cuts might also cripple the space industry in Brevard, which has just begun to recover economically from the end of the shuttle program last year, said Steve Howell, director of public policy at the American Institute of Aeronautics and Astronautics, said.
“The cuts will probably necessitate cancellation of the commercial space effort,” Howell added. “We’re really starting to play with fire.”
Scientific research for the space industry could be among the first things cut, which would gut technologies of the future.
“This trickles out into the universities,” Howell said.
Under the worse case, the reduced funding could cause top U.S. students and professors to go overseas to do research, causing a brain drain and a decline in the innovation that supports space industries in the U.S., Howell said.
“Most of that is going to impact future capabilities,” he said. “It’s going to be more the long-range research. The ripple effects will be crippling. They survive on these government contracts.”
Smaller companies, the source of most innovation, will be hit hardest because they don’t have the flexibility to shift into the commercial market.
“You’re going to lose the innovations they build on,” Howell said. “If you don’t have today’s business, you’re not going to be working on tomorrow’s innovations.”
This article can be read here: http://www.floridatoday.com/article/20120923/BUSINESS/309230015/Contractors-brink
