Traverse City News and Events

Connecting Local Businesses With World’s Biggest Customer: The Government

By Beth Milligan | Dec. 17, 2018

The U.S. government spends billion of dollars annually on goods and services, much of it through contracts with private businesses – making it the largest potential customer in the world. Yet a new study shows that in one particularly lucrative industry, government defense contracts, northern Michigan counties are significantly lagging behind other regions in landing federal business – an imbalance Networks Northwest hopes to correct.

Networks Northwest received funding from the Michigan Economic Development Corporation (MEDC) and Michigan Defense Center to analyze defense contracts in the 10-county northwest Michigan region. The study compared areas like Grand Traverse, Leelanau, Benzie, and Kalkaska counties with counties across the country with similar-sized workforces. Local businesses were also surveyed about their interest in working with the government, as well as challenges they’ve experienced in landing contracts.

The results of the study? Almost all northern Michigan counties, except for Benzie and Wexford, are “underperforming” when it comes to landing government contracts. Grand Traverse County is only earning two percent of the defense business its peer group earns; Manistee is at four percent, while Charlevoix is at nine. Kalkaska and Leelanau counties fared slightly better at 17 and 41 percent, respectively, while Emmet and Missaukee counties were at zero. The study also warned a disproportionate amount of business was tied up in a small number of contracts. Of 32 northern Michigan companies who contracted with the government last year for defense goods or services, the top three firms represented 94.2 percent of total spending, or $121.8 million.

“With the large percentage of contract amounts held by just three firms, the impact of the loss of these contract relationships would negatively impact the local and regional economies,” the report cautioned.

The report does present a silver lining: Northern Michigan has “competitive workforce wages” and healthy workforce growth compared to similarly-sized counties across the country, and local firms “possess advanced manufacturing technology and equipment” suitable for defense contracts. The biggest challenge lies not necessarily in the region’s talent pool or products, the report surmises, but in connecting businesses to available government contracts. Seventy-three percent of surveyed companies said difficulty locating contract opportunities was a barrier to working with the government.

That’s where Networks Northwest hopes to come in. Based on the findings of the study, the MEDC and Michigan Defense Center have awarded a second round of funding to Networks Northwest to create a program to help local businesses land government contracts. The new Defense Industry Growth Program (DIGP) will reimburse area businesses up to $5,000 for 50 percent of their expenses to pursue defense contracts. Businesses must be small, headquartered in the 10 counties of northwest Michigan, and fall within one of seven industry categories. Those include advanced manufacturing, aerospace, autonomous aerial systems, autonomous ground systems, cybersecurity, robotics, and 3D printing.

“Let’s say a business is having trouble finding opportunities, and there’s a big industry day happening in San Diego where suppliers and buyers meet once a year…maybe we can assist them with the cost of going to a show,” explains Cathy Fairbanks, the program manager of Networks Northwest’s Procurement Technical Assistance Center (PTAC). The PTAC focuses on helping businesses of all types land local, state, and federal contracts. Fairbanks continues: “Maybe they don’t have marketing materials, or a website. The Department of Defense looks for specific things in marketing materials…so we could help financially with that.”

Networks Northwest will also host a free workshop in Traverse City on January 24 from 9am to 3pm specifically focused on connecting local businesses with defense contracts. Representatives from the Army, Navy, Air Force, and other major government divisions have been invited to advise attendees on what kinds of goods and services they look for and how to do business with their organizations, while Networks Northwest staff will give an overview of the DIGP program. Registration information for the event is online here.

The potential for northern Michigan businesses to claim a bigger piece of defense spending is a lucrative one, Fairbanks says. “The federal government is the world's largest customer, and within the federal government, the Department of Defense is the largest spend,” she says. “They buy everything from toothbrushes to jets to veterinary services to logoed t-shirts. Obviously if they’re going to buy products and services, we’d like them to buy from northwest Michigan.”

Fairbanks says there are also opportunities for local businesses of all sizes – and even individuals – to work with the government beyond just defense contracts. PTAC provides free assistance to companies and residents throughout the 10-county region that includes one-on-one counseling, bid match notifications, contracting assistance, training, and special events. The program is tapped into more than 4,000 databases of potential contracts, ranging from schools and universities to cities to public hospitals.

“We have a lot of companies that are very small that do work for the government,” Fairbanks says. “We have somebody who used to work for the FBI who works from home and does background checks. There’s someone in the U.P. that goes out once a year and checks equipment in the middle of the forest. There was even someone doing badminton lessons. It’s amazing to come across what the government buys.”

Pictured: A chart showing annual defense spending across all counties in northern Michigan. The figures represent a five-year average from 2013 to 2017. Wexford County performs the best, ranking 236 out of 3,179 counties across the U.S. with an annual contract average of $111.5 million.

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