Defense Industry Adjustment Defense Industry Adjustment 101 Presented by Michael Gilroy Program Director (DIA) Office of Economic Adjustment

Sources: Defense Manpower Data Center and Chmura Economics & Analytics

The Defense Industry Today Nature of defense industry No longer vertically integrated Data-driven Just-in-time supply chain Globalization Businesses OEMs dominate most discussions but… …small firms drive the DIA program

DIA Historical Background Current program based on White House concern over DoD’s impact on economy after ending 2 wars. OEA developed proposal for expanded DIA program throughout late 2011 and In November 2013 proposed program of $300 million over 5 years (FY14-FY18 FYDP) RMD 700A1 (March 2013) instead authorized the following ($ in millions): FY 14FY 15FY 16FY 17FY

OEA’s Defense Industry Adjustment Program Assistance for regions impacted by Defense budget and contract reductions Supports communities to carry out strategies to retain critical workforce skills and business capacities Work with Federal, state and local agencies to integrate regional project plans and identify specific actions to support regional cluster growth and job creation 22 active projects with 18 more expected to be assisted in FY 15 PB FY 2016 requests $33.1M for program

Greater Wichita Region State of Oklahoma Southwest Ohio Region (Wright-Paterson AFB) Southwest Ohio Region (Wright-Paterson AFB) Commonwealth of Pennsylvania Commonwealth of Massachusetts State of Arizona St. Louis Region Texarkana Region Middle Georgia Region (Warner-Robins AFB) Middle Georgia Region (Warner-Robins AFB) State of Georgia Solano County (Travis AFB) Solano County (Travis AFB) State of Indiana Kern County State of Rhode Island State of South Carolina State of Alabama State of New Mexico City of Long Beach State of Wisconsin Oshkosh Region State of Washington Commonwealth of Virginia State of Maryland Southern California Region Southern California Region Allen County (Joint Systems Manufacturing Center) Allen County (Joint Systems Manufacturing Center) State of Colorado Southeast Michigan Region (Detroit Arsenal) Southeast Michigan Region (Detroit Arsenal) State of Connecticut State of New Jersey State of Tennessee State of Illinois Active projects Developing projects Defense Manufacturing Assistance Program (DMAP) (UMichigan/OhioState/Purdue) Defense Manufacturing Assistance Program (DMAP) (UMichigan/OhioState/Purdue) State of New Hampshire State of West Virginia Central Ohio Region Central Ohio Region State of Ohio

Project Approach and Structuring

Three Step Process 8

How is DIA Different From BRAC? No single starting point or animating event Contract cancellations Contracts which do not materialize Personnel reductions No clearly identifiable geography around which to organize a response. No clearly identifiable entity to be in charge No consensus on target for manufacturing communities Preserve defense industrial base? Expand defense-oriented foreign business? Diversify into non-defense lines of business?

What Are We Seeing Today? Organizing is most difficult and time-consuming activity regardless of grantee type. Our best managed projects tended to recognize this in their initial application. Most grantees already have everything they need to recover – but the assets are not aligned. The Chicken and Egg argument Grantees generally see businesses as the economic growth/recovery driver. Businesses see workforce as their growth driver. Planning is necessary, but not sufficient Sustainability is critical – yet few grantees address it. About 50% of the time MEP is not at the table.

What are DIA Grantees Doing? Organization Salaries & Expenses (S&E) Charrette Meetings / Outreach Stakeholder Engagement Social Network Analysis Website / Social Media Measurement & Evaluation IMCP Supply Chain Mapping Direct Assistance / MEP Assistance Mfr. Collaboration Studies Cluster SWOT Asset Mapping CEDS Update Defense Diversification Defense Impact / Dependency Acceleration/Incubation Facility / Op. Plans Programming Curriculum Salaries & Expenses (S&E) Workforce Dislocated Worker Training / Assistance Skills Gap Analysis Career Pathway Study / Mapping Curriculum Development Supplies & Equipment Other Tech. Transfer / Commercialization Pilot / Demonstration Projects Export Assistance Tooling & Equipment Disposal Facility Reuse Access to Capital Markets

Eligibility

Two fold test: Legal grantee Eligible event Legal grantees: States Municipalities Tribal Nations Public instrumentalities Eligible Events: Cancellation or termination of a DoD contract Planned major reduction in DoD spending Closure or reduced operations of defense facility Diversification

Assistance Types in DIA Portfolio Community Economic Adjustment Assistance for Reductions in Defense Industry Employment CFDA EADS Project Codes: CR, PR, BC Community Economic Adjustment Assistance for Advance Planning and Economic Diversification CFDA EADS Project Type: DD Economic Adjustment Assistance for State Governments CFDA EADS Project Type: ST

Take Aways for Potential Applicants When in doubt….call OEA earlier rather than later. Learn from other grantees. OEA can help you make connections. Devote bulk of your time to networking, communications and outreach before you apply, or…. Extend your organize/planning phase and use OEA resourcing to get organized Use a facilitation expert/consultant when needed Spend as much time as it takes up front to define the problem, the strategy, the goals and the tasks. Use a formal project plan with reporting mechanisms Who is responsible? When is it due? What does it cost?

Contact OEA Michael P. Gilroy Program Director (Defense Industry Adjustment) Office of Economic Adjustment 2231 Crystal Drive - Suite 520 Arlington, Virginia Office: (703) Cell: (703) NIPR:

Questions?