Section 5 Defense Industry Cluster Potential in the ... · Defense contracting levels performed in Milwaukee County could also be explained by a misalignment between the purchasing

Transform Milwaukee 5-1 Defense Industry Cluster

Section 5 – Defense Industry Cluster Potential in the Milwaukee Region Federal taxes represent a flow of income away from a community. However, these dollars can be returned to

communities through a variety of intergovernmental aids and funds transfers.1 While some revenue is

passively returned to communities, actively pursuing dollars taxed away has been recognized as a central

community economic development strategy (Pulver, 1979; Shaffer, Deller and Marcouiller, 2004). Federal

government procurement contracts with local businesses provide one particular means of recapturing tax

revenue. While contracts are available through many federal agencies, the Department of Defense (DOD) is by

far the largest source of procurement. In recognizing this potential source of revenue, states and regions

frequently target DOD contracting through the implementation of defense industry cluster initiatives.

To better understand whether a similar strategy could be pursued locally, Section 5 examines the potential for

developing an industry cluster around defense contracting in Milwaukee’s Industrial Corridor and the broader

region.2 Importantly, this analysis is exploratory as it seeks to determine those industries, goods, or services

that might form the basis for a local defense industry cluster. That is, the following overview should be

considered as a pre-venture assessment rather than an analysis of cluster competitiveness or an attempt to

identify issues that may be most important to a local defense cluster. Specific areas of interest considered

below include:

Exploring DOD contracting changes and geographic distributions;

Understanding the broader theory behind industry clusters as an economic development strategy;

Defining local industries that potentially could align with a defense industry cluster; and

Identifying prospective challenges and opportunities facing the implementation of a formal defense

cluster initiative in the Milwaukee region.

Department of Defense Contracting Trends

For federal fiscal year 2012 (FY 2012), Department of Defense procurement totaled $361 Billion or $1,150 per

capita (Chart 5.1). While DOD contracts continue to account for almost 70% of all federal procurement dollars,

FY 2012 marked a fourth consecutive year of declining values. These decreasing contract levels mark the end

of a post-September 11 period when DOD procurement spending increased by 104% between FY 2000 and FY

2008. Importantly, these recent declines are expected to continue given the on-going federal debate over

austerity measures and waning commitments in Afghanistan and Iraq. While DOD procurement levels remain

relatively high, the potential for spending reductions must be considered when assessing local efforts to

promote and increase defense contracting.

Despite a risk of declining DOD spending, prospects for increasing procurement in the region remain feasible.

When measured on a per capita basis, the values of DOD contracts performed in Milwaukee County and the

1 See Appendix 5A for an overview of specific types of aids and funds transfers.

2 An analysis of a potential defense cluster was a research request from WHEDA.


Chart 5.1 – Federal Contracting Values FY 2000 to FY 2012 (in Constant $2012)

Source: Federal Procurement Data System (FPDS) and Author’s Calculations. Figures are subject to revision.

Chart 5.2 – Department of Defense Contract Obligations per Capita FY 1995 to

FY 2010 (Based on Place-of-Performance)

Source: Federal Procurement Data System (FPDS) as summarized by the U.S. Census Bureau

Consolidated Federal Funds Report. Author’s Calculations. All values are in constant $2010.

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State of Wisconsin

Balance of M7 Region

Milwaukee County

Balance of the M7 Region have traditionally remained well-below the national average (Chart 5.2).3 Somewhat

similar per capita trends are present in the State of Wisconsin prior to 2008, but recent large contracts secured

by the Oshkosh Corporation have aided in moving Wisconsin’s procurement obligations above the national

average.

The relatively low per capita DOD contracting levels performed in the Milwaukee 7 Region could be somewhat

surprising given the size of the area’s industrial base. However, the region’s large population and its lack of

sizable military facilities partially explain these levels. Many counties showing the highest per capita values

have small populations with large

military installations nearby, such as

Naval Support Activity Crane in Martin

County, Indiana and Fort Benning in

Chattahoochee County, Georgia. Other

high per capita values are found in less

populous counties containing a large

defense contractor, such as the Oshkosh

Corporation in Winnebago County,

Wisconsin and Boeing/Textron in Potter

County, Texas (Map 5.1).

Measuring DOD contracting activity in

the nation’s 100 most populous

counties removes the influence of

smaller communities and provides

another benchmark for Milwaukee

County. While the 100 most populous

counties account for over half of all

Department of Defense contract values

on a place-of-performance basis, two-

thirds of these large counties still have

per capita contracting levels below the

national average. Milwaukee County is

one of the counties below the national

average. Specifically, Milwaukee

County ranks 41st in population, but

only 84th in per capita contracting

among these 100 counties.

Again, Milwaukee County’s per capita

procurement level among large counties

is partially explained by the lack of a

3 Contracting can be measured on a place of performance or place of award basis. Place of performance estimates contracting

amounts based on where the contract actually executed. Place of award figures will be examined later in Section 5.


large local defense industry firm or a sizeable military facility located in the region. For instance, St. Louis

County, Missouri and Fairfax County, Virginia have two of the largest procurement levels among populous

counties. St. Louis County is home to Boeing Defense while Fairfax County includes large defense contractors

such as the Carlyle Group, CACI, Northrop Grumman, and General Dynamics. Moreover, San Diego County,

California and Bexar County, Texas (San Antonio) also have high per capita procurement values and are home

to almost 150,000 military employees.

Defense contracting levels performed in Milwaukee County could also be explained by a misalignment

between the purchasing needs of the Department of Defense and the production capabilities of the region’s

industrial base. That is, the types of products and services most needed by the DOD may not be those that are

largely available in Milwaukee County or the broader M7 Region. This potential mismatch is explored later.

Map 5.1 – DOD Contracting Obligations per Capita (FY 2010)


Understanding Industry Clusters

Industry cluster initiatives are widely embraced by states and regions as economic development strategies.

Despite their broad appeal, cluster-based strategies are often misused. Many economic development

practitioners and policy analysts do not fully understand how clusters operate either from a theoretical

perspective or in terms of their identification and implementation. Consequently, evaluating the potential for

developing an industry cluster, defense-based or otherwise, requires a basic understanding of the concepts

and theories surrounding clusters.

A wide variety of industry cluster definitions exist, but clusters are often described as “geographic

concentrations of interconnected companies, specialized suppliers, service providers, firms in related

industries, and associated institutions (e.g. universities, standards agencies, trade associations) in a particular

field that compete but also cooperate” (Porter 1998, p. 197). A better understanding of this definition is

gained by examining several key terms in greater detail:

Industry clusters involve interconnected companies, specialized suppliers, service providers, and firms in

related industries - The concept of clusters goes beyond the recognition of a single industry sector or

classification. Clusters acknowledge important connections and relationships among different business

types that support each other through supply chains and other buying and selling relationships. In theory,

the presence of quality local suppliers and services creates efficiencies and increases competitiveness. For

instance, nearby firms in a cluster’s supply chain can offer lower transportation costs and provide quicker

delivery or access to support. Interconnectedness can also extend to firms in a cluster sharing a common

labor force or similar types of infrastructure. Consequently, cluster-specific workforce and infrastructure

development efforts can support many firms rather than just an individual company;

Industry clusters include associated institutions – Industry clusters are not solely comprised of for-profit,

private-sector firms. Industry clusters recognize the potential assistance and knowledge spillovers

(transfers) that universities, trade associations, and government agencies can provide.4 The participation

of these institutions in cluster-based initiatives can provide research, labor training, support, and advocacy

for cluster establishments;

Industry clusters have a geographic concentration – Clusters and their associated components are

concentrated in a distinct geographic area. Geographic concentration allows for increased interaction and

efficiencies to be developed among companies in a cluster. Geographic proximity can also provide access

to a concentrated, specialized labor force residing in a region. While the exact geographic extent of a

cluster will depend on a variety of factors, industry clusters are often regional in nature. That is, clusters

typically are not bound to a neighborhood or municipality. Instead, Porter (2000) suggests that the

geographic scope of a cluster relates to the distance in which informational, transactional, incentive, and

other efficiencies occur. Accordingly, the geographic boundaries of clusters are defined by inter-company

relationships and not political boundaries (Rosenfeld, 2001);

4 Knowledge spillovers can also occur among individual firms in an industry cluster.


Companies within a cluster compete, but also cooperate – Individual firms within an industry cluster are in

competition with one another, but also exhibit varying levels of cooperation. Examples of cooperation can

include activities such as joint-contract bidding; developing custom labor force training programs;

providing a unified voice on industry-wide issues; and improving an industry’s visibility. The condition of

cooperation requires that private industry stakeholders, or industry champions, have a lead role in the

potential success of industry clusters. Government can support the development of a cluster, but usually

cannot be the motivating force for its formation and success. Without private sector cooperation, a region

does not have an industry cluster, but rather a concentration of similar firms;

Some aspects of industry clusters suggest similarities to the concept of agglomeration economies. That is, part

of cluster theory relies on the co-location of associated firms to create conditions such as lower input costs,

reduced transportation expenditures, and greater access to the traditional factors of land, labor and capital.

As with industry agglomeration, cluster theory also seeks to maximize demand for those products and services

produced by a cluster. However, industry clusters differ from agglomeration economies in that industry

agglomerations only seek to passively minimize the costs of production, while clusters attempt to improve the

competitive advantage of firms through innovation and knowledge transfer among participants (Shaffer, Deller

and Marcouiller, 2004). In seeking to lower costs of production while also improving innovation, clusters

extend a number of theoretical advantages to both individual firms and the broader region:

Efficient focusing and allocation of resources – Viewing a local economy through the lens of a cluster allows

for a better alignment of local economic and workforce development resources. As clusters capture

important linkages among industries, understanding a cluster helps government entities, educational

institutions, and non-profit organizations to identify technology, skills, information, marketing and

customer needs that cut across firms and industries. Consequently, the linkages among firms in a cluster

suggest that programs supporting clusters could have relatively large multiplier effects. That is, the total

employment and income gains from recruiting, retaining and growing cluster-based firms could exceed

those associated with non-cluster firms of similar size (Barkley and Henry, 2001);

Strengthening the local economy and generating cost savings to firms in the industry cluster – As previously

suggested, cost savings can arise from a greater availability of specialized suppliers and support services; a

larger pool of highly-trained workers; public infrastructure investments that are better targeted towards

the needs of specific industries; the presence of financial institutions familiar with an industry; and a

greater potential for inter-firm technology and information transfers (Barkley and Henry, 2001);

Facilitation of Industry Reorganization – Global competition and the creation of new production

technologies often have encouraged a transition from large firms involved in mass production to smaller

firms with a focus on specialization. Cluster theory suggests that adoption of new technologies and

product specializations are more prominent and easily attained by firms in industry clusters (especially for

small firms). Proximity among these specialized firms, their suppliers, and their markets may enhance the

flow of goods through the production system and enable firms to quickly adapt to market changes (Barkley

and Henry, 2001);


Clustering encourages networking among firms - Networking potentially allows firms to take advantage of

shared needs; exploit new markets; integrate activities; and pool resources or knowledge. Surveys of

manufacturing networks suggest that establishments engaged in networking find significant advantages

through cooperation with their counterparts. Networking firms also report that their competitiveness and

profitability are enhanced by inter-firm cooperation and collaboration (Barkley and Henry, 2001). The

formation of industry clusters can assist in creating and nurturing the networking process;

Clusters can facilitate the commercialization of innovation – Theoretically, clusters can lower the entry

barriers for new firms whether they be start-ups, spin-offs, or new business lines within established firms.

According to Porter (2004), starting a new business within an established cluster can be easier as most of

the needed inputs are available locally. Furthermore, technology commercialization can also be eased by

cluster awareness and expertise among lenders and venture capitalists.

Despite all of the proposed benefits to regions and firms, it is important to recognize that the success of

clusters as an economic development strategy is open to considerable debate, even when fully understood

and properly implemented. While anecdotal examples of success exist, empirical evidence on the ability of

clusters to increase competitiveness, generate job growth, and produce new economic activity is somewhat

limited. 5 Nonetheless, clusters are beneficial as a framework for economic analysis and the following overview

considers the potential connections and synergies among defense contractors in the region.

5 For several summaries on the debate surrounding the effectiveness of industry clusters as an economic development strategy, see:

McDonald, F., Huang, Q., Tsagdis, D. and Tüselmann, H.J. (2007). Is there Evidence to Support Porter-type Cluster Policies?

Regional Studies, 41(1), 39-49.

Motoyama, Y. (2008). What Was New About the Cluster Theory?: What Could it Answer and What Could it Not Answer?

Economic Development Quarterly, 22(4), 353-363.

Palazuelos, M. (2005). Clusters: Myth or Realistic Ambition for Policy-makers? Local Economy, 20(2), 131–140.


Defense Industry Cluster Identification and Definition

Industry cluster analysis can be segmented into three distinct phases: 1) definition, 2) identification and 3)

activation. Definition involves determining the connections or groupings of industries that might form a

cluster. The identification phase assesses the suitability of pursuing a potential industry cluster within a given

region. Finally, the activation phase identifies and implements appropriate strategies to grow the cluster (Brun

and Jolley, 2011). The following analysis focuses on cluster definition and identification, while the activation

phase is considered later in this section.

The goal of the following cluster definition and identification analysis is to determine those industries and

firms that provide some potential source of specialization for the region and have varying connections through

their supply chains and workforce. A wide variety of methods have been used to define industry clusters, each

with various advantages and disadvantages.6 For instance, a potential defense industry cluster in the

Milwaukee region could be based on defense cluster definitions found elsewhere in the nation. However,

defense clusters in other regions do not recognize any potential variations or uniqueness in the local products

and services that are provided to the Department of Defense.

It is also tempting to group all firms that have been awarded DOD contracts into a regional cluster, regardless

of the good or service they provide. However, having a contract with the DOD does not necessarily mean that a

firm is connected through traditional cluster synergies such as supply chains or a shared labor force. In other

words, being a DOD contractor should not automatically constitute potential cluster inclusion. For defense

contractors in the region to truly be part of any potential cluster, they should be connected in the various

manners detailed in the previous discussion surrounding cluster definition.

To explore a potential defense industry cluster in the Milwaukee region, the following analysis seeks to identify

industries that could occupy the core of a cluster, also known as “driver” industries. These industries have

characteristics such as notable export levels; large forward or backward multipliers; high productivity levels; or

specialization in certain products (Brennan and Hill, 2000). For this analysis, driver industries are defined using

DOD contracts between FY 2007 and FY 2011 mined from the Federal Procurement Data System (FPDS) via

USASpending.gov.7 Contract data includes detailed information on contractor firms, the types of products

procured, and values of contracts. By their nature, firms with large contracting values suggest export

industries and potential sources of specialization.

As industry clusters are regional in nature and should not be limited by political geographies, transaction data

are summarized for an area beyond Milwaukee’s Industrial Corridor. Four areas considered in the analysis

include: Milwaukee County, the Balance of the M7 Region, the State of Wisconsin, and a 100-mile radius

surrounding Milwaukee County. The geographic regions covered by these four areas provide an appropriate

starting point for considering potential industry concentration and interactions among firms.8

6 For instance see: Brennan and Hill, 2000; Feser and Bergman, 2000; Austrian, 2000; Colgan and Baker, 2003; Reid, Smith and Carroll,

2008. 7 Data from FY2007 to FY 2011 covers a period of ascending and declining contracting values. A multi-year period also reduces the

influence of contracts that may cover a brief period (such as construction projects). 8 Methods for appropriately defining geographic boundaries for industry clusters have been widely debated among academics and

practitioners.


Contracting values are summarized in three manners to provide different perspectives on the types of goods

and services produced locally for the Department of Defense:

1. Total contract values are aggregated using parent Dun and Bradstreet D-U-N-S® numbers of the prime

contract awardees. Identifying existing DOD contractors in the region offers a starting point for

categorizing potential cluster participants and providing perspectives on the goods and services provided

to the DOD;

2. Total contract amounts are aggregated by four-digit NAICS codes attached to the industries in which the

contractors conduct business. Note that NAICS codes are self-determined by contractors;

3. Contracts are evaluated according to Product Service Codes (PSCs) and Federal Supply Codes (FSCs) of the

products and services provided. Summarizing contracts by PSCs and FCSs provides additional perspectives

on the specific types of products being provided by firms;

When evaluating these summaries, it is important to recognize that the transaction data is based on prime

awardees and does not include suppliers. Consequently, understanding the supply chains for potential driver

industries is vital to fully identifying the cluster. While some limited data are available on sub-contractors that

may be working alongside these firms, the information is largely insufficient for this analysis.9

Contracting values for prime awardees and NAICS codes are reported by both place of award (the geographic

location of the firm awarded the contract) and by place of performance (where the majority of the contract

work was performed). Differences between place of award and place of performance are important as not all

contract work awarded to local firms is actually performed in the Milwaukee region. Furthermore, there may

be firms performing work for the Department of Defense in the region who are headquartered or located

elsewhere. Reconciling these differences will be important to identifying potential cluster industries and

members in the region.

Table 5.1 summarizes parent companies with the largest total DOD transactions in Milwaukee County (for FY

2007 to FY 2011). Figures for are reported for Milwaukee County as the place of award and place of

performance. Figures are in constant 2011 dollars and are rounded. Figures are also subject to revision and

change. Note that some affiliated firms appear several times in these tables as the figures are based on Parent

D-U-N-S numbers and some firms have multiple numbers. The firms are listed as they appear in

USASpending.gov and may differ from how a firm is commonly recognized. Similarly, Table 5.2 lists the NAICS

industry codes accounting for the greatest levels of DOD contracts in Milwaukee County. While only the top

NAICS codes are included, full lists are available upon request. Between FY 2007 and FY 2011, Milwaukee

County firms were awarded almost $1.5 billion in DOD contract obligations, while a reported $663.7 million of

contracting work was performed in Milwaukee County.

9 Beginning in October 2010, sub-contract data was added to the Federal Procurement Data System for first-tier sub-contracts over

$25,000. However, this information is not sufficiently complete for purposes of this analysis.


Table 5.1 – Top 25 Total Transaction Values in Milwaukee County by Parent Company (FY 2007 to FY 2011) Place of Award Place of Performance

Parent Company Total Transaction Values Parent Company Total Transaction Values

Goodwill Industries of Southeastern Wisconsin Inc. $ 296,900,000 Badger Truck Center Inc. $114,600,000 Johnson Controls Inc. $ 133,800,000 Industries For The Blind Inc. $81,800,000 Johnson Controls Government Systems LLC $ 131,100,000 TRC Global Solutions Inc. $60,100,000 Badger Truck Center Inc. $ 117,400,000 Finmeccanica S.p.A. (DRS Technologies) $53,800,000 Industries For The Blind Inc. $ 112,900,000 United Technologies Corporation $41,800,000 TRC Global Solutions Inc. $ 64,600,000 General Electric Company $32,300,000 Nuvo Construction Company Inc. $ 63,100,000 Astronautics Corporation of America $29,800,000 T N & Associates Inc. $ 56,000,000 Johnson Controls Inc. $27,200,000 United Technologies Corporation $ 49,700,000 Hentzen Coatings Inc. $19,500,000 General Electric Company $ 38,600,000 Nuvo Construction Company Inc. $16,700,000 Astronautics Corporation Of America $ 30,100,000 Eaton Corporation $10,900,000 Finmeccanica S.p.A. (DRS Technologies) $ 30,000,000 Marquette University $9,700,000 Arteaga Construction Inc. $ 26,100,000 Mason Wells Buyout Fund II Ltd Partnership $9,700,000 Hentzen Coatings Inc. $ 21,100,000 Karl's Rental Center Inc. $9,600,000 World Environmental Inc. $ 19,700,000 T N & Associates Inc. $7,000,000 National Business Furniture $ 17,400,000 Master Lock Company LLC $6,700,000 Shoreland Inc. $ 15,700,000 World Environmental Inc. $6,700,000 Oneida Total Integrated Enterprises LLC $ 13,600,000 National Business Furniture $6,500,000 Event Source LLC $ 11,300,000 AH West Group LLC $5,400,000 Eaton Corporation $ 10,800,000 KPH Construction Corp. $5,200,000 Karl's Rental Center Inc. $ 10,200,000 University of Wisconsin System $4,800,000 Marquette University $ 9,800,000 Thermasys Group Holding Company $4,800,000 Mason Wells Buyout Fund II Ltd Partnership $ 9,700,000 Futurenet-Bhate Jv LLC $3,800,000 Sonag Company Inc. $ 7,200,000 Phoenix Management Inc. $3,500,000 Ingersoll-Rand Company $ 6,900,000 Universal Mfg. Co. $3,200,000

Sources: FPDS extracted from USASpending.gov and Author’s Calculations. Values are in constant $2011.

Table 5.2 – Top 25 Total Transaction Values in Milwaukee County by NAICS (FY 2007 to FY 2011) Place of Award Place of Performance

NAICS and Description Total Transaction Values NAICS and Description Total Transaction Values

7223 Special Food Services $260,500,000 3363 Motor Vehicle Parts Manufacturing $68,700,000

2362 Nonresidential Building Construction $98,300,000 5312 Offices of Real Estate Agents and Brokers $60,600,000

5415 Computer Systems Design and Related Services $85,500,000 3399 Other Miscellaneous Manufacturing $50,400,000

3363 Motor Vehicle Parts Manufacturing $70,400,000 3353 Electrical Equipment Manufacturing $44,200,000

5312 Offices of Real Estate Agents and Brokers $64,600,000 5417 Scientific Research and Development Services $39,300,000

3399 Other Miscellaneous Manufacturing $60,400,000 5418 Advertising, P.R. and Related Services $30,000,000

5629 Remediation & Other Waste Management Svcs. $59,500,000 2362 Nonresidential Building Construction $27,000,000

5413 Architectural, Engineering, and Related Services $45,100,000 3359 Other Electrical Equipment & Component Mfg. $26,000,000

5417 Scientific Research and Development Services $39,800,000 4234 Professional & Commercial Equipment Whlse. $23,600,000

5418 Advertising, Public Relations, and Related Services $35,000,000 3345 Navig., Measuring, Electromed. & Control Mfg. $22,800,000

5611 Office Administrative Services $32,600,000 4244 Grocery and Related Product Wholesalers $17,900,000

3342 Communications Equipment Manufacturing $31,600,000 3255 Paint, Coating, and Adhesive Manufacturing $17,600,000

3339 Other General Purpose Machinery Manufacturing $26,000,000 3333 Commercial & Service Industry Machinery Mfg. $17,500,000

4234 Professional & Commercial Equipment Whlse. $25,000,000 5629 Remediation & Other Waste Management Svcs. $16,000,000

3345 Navig., Measuring, Electromed. & Control Mfg. $22,800,000 3364 Aerospace Product and Parts Manufacturing $14,800,000

4244 Grocery and Related Product Wholesalers $19,600,000 3339 Other General Purpose Machinery Mfg. $13,100,000

5416 Management, Scientific and Technical Consulting $19,500,000 6113 Colleges, Universities, and Professional Schools $11,800,000

3255 Paint, Coating, and Adhesive Manufacturing $19,100,000 3362 Motor Vehicle Body and Trailer Manufacturing $11,300,000

3364 Aerospace Product and Parts Manufacturing $18,600,000 3149 Other Textile Product Mills $10,500,000

3353 Electrical Equipment Manufacturing $18,200,000 3391 Medical Equipment and Supplies Manufacturing $9,400,000

3372 Office Furniture (including Fixtures) Manufacturing $18,000,000 3344 Semiconductor & Other Electronic Component Mfg $9,100,000

3333 Commercial and Service Industry Machinery Mfg. $17,900,000 3325 Hardware Manufacturing $8,100,000

3391 Medical Equipment and Supplies Manufacturing $14,100,000 3372 Office Furniture (including Fixtures) Mfg. $6,900,000

5622 Waste Treatment and Disposal $13,700,000 3329 Other Fabricated Metal Product Manufacturing $6,700,000

3359 Other Electrical Equipment and Component Mfg. $13,200,000 2371 Utility System Construction $5,700,000

Total Transactions for All Contracts $1,448,500,000 Total Transactions for All Contracts $663,700,000



When measured by place of award, Goodwill Industries of Southeastern WI Inc., Johnson Controls, Inc. and

Johnson Controls Government Systems LLC accounted for almost 40% of all contract obligations. A large share

of this work was conducted outside Milwaukee County. Goodwill Industries is particularly notable as much of

this work was performed in Illinois and appears to be associated with food, laundry, administrative and logistic

services provided at Naval Station Great Lakes in North Chicago. DOD contracts with these firms also explain a

large share of transaction values related to NAICS 7223 (special food services), NAICS 5415 (computer systems

design and related services), NAICS 5413 (architectural, engineering and related services), and NAICS 3342

(communications equipment manufacturing). While the majority of these products and services are produced

elsewhere, it does not mean that all of the revenue generated by these activities remains outside Milwaukee

County.

When examining the remaining parent companies and NAICS codes in Table 5.1 and Table 5.2, a number of

potential industry themes appear:

Companies and industries related to electronic component manufacturing are heavily represented

including: NAICS 3353 (electrical equipment manufacturing); NAICS 3359 (other electrical equipment and

component manufacturing); NAICS 3345 (navigational, measuring, electromedical, and control instruments

manufacturing); and NAICS 3344 (semiconductor and other electronic component manufacturing). Many

of the parent companies listed in Table 5.1 are related to these products including United Technologies

Corporation; Astronautics Corporation of America; DRS Technologies; Mason Wells Buyout Fund LTD

Partnership (The Oilgear Company); and the aforementioned Johnson Controls.

Transportation equipment manufacturing is also prevalent among parent contractors and NAICS codes

accounting for large shares of DOD contracting in Milwaukee County. Motor vehicle parts manufacturing

(NAICS 3363); aerospace products and parts manufacturing (NAICS 3364); and motor vehicle body and

trailer manufacturing (NAICS 3362) are among the largest industry categories in Table 5.2. These

industries also cover some of the awards to Badger Truck Center Inc., United Technologies Corporation,

and Astronautics Corporation of America. Hentzen Coatings, Inc. also produces paint and coating products

used in transportation equipment applications;

A number of construction categories and companies are among the largest DOD contractors in Milwaukee

County. Nuvo Construction Company Inc.; T N & Associates Inc.; Arteaga Construction Inc.; Oneida Total

Integrated Enterprises LLC; Sonag Company; AH West Group LLC, and KPH Construction are all among the

largest contractors by place of award or place of performance. However, a large share of these services

are provided outside of Milwaukee County.

According to the Federal Procurement Data System, waste treatment, remediation and environmental

services are provided by a variety of firms such as T N & Associates Inc., Oneida Total Integrated

Enterprises LLC, and World Environmental Inc.;

Professional, technical and scientific services and travel relocation services are provided by a variety of

firms. While a number of these services are performed outside of the county, most contracting activity

related to scientific research and development services (NAICS 5417) and advertising, public relations and

related services (NAICS 5418) appears to remain in the county.


When compared to DOD contracting patterns in Milwaukee County, there is a greater balance between

contract values awarded in the Balance of the M7 Region and the values of contracts performed in the region.

Specifically $1.69 billion of contracts were awarded in the six-county area while $1.39 billion of contracts were

performed in the region. A diversity of products and services were provided by companies in the Balance of

the M7 Region, but a number of them are similar to those found in Milwaukee County (Table 5.3 and Table

5.4). In particular, products and services related to electrical components and transportation equipment

manufacturing are common in the Balance of the M7 Region and include: motor vehicle parts manufacturing;

navigational, measuring, electromedical and control instruments manufacturing; motor vehicle body and

trailer manufacturing; other transportation equipment manufacturing; and aerospace product and parts

manufacturing.

Machinery manufacturing, which is somewhat similar to transportation equipment manufacturing from a

variety of labor force and supply chain perspectives, is also common in the region and includes NAICS 3331

(agriculture, construction and mining machinery); NAICS 3336 (engine, turbine and power transmission

manufacturing); NAICS 3339 (other general purpose machinery manufacturing ); and NAICS 3335

(metalworking machinery manufacturing). When combined, transportation equipment manufacturing,

electrical component manufacturing, and machinery manufacturing encompasses goods and services provided

by some of the region’s largest contractors including: General Electric; J.A. Bombardier; Fiat Netherlands

Holding/Fiat/CNH Global N.V.; MetalTek International; Hader Industries Inc.; Milwaukee Valve Company, Inc.;

Power Test, Inc.; Underground Pipeline Inc. (UPI Manufacturing); Twin Disc Incorporated; and Fuel Systems Inc.

Pomp’s Tire Service Inc. also provides products used by transportation equipment;

Table 5.3 - Top 25 Total Transaction Values the Balance of the M7 Region by Parent Company (FY 2007 to FY 2011) Place of Award Place of Performance


General Electric Company $ 364,400,000 General Electric Company $323,000,000 Snap-On Incorporated $ 315,000,000 Snap-On Incorporated $271,800,000 Fiat Netherlands Holding N.V. $ 216,000,000 S. C. Johnson & Son Inc. $195,200,000 S. C. Johnson & Son Inc. $ 195,200,000 Fiat Netherlands Holding N.V. $134,900,000 Pomp's Tire Service Inc. $ 63,200,000 Pomp's Tire Service Inc. $63,200,000 WHR Group Inc. $ 48,800,000 WHR Group Inc. $45,200,000 Kenosha Beef International Ltd. $ 37,100,000 Kenosha Beef International Ltd. $36,500,000 J.A. Bombardier (J.A.B.) Inc. $ 32,100,000 J.A. Bombardier (J.A.B.) Inc. $30,900,000 Underground Pipeline Inc. $ 29,600,000 Underground Pipeline Inc. $28,400,000 Military Training Solutions LLC $ 20,100,000 Wellpoint Inc. $13,900,000 Fiat $ 18,800,000 MetalTek International Inc. $13,500,000 Runzheimer International Ltd. $ 16,500,000 Ocenco Incorporated $12,800,000 MetalTek International Inc. $ 14,800,000 Waukesha Foundry Inc. $11,900,000 Wellpoint Inc. (Blue Cross Blue Shield) $ 13,900,000 Meridian Resource Corporation $11,900,000 Ocenco Incorporated $ 12,900,000 Arnson-Lupton Holdings $11,600,000 Waukesha Foundry Inc. $ 12,200,000 Hader Industries Inc. $10,600,000 Meridian Resource Corporation $ 11,900,000 Modine Manufacturing Company Inc. $9,800,000 Arnson-Lupton Holdings $ 11,600,000 Twin Disc Incorporated $8,200,000 Hader Industries Inc. $ 10,700,000 Milwaukee Valve Company Inc. $8,200,000 Belonger Corporation Inc. $ 10,100,000 Able Business Technologies Inc. $7,700,000 Milwaukee Valve Company Inc. $ 9,900,000 Runzheimer International Ltd. $7,000,000 Modine Manufacturing Company Inc. $ 9,800,000 Dover Corporation $5,600,000 CNH Global N.V. $ 9,100,000 Fiat $5,500,000 Power Test Inc. $ 9,100,000 Fuel Systems Incorporated $4,900,000 Twin Disc Incorporated $ 8,500,000 Power Test Inc. $4,600,000



Other common products and services found in the Balance of the M7 Region include: relocation services (e.g.

WHR Group Inc.); medical equipment; professional and technical consulting; safety equipment; food

manufacturing; hand tools; equipment rental; and household products (e.g. S.C. Johnson & Son Inc.).

Table 5.4 – Top 25 Total Transaction Values in the Balance of M7 Region by NAICS (FY 2007 to FY 2011)

Place of Award Place of Performance


3331 Agriculture, Construction and Mining Machinery $224,200,000 3322 Cutlery and Handtool Manufacturing $209,200,000

3256 Soap, Cleaning Compound & Toilet Prep. Mfg. $195,200,000 3256 Soap, Cleaning Compound & Toilet Prep. Mfg. $195,200,000

3322 Cutlery and Handtool Manufacturing $187,700,000 3391 Medical Equipment and Supplies Manufacturing $165,200,000

3391 Medical Equipment and Supplies Manufacturing $173,000,000 4234 Professional and Commercial Equipment Whlse. $137,500,000

4234 Professional and Commercial Equipment Whlse. $148,800,000 3331 Agriculture, Construction and Mining Machinery $123,500,000

4441 Building Material and Supplies Dealers $107,500,000 3262 Rubber Product Manufacturing $63,500,000

3262 Rubber Product Manufacturing $63,500,000 5312 Offices of Real Estate Agents and Brokers $45,700,000

5312 Offices of Real Estate Agents and Brokers $48,800,000 4441 Building Material and Supplies Dealers $44,600,000

3336 Engine, Turbine and Power Transmission Mfg. $39,400,000 3336 Engine, Turbine and Power Transmission Mfg. $36,600,000

3116 Animal Slaughtering and Processing $37,100,000 3116 Animal Slaughtering and Processing $36,500,000

5416 Management, Scientific and Technical Consulting $35,600,000 3363 Motor Vehicle Parts Manufacturing $35,000,000

3363 Motor Vehicle Parts Manufacturing $35,000,000 5416 Management, Scientific, and Technical Consulting $31,100,000

3345 Navig., Measuring, Electromed. & Control Mfg. $32,300,000 3339 Other General Purpose Machinery Manufacturing $24,000,000

3339 Other General Purpose Machinery Manufacturing $26,800,000 3399 Other Miscellaneous Manufacturing $22,100,000

2362 Nonresidential Building Construction $26,200,000 3345 Navig., Measuring, Electromed. & Control Mfg. $21,500,000

3399 Other Miscellaneous Manufacturing $23,800,000 3315 Foundries $19,900,000

3315 Foundries $21,100,000 5417 Scientific Research and Development Services $15,700,000

8112 Electronic and Precision Equipment Repair $17,500,000 3335 Metalworking Machinery Manufacturing $15,100,000

8113 Commercial & Industrial Machinery/Equip. Repair $16,300,000 3329 Other Fabricated Metal Product Manufacturing $14,300,000

5417 Scientific Research and Development Services $16,200,000 3362 Motor Vehicle Body and Trailer Manufacturing $13,600,000

5322 Consumer Goods Rental $15,300,000 3341 Computer and Peripheral Equipment Mfg. $11,200,000

3335 Metalworking Machinery Manufacturing $15,200,000 8113 Commercial & Industrial Machinery/Equip. Repair $10,200,000

3329 Other Fabricated Metal Product Manufacturing $15,000,000 3369 Other Transportation Equipment Manufacturing $8,800,000

3362 Motor Vehicle Body and Trailer Manufacturing $13,500,000 3364 Aerospace Product and Parts Manufacturing $7,400,000

3341 Computer and Peripheral Equipment Mfg. $13,300,000 9211 Executive, Legislative & Other General Government $7,200,000

Total Transactions for All Contracts $1,690,000,000 Total Transactions for All Contracts $1,390,500,000


Going beyond the M7 Region, Table 5.5 and Table 5.6 report total transaction amounts by parent companies

and NAICS categories in the State of Wisconsin. A number of firms listed as having the largest transaction

amounts in the Milwaukee 7 Region are also among the largest in the state including General Electric, Goodwill

Industries, Johnson Controls, Fiat Netherlands Holding N.V. (CNH), Badger Truck Center, and others. Despite

their size, these firms have transaction totals well below the almost $22.8 billion reported to the Oshkosh

Corporation, which is one of the largest Department of Defense contractors in the United States in terms of

total obligations. Oshkosh Corporation is also among several prominent transportation equipment

manufacturers not previously mentioned, including Schutt Industries of Clintonville Wis. Inc. (trailer

manufacturing) and Marinette Marine (ship building).

As found in the Milwaukee 7 Region, there are some differences between contracts awarded in the State of

Wisconsin and contracts performed in the state. For instance, large shares of the contracts awarded to

Logistics Health, Inc. are performed outside of Wisconsin. Bristol Bay Native Corporation is one of the largest

parent companies by place of performance, but does not have an established presence in the state. This firm


has been performing reclamation services at the Badger Army Ammunition facility in Sauk County.

Furthermore, transactions attributed to Lockheed Martin are actually part of the littoral combat ship

construction work currently being performed by Marinette Marine.

Other large Wisconsin-based contractors and NAICS codes not previously mentioned in the Milwaukee 7

Region provide a variety of products and services including:

Ammunition – NAICS 3329 (other fabricated metal product manufacturing) largely attributed to National

Presto Industries Inc.;

Health care services and management – NAICS 5242 (agencies, brokerages and other insurance related

activities) related to firms such as WPS Insurance Corporation, Logistics Health Inc. and UnitedHealth

Group;

Food manufacturing – NAICS 3115 and NAICS 3116 and firms such as Sargento Foods Inc., Johnsonville

Sausage LLC, and Unilever;

Textiles – ORC Industries, Industries for the Blind Inc., and UNICOR;

Other various products such as furniture manufacturing, wholesale and professional, technical and

scientific consulting. These NAICS categories include activities by firms such as UNICOR, KI, TCI

Architects/Engineers/Contractor Inc., Industries for the Blind, and the Kimberly-Clark Corporation;

Table 5.5 - Top 25 Transaction Values in the State of Wisconsin by Parent Company (FY 2007 to FY 2011) Place of Award Place of Performance


Oshkosh Corporation $22,785,800,000 Oshkosh Corporation $22,748,000,000

National Presto Industries Inc. $787,500,000 National Presto Industries Inc. $787,600,000 WPS Insurance Corporation $595,000,000 WPS Insurance Corporation $594,900,000

Logistics Health Inc. $543,600,000 General Electric Company $374,800,000

General Electric Company $425,400,000 Kimberly-Clark Corporation $356,900,000

Government of the United States (UNICOR, etc.) $402,700,000 Schutt Industries of Clintonville Wis. Inc. $348,100,000 Snap-On Incorporated $364,300,000 Snap-On Incorporated $275,300,000

Kimberly-Clark Corporation $357,100,000 Repubblica Italiana (Marinette Marine) $252,700,000

Schutt Industries of Clintonville Wis. Inc. $348,200,000 S. C. Johnson & Son Inc. $195,200,000

Goodwill Industries of Southeastern WI Inc. $296,900,000 ORC Industries Inc. $191,700,000 Repubblica Italiana (Marinette Marine) $252,900,000 Fiat Netherlands Holding N.V. $134,900,000

Fiat Netherlands Holding N.V. $216,000,000 Badger Truck Center Inc. $116,400,000

S. C. Johnson & Son Inc. $195,200,000 Sargento Foods Inc. $94,300,000

ORC Industries Inc. $191,500,000 Logistics Health Inc. $94,200,000 UnitedHealth Group Incorporated $186,000,000 Tower Industries Inc. $88,900,000

Johnson Controls Inc. $133,800,000 Johnsonville Sausage LLC $88,300,000

Johnson Controls Government Systems LLC $131,100,000 Bristol Bay Native Corporation $84,900,000

Badger Truck Center Inc. $117,400,000 Unilever $84,300,000 TCI Architects/Engineers/Contractor Inc. $116,900,000 Industries For The Blind Inc. $82,400,000

Industries For The Blind Inc. $112,900,000 Babcock International Group PLC $77,100,000

Sargento Foods Inc. $94,300,000 Schreiber Foods Inc. $70,200,000

Johnsonville Sausage LLC $88,300,000 Packaging Holdings Limited $65,800,000 Unilever $84,300,000 Alliance Steel Construction Inc. $63,900,000

Krueger International Inc. (KI) $79,500,000 Lockheed Martin Corporation $63,800,000

Tower Industries Inc. $76,700,000 Pomp's Tire Service Inc. $63,300,000



Table 5.6 - Top 25 Total Transaction Values in the State of Wisconsin by NAICS (FY 2007 to FY 2011) Place of Award Place of Performance


3362 Motor Vehicle Body and Trailer Manufacturing $13,509,100,000 3362 Motor Vehicle Body and Trailer Manufacturing $13,509,100,000

3369 Other Transportation Equipment Mfg. $6,664,000,000 3369 Other Transportation Equipment Mfg. $6,653,200,000

3336 Engine, Turbine and Power Transmission Mfg. $1,339,000,000 3336 Engine, Turbine and Power Transmission Mfg. $1,320,800,000

3361 Motor Vehicle Manufacturing $1,054,800,000 3361 Motor Vehicle Manufacturing $1,048,200,000

3329 Other Fabricated Metal Product Mfg. $961,500,000 3329 Other Fabricated Metal Product Mfg. $978,400,000

6211 Offices of Physicians $654,300,000 5242 Agencies, Brokerages & Other Insurance $594,900,000

5242 Agencies, Brokerages & Other Insurance $594,900,000 4244 Grocery and Related Product Wholesalers $398,600,000

2362 Nonresidential Building Construction $423,000,000 2362 Nonresidential Building Construction $376,800,000

4244 Grocery and Related Product Wholesalers $396,800,000 5612 Facilities Support Services $361,600,000

3363 Motor Vehicle Parts Manufacturing $333,200,000 3363 Motor Vehicle Parts Manufacturing $328,100,000

7223 Special Food Services $268,300,000 3366 Ship and Boat Building $256,500,000

3366 Ship and Boat Building $262,400,000 3322 Cutlery and Handtool Manufacturing $210,400,000

3399 Other Miscellaneous Manufacturing $252,400,000 3256 Soap, Cleaning Compound & Toilet Prep. Mfg. $197,000,000

3331 Agriculture, Construction, and Mining Machinery $246,300,000 3391 Medical Equipment and Supplies Mfg. $193,900,000

3322 Cutlery and Handtool Manufacturing $238,900,000 4234 Professional & Commercial Equip. Wholesalers $184,500,000

3391 Medical Equipment and Supplies Manufacturing $220,800,000 5417 Scientific Research and Development Services $180,600,000

3152 Cut and Sew Apparel Manufacturing $217,800,000 3115 Dairy Product Manufacturing $157,000,000

3256 Soap, Cleaning Compound & Toilet Prep. Mfg. $196,800,000 4242 Drugs and Druggists' Sundries Wholesalers $154,300,000

4234 Professional & Commercial Equip. Wholesalers $196,400,000 3399 Other Miscellaneous Manufacturing $152,200,000

5417 Scientific Research and Development Services $175,900,000 8111 Automotive Repair and Maintenance $150,000,000

5413 Architectural, Engineering, and Related Services $173,500,000 3331 Agriculture, Construction & Mining Machinery $148,100,000

2379 Other Heavy and Civil Engineering Construction $167,400,000 3339 Other General Purpose Machinery Mfg. $136,500,000

3159 Apparel Accessories and Other Apparel Mfg. $160,900,000 3116 Animal Slaughtering and Processing $129,100,000

3115 Dairy Product Manufacturing $157,100,000 9211 Executive, Legislative & Other General Govern. $113,000,000

4242 Drugs and Druggists' Sundries Wholesalers $154,300,000 5416 Management, Scientific & Technical Consulting $111,300,000

Total Transactions for All Contracts $31,850,700,000 Total Transactions for All Contracts $30,079,700,000 Sources: FPDS extracted from USASpending.gov and Author’s Calculations. Values are in constant $2011.

Within a 100-mile radius around Milwaukee County, $61.6 billion in contracts was awarded to firms in the

region while $54.3 billion in activity was performed. The largest transaction amounts summarized by industrial

categories and parent companies within a 100 mile radius reflect many of the same companies found in the

M7 Region and the State of Wisconsin (Table 5.7 and Table 5.8). In particular, transportation equipment

manufacturing and electronics components again dominate the top industries performing work in a 100 mile

radius. This activity includes many of the same parent companies mentioned previously, but also includes

large national DOD contractors such as Navistar International Corporation and Northrop Grumman.

Woodward, Alion Science and Technology Corporation, and AAR Corporation are also related to transportation

equipment and electronic components through various products and services related to aerospace and naval

engineering.


Table 5.7 - Top 25 Transaction Values in a 100-Mile Radius of Milwaukee County by Parent Company (FY 2007 to FY 2011) Place of Award Place of Performance


Oshkosh Corporation $22,787,600,000 Oshkosh Corporation $22,749,900,000 Navistar International Corporation $10,939,200,000 Navistar International Corporation $10,583,200,000 Northrop Grumman Corporation $ 4,100,300,000 Northrop Grumman Corporation $4,072,000,000 Great Lakes Dredge & Dock Corporation $ 1,495,300,000 Kraft Foods Inc. $1,050,900,000 CDW Holdings LLC $ 1,354,900,000 Cardinal Health Inc. $1,031,200,000 Kraft Foods Inc. $ 1,050,800,000 National Presto Industries Inc. $787,600,000 Cardinal Health Inc. $ 1,038,100,000 CDW Holdings LLC $787,200,000 Alion Science And Technology Corporation $ 879,300,000 Alion Science And Technology Corporation $627,600,000 National Presto Industries Inc. $ 787,500,000 WPS Insurance Corporation $594,900,000 The Walsh Group Ltd $ 736,100,000 Northrop Grumman Corporation $566,300,000 WPS Insurance Corporation $ 595,000,000 Pepsico Inc. $541,200,000 Pepsico Inc. $ 541,800,000 Supplycore Inc. $495,000,000 Northrop Grumman Corporation $ 505,200,000 LIT Research Institute $396,100,000 BP P.L.C. $ 505,100,000 General Electric Company $384,100,000 Supplycore Inc. $ 499,100,000 Kimberly-Clark Corporation $356,900,000

General Electric Company $ 431,900,000 Schutt Industries Of Clintonville Wis. Inc. $348,100,000

LIT Research Institute $ 403,000,000 Snap-On Incorporated $322,600,000

Government of The United States (UNICOR) $ 382,100,000 Goodwill Industries of Southeastern WI Inc. $297,000,000

Archer Western/Alberici $ 361,600,000 Woodward Governor Company $201,600,000

Kimberly-Clark Corporation $ 357,100,000 S. C. Johnson & Son Inc. $195,200,000

Schutt Industries Of Clintonville Wis. Inc. $ 348,200,000 DMS Pharmaceutical Group Inc. $181,300,000

Snap-On Incorporated $ 315,000,000 The Walsh Group Ltd $157,100,000

Alion - LP Corporation $ 307,500,000 AAR Corp. $149,700,000

Goodwill Industries of Southeastern WI Inc. $ 296,900,000 Packaging Holdings Limited $136,500,000

Archer Western/Butt Construction $ 231,200,000 Fiat Netherlands Holding N.V. $134,900,000


Table 5.8- Top 25 Total Transaction Values in a 100-Mile Radius of Milwaukee County by NAICS (FY 2007 to FY 2011)

Place of Award Place of Performance


3362 Motor Vehicle Body and Trailer Manufacturing $15,190,900,000 3362 Motor Vehicle Body and Trailer Manufacturing $15,190,600,000 3369 Other Transportation Equipment Mfg. $15,090,000,000 3369 Other Transportation Equipment Mfg. $14,749,600,000 3344 Semiconductor & Other Elect. Component Mfg. $2,353,500,000 3344 Semiconductor & Other Elect. Component Mfg. $2,351,600,000 2379 Other Heavy and Civil Engineering Construction $2,301,800,000 4244 Grocery and Related Product Wholesalers $2,077,400,000 4244 Grocery and Related Product Wholesalers $2,073,300,000 3345 Navig., Measuring, Electromed. & Control Mfg. $1,763,300,000 2362 Nonresidential Building Construction $1,951,200,000 3361 Motor Vehicle Manufacturing $1,470,000,000 3345 Navig., Measuring, Electromed. & Control Mfg. $1,880,400,000 3336 Engine, Turbine, and Power Transmission Mfg. $1,404,300,000 3361 Motor Vehicle Manufacturing $1,477,900,000 4234 Professional & Commercial Equip. Wholesalers $1,210,800,000 3336 Engine, Turbine, and Power Transmission Mfg. $1,419,500,000 3329 Other Fabricated Metal Product Manufacturing $1,142,800,000 4234 Professional & Commercial Equip. Wholesalers $1,268,000,000 5417 Scientific Research and Development Services $961,100,000 3329 Other Fabricated Metal Product Manufacturing $1,122,600,000 3364 Aerospace Product and Parts Manufacturing $842,700,000 3341 Computer and Peripheral Equipment Mfg. $1,015,300,000 3363 Motor Vehicle Parts Manufacturing $707,600,000 5417 Scientific Research and Development Services $1,001,600,000 3341 Computer and Peripheral Equipment Mfg. $607,600,000 5413 Architectural, Engineering, and Related Services $861,200,000 2362 Nonresidential Building Construction $600,100,000 3364 Aerospace Product and Parts Manufacturing $836,200,000 5242 Agencies, Brokerages, and Other Insurance $595,000,000 3363 Motor Vehicle Parts Manufacturing $705,300,000 5413 Architectural, Engineering, and Related Services $562,800,000 5242 Agencies, Brokerages, and Other Insurance $595,000,000 2379 Other Heavy and Civil Engineering Construction $480,800,000 5415 Computer Systems Design and Related Services $423,800,000 4239 Miscellaneous Durable Goods Wholesalers $363,100,000 3241 Petroleum and Coal Products Manufacturing $418,100,000 6114 Business Schools & Computer/Mgmt. Training $323,000,000 4239 Miscellaneous Durable Goods Wholesalers $368,600,000 4242 Drugs and Druggists' Sundries Wholesalers $311,700,000 3399 Other Miscellaneous Manufacturing $334,200,000 3391 Medical Equipment and Supplies Manufacturing $287,600,000 6114 Business Schools & Computer/Mgmt. Training $331,500,000 7223 Special Food Services $261,000,000 3391 Medical Equipment and Supplies Manufacturing $326,400,000 3322 Cutlery and Handtool Manufacturing $240,100,000 4242 Drugs and Druggists' Sundries Wholesalers $310,900,000 4451 Grocery Stores $239,500,000 3331 Agriculture, Construction, and Mining Machinery $277,300,000 3256 Soap, Cleaning Compound, and Toilet Prep. Mfg. $231,600,000 Total Transactions for All Contracts $61,106,400,000 Total Transactions for All Contracts $54,325,600,000



Reporting transaction values by the aforementioned parent companies and NAICS codes provides some insight to

the types of local products produced for the Department of Defense. Another means for grouping DOD transactions

is the use of Product Service Codes (PSCs) and Federal Supply Codes (FSCs). These codes classify transactions

according to 102 different categories of products and services purchased by the DOD. Table 5.9 lists the top 80

products and services purchased by the Department of Defense between FY 2007 and FY 2011. These products and

services are reported by their respective shares of total DOD purchases. The overall percentage by PSCs/FSCs is also

compared to their respective shares of DOD transactions awarded to firms in Milwaukee County, the Balance of the

M7 Region, the State of Wisconsin, and within a 100-Mile radius.10

Between FY 2007 and FY 2011, the top three overall products and services purchased nationally by the Department

of Defense were professional, administrative and management support services; research and development; and

aircraft and airframe structural components. These three categories accounted for almost a third of total DOD

contract spending over this five-year period. While Milwaukee County firms had a large share of transactions

awarded in professional, administrative and management support services, the county had minimal shares in R & D

and aircraft and airframe structural components. Furthermore, the Balance of the M7 Region and the State of

Wisconsin had low shares of transactions in all three of these prominent categories. The mismatch between total

DOD spending priorities in these categories relative to the share of transactions received locally could partially

explain why Milwaukee County and the Balance of the M7 Region have per capita DOD procurement levels below

the national average.

Despite lower levels of awarded contracts in several of the DOD’s largest purchasing categories, there are other

products and services where the region exceeds the national share. Shares of transaction values in Milwaukee

County, the Balance of the M7 Region, the State of Wisconsin, and/or the 100-mile radius either exceed or equal the

national average in categories such as:

Transportation equipment manufacturing related to ground effect vehicles, motor vehicles, trailers, and cycles;

vehicular equipment components; ship and marine equipment; and engine accessories;

Machinery manufacturing such as construction, mining, excavating and highway maintenance equipment;

materials handling equipment; maintenance and repair shop equipment; metalworking machinery; pumps and

compressors; refrigeration, air conditioning and air circulating equipment; and mechanical power transmission

equipment;

Medical services and medical, dental, and veterinary equipment and supplies;

Subsistence (food) and furniture;

Transportation, travel and relocation services;

Instruments and laboratory equipment and quality control, testing, and inspection services;

Electric wire, and power and distribution equipment;

Fabricated metal manufacturing such as hardware, hand tools, metal bars, sheets and shapes, valves, bearings;

Construction and building materials;

Textile and apparel manufacturing (textiles, leather, furs, apparel and shoes, tents, flags).

10 Summaries of contracts awarded by PSCs and FSCs are only provided by place of award. However, a summary by place of performance is available upon request.


Tab

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ne

nts

1

.44

%

0.3

0%

1

.95

%

0.4

5%

0

.46

%

Air

craf

t C

om

po

nen

ts a

nd

Acc

esso

ries

1

.39

%

1.2

2%

0

.20

%

1.1

6%

0

.08

%

Med

ical

, Den

tal,

and

Vet

eri

nar

y E

qu

ipm

ent

and

Su

pp

lies

1.2

6%

2

.69

%

20

.96

%

3.0

3%

1

.40

%

Mis

cella

neo

us

1.1

1%

0

.47

%

8.0

5%

0

.87

%

1.1

8%

A

rch

itec

t an

d E

ngi

nee

rin

g Se

rvic

es

-- C

on

stru

ctio

n

0.9

7%

1

.64

%

0.0

3%

0

.36

%

0.3

3%

C

loth

ing,

Ind

ivid

ual

Eq

uip

me

nt,

an

d In

sign

ia

0.9

7%

1

.17

%

0.0

3%

0

.68

%

1.8

1%

W

eap

on

s 0

.73

%

0.0

5%

0

.44

%

0.3

5%

0

.22

%

Elec

tric

al a

nd

Ele

ctro

nic

Eq

uip

me

nt

Co

mp

on

ents

0

.72

%

0.8

0%

0

.41

%

0.3

9%

0

.13

%

Spac

e V

ehic

les

0.7

1%

0

.00

%

0.0

0%

0

.00

%

0.0

0%

V

ehic

ula

r Eq

uip

me

nt

Co

mp

on

ents

0

.68

%

5.8

3%

5

.96

%

1.5

9%

2

.05

%

Nat

ura

l Re

sou

rces

an

d C

on

serv

atio

n S

ervi

ces

0.6

6%

2

.60

%

0.0

2%

0

.11

%

0.1

4%

O

per

atio

n o

f G

ove

rnm

ent

Ow

ned

Fac

ility

0

.62

%

17

.93

%

0.0

0%

0

.44

%

0.8

2%

Fi

re C

on

tro

l Eq

uip

me

nt

0.6

0%

0

.01

%

0.0

1%

0

.07

%

0.0

1%

In

stru

men

ts a

nd

Lab

ora

tory

Eq

uip

men

t 0

.54

%

1.2

8%

0

.65

%

0.3

9%

0

.16

%

Spec

ial S

tud

ies

and

An

alys

es -

- N

ot

R&

D

0.5

3%

0

.88

%

0.0

6%

0

.05

%

0.0

6%

Te

chn

ical

Rep

rese

nta

tive

Ser

vice

s 0

.52

%

0.2

4%

1

.03

%

0.0

5%

0

.07

%

Trai

nin

g A

ids

and

Dev

ices

0

.49

%

0.0

1%

0

.00

%

0.0

4%

0

.02

%

Edu

cati

on

an

d T

rain

ing

Serv

ice

s 0

.48

%

0.8

1%

0

.01

%

0.0

9%

0

.05

%

Furn

ace,

Ste

am P

lan

t, a

nd

Dry

ing

Equ

ip, N

ucl

ear

Rea

cto

rs

0.3

4%

0

.30

%

0.0

3%

0

.01

%

0.0

2%

El

ectr

ic W

ire,

an

d P

ow

er a

nd

Dis

trib

uti

on

Eq

uip

men

t 0

.33

%

1.3

8%

0

.30

%

0.3

9%

0

.24

%

Har

dw

are

and

Ab

rasi

ves

0.2

8%

1

.23

%

1.2

4%

0

.29

%

0.2

2%

C

on

stru

ctio

n a

nd

Bu

ildin

g M

ater

ials

0

.28

%

0.5

4%

0

.03

%

0.8

5%

0

.05

%


Ta

ble

5.9

(C

on

tin

ue

d)

- Tr

ansa

ctio

n V

alu

e D

istr

ibu

tio

ns

for

Top

80

Fe

de

ral S

up

ply

Gro

up

s (F

Y 2

00

7 t

o F

Y 2

01

1)

Fed

era

l Su

pp

ly G

rou

p

Un

ite

d S

tate

s M

ilwau

kee

Co

un

ty

Bal

ance

of

M7

Re

gio

n

Stat

e o

f W

isco

nsi

n

10

0-M

ile R

adiu

s

Fire

Fig

hti

ng,

Res

cue,

an

d S

afet

y Eq

uip

me

nt

0.2

7%

0

.02

%

0.7

5%

0

.35

%

0.3

5%

M

od

ific

atio

n o

f Eq

uip

men

t 0

.27

%

0.2

4%

0

.00

%

0.0

8%

0

.00

%

Furn

itu

re

0.2

4%

2

.98

%

0.2

4%

0

.50

%

0.4

6%

C

on

stru

ctio

n, M

inin

g, E

xcav

atin

g, a

nd

Hig

hw

ay M

ain

ten

ance

Eq

uip

. 0

.22

%

0.4

4%

6

.17

%

0.4

1%

0

.67

%

Ship

an

d M

arin

e Eq

uip

men

t 0

.21

%

0.7

8%

1

.29

%

0.1

1%

0

.20

%

Qu

alit

y C

on

tro

l, Te

stin

g, a

nd

Insp

ecti

on

Ser

vice

s 0

.21

%

1.9

9%

0

.53

%

0.0

7%

0

.12

%

Mai

nte

nan

ce a

nd

Rep

air

Sho

p E

qu

ipm

en

t 0

.21

%

0.5

6%

0

.42

%

0.2

7%

0

.33

%

Leas

e o

r R

enta

l of

Equ

ipm

en

t 0

.20

%

0.6

3%

0

.87

%

0.1

0%

0

.12

%

Inst

alla

tio

n o

f Eq

uip

men

t 0

.20

%

1.3

6%

0

.00

%

0.2

3%

0

.08

%

Pre

fab

rica

ted

Str

uct

ure

s an

d S

caff

old

ing

0.1

9%

0

.02

%

0.2

2%

0

.15

%

0.0

3%

M

ater

ials

Han

dlin

g Eq

uip

me

nt

0.1

6%

0

.49

%

0.8

2%

0

.15

%

0.2

0%

A

ircr

aft

Lau

nch

ing,

Lan

din

g, a

nd

Gro

un

d H

and

ling

Equ

ip.

0.1

5%

0

.04

%

0.1

9%

0

.03

%

0.2

0%

En

gin

e A

cces

sori

es

0.1

5%

0

.88

%

0.3

6%

0

.55

%

0.1

6%

O

ffic

e Su

pp

lies

and

Dev

ices

0

.11

%

2.1

6%

0

.00

%

0.0

7%

0

.10

%

Co

nta

iner

s, P

acka

gin

g, a

nd

Pac

kin

g Su

pp

lies

0.0

9%

0

.05

%

0.0

4%

0

.04

%

0.0

4%

C

hem

ical

s an

d C

hem

ical

Pro

du

cts

0.0

9%

0

.11

%

0.0

4%

0

.05

%

0.0

1%

Te

xtile

s, L

eath

er, F

urs

, Ap

par

el a

nd

Sh

oes

, Ten

ts, F

lags

0

.09

%

1.0

6%

0

.50

%

0.0

5%

0

.17

%

Ala

rm, S

ign

al a

nd

Sec

uri

ty D

etec

tio

n S

yste

ms

0.0

9%

0

.24

%

0.0

3%

0

.02

%

0.0

1%

H

and

To

ols

0

.09

%

0.0

3%

1

6.7

3%

0

.48

%

1.0

5%

Le

ase

or

Ren

tal o

f Fa

cilit

ies

0.0

8%

0

.02

%

0.0

5%

0

.00

%

0.0

4%

P

um

ps

and

Co

mp

ress

ors

0

.08

%

0.6

5%

0

.20

%

0.0

7%

0

.08

%

Met

alw

ork

ing

Mac

hin

ery

0.0

7%

0

.27

%

0.5

7%

0

.30

%

0.3

6%

V

alve

s 0

.07

%

0.4

6%

0

.62

%

0.0

6%

0

.07

%

Mec

han

ical

Po

wer

Tra

nsm

issi

on

Eq

uip

me

nt

0.0

7%

0

.64

%

0.5

0%

0

.14

%

0.0

8%

Sp

ecia

l In

du

stry

Mac

hin

ery

0.0

7%

0

.04

%

0.2

2%

0

.06

%

0.0

4%

P

ipe,

Tu

bin

g, H

ose

, an

d F

itti

ngs

0

.06

%

0.1

3%

0

.04

%

0.0

4%

0

.03

%

Off

ice

Mac

hin

es

0.0

6%

0

.01

%

0.0

1%

0

.03

%

0.0

0%

R

efri

gera

tio

n, A

ir C

on

dit

ion

ing

and

Air

Cir

cula

tin

g Eq

uip

. 0

.06

%

0.5

2%

0

.03

%

0.1

0%

0

.06

%

Ph

oto

grap

hic

, Map

pin

g, P

rin

tin

g, a

nd

Pu

blic

atio

ns

Serv

ices

0

.05

%

0.0

0%

0

.00

%

0.0

1%

0

.01

%

Ligh

tin

g Fi

xtu

res

and

Lam

ps

0.0

5%

0

.04

%

0.0

4%

0

.18

%

0.1

2%

B

eari

ngs

0

.05

%

0.0

6%

0

.06

%

0.0

3%

0

.01

%

Tire

s an

d T

ub

es

0.0

5%

0

.02

%

0.1

9%

0

.01

%

0.0

3%

Sa

lvag

e Se

rvic

es

0.0

5%

0

.00

%

0.0

0%

0

.01

%

0.0

0%

M

etal

Bar

s, S

hee

ts, a

nd

Sh

ape

s 0

.04

%

0.0

0%

1

.16

%

0.0

9%

0

.07

%

Ho

use

ho

ld a

nd

Co

mm

erci

al F

urn

ish

ings

an

d A

pp

lian

ces

0.0

4%

0

.03

%

0.0

2%

0

.07

%

0.0

6%

R

ailw

ay E

qu

ipm

ent

0.0

4%

0

.07

%

0.0

2%

0

.00

%

0.0

0%

Fo

od

Pre

par

atio

n a

nd

Ser

vin

g Eq

uip

me

nt

0.0

4%

0

.28

%

0.0

4%

0

.02

%

0.0

2%

B

oo

ks, M

aps,

an

d O

ther

Pu

blic

atio

ns

0.0

4%

0

.02

%

0.0

1%

0

.07

%

0.0

0%

P

ho

togr

aph

ic E

qu

ipm

ent

0.0

4%

0

.01

%

0.0

4%

0

.02

%

0.0

0%

W

ater

Pu

rifi

cati

on

an

d S

ewag

e Tr

eatm

ent

Equ

ipm

en

t 0

.03

%

0.0

2%

0

.00

%

0.0

1%

0

.01

%

Sou

rces

: FP

DS

extr

acte

d f

rom

USA

Spen

din

g.go

v an

d A

uth

or’

s C

alcu

lati

on

s. V

alu

es a

re in

co

nst

ant

$2

01

1.


Note that the local relative concentrations of purchasing categories vary across the areas depicted in Table 5.9.

That is, some categories may be significant in Milwaukee County (e.g. electric wire, and power and distribution

equipment), while others may be concentrated in the Balance of the M7 Region or the State of Wisconsin (e.g.

food). However, all of these concentrations should be considered as part of a potential cluster as there may be

connections and benefits to be leveraged by Milwaukee firms. For instance, a product or service strength in the

Balance of the M7 Region or the 100-mile radius may need goods or services produced by firms located inside

Milwaukee’s Industrial Corridor.

When considering regional concentrations of products purchased by the Department of Defense, along with the

previous analysis of contracting by parent companies and NAICS codes, there are several possibilities for

structuring industry clusters around defense contracting strengths in the region. Three broad opportunities could

include: 1) transportation equipment manufacturing; 2) machinery manufacturing; and 3) electronic components

and controls. While other industry categories could provide some opportunities as well, these three offer a

logical structure and potential for inter-industry connections, networking, and other market synergies. These

three also align with the target industries suggested in Section 2.

As implied earlier, the transportation equipment manufacturing industry encompasses a number of PSCs/FSCs

categories including ground effect vehicles; motor vehicles, trailers, and cycles; vehicular equipment components;

ship and marine equipment; aerospace products; and engine accessories. While a cluster could certainly include

somewhat non-local firms such as Oshkosh Corporation and Navistar International Corporation, a large number of

local firms also fit into this category (such as many of those listed in Table 5.1 and Table 5.3). Furthermore, firms

in the transportation equipment manufacturing industry often use production processes such as bending,

forming, welding, machining and assembling parts into components and finished products. Consequently, many

of the skills and products needed by the industry would align well with local metal fabrication establishments

(such as those detailed in Section 6).

To further depict the potential connections among firms involved in transportation equipment manufacturing,

Figure 5.1 identifies common primary inputs and primary support services used by the industry. A primary input is

a product that is directly used or consumed in the production process. For instance, metal and plastic

components are used directly in the production of transportation equipment. In contrast, a primary support

product or service is vital to the operation of the cluster, but is not part of final products produced. As an

example, metalworking tools are needed in the manufacturing process, but do not directly become part of an end

product and are not consumed by the production process.11

Machinery manufacturing in the region includes industries providing a variety of products to the Department of

Defense including: mining, excavating and highway maintenance equipment; materials handling equipment;

maintenance and repair shop equipment; metalworking machinery; refrigeration; pumps and compressors; air

conditioning and air circulating equipment; and mechanical power transmission equipment. From a broad

perspective, machinery manufacturing shares a number of primary input and primary support service similarities

with transportation equipment manufacturing (Figure 5.2). The two industries also share some labor force

similarities in terms of common occupations found in these manufacturing sub-sectors. Consequently, machinery

manufacturing is aligned well with transportation equipment from a cluster perspective.

11

Primary inputs and primary support services are identified from a variety of sources such as an input-output model constructed for the region and industry specific information from IBISWorld Inc. Actual inputs and services required will vary by individual firm.


Pri

ma

ry In

pu

ts

Pri

ma

ry S

up

po

rt

Lega

l, ac

cou

nti

ng

and

fin

anci

al s

erv

ices

Engi

nee

rin

g an

d

rese

arch

an

d d

esig

n

serv

ices

Mat

eri

al h

and

ling

equ

ipm

ent

Ind

ust

rial

co

ntr

ols

an

d

ind

ust

rial

pro

cess

inst

rum

ents

Man

agem

ent

of

com

pan

ies

and

ente

rpri

ses

War

eho

usi

ng

and

sto

rage

Pla

stic

, met

al a

nd

pap

erb

oar

d p

acki

ng

Tru

ck, r

ail,

air

and

co

uri

er

tran

spo

rtat

ion

Iro

n, s

tee

l, zi

nc,

lead

,

alu

min

um

, co

pp

er, a

nd

oth

er f

erro

us

and

no

n-

ferr

ou

s m

etal

s/al

loys

Bat

teri

es, c

ircu

it

asse

mb

lies,

ele

ctri

cal

con

nec

tors

, rel

ays,

wir

ing

and

oth

er s

emic

on

du

cto

rs

Mac

hin

ed, c

oat

ed,

stam

ped

, ext

rud

ed,

engr

ave

d a

nd

hea

t

trea

ted

met

al p

rod

uct

s

Val

ves,

gas

kets

, fit

tin

gs a

nd

bea

rin

gs –

pla

stic

an

d m

etal

Tire

s, g

aske

ts h

ose

s, b

elts

and

oth

er r

ub

ber

pro

du

cts

Gla

ss, l

eath

er a

nd

te

xtile

s

Au

dio

, vid

eo, s

earc

h,

det

ecti

on

, nav

igat

ion

an

d

wir

eles

s co

mm

un

icat

ion

equ

ipm

ent

Met

al c

utt

ing

and

form

ing

mac

hin

e to

ols

,

and

oth

er m

ach

ine

too

ls

Pla

stic

res

ins,

co

mp

osi

tes,

foam

s an

d u

nla

min

ate

d

and

lam

inat

ed

pla

stic

pla

tes,

sh

eets

an

d s

hap

es

Pai

nts

, co

atin

gs,

lub

rica

nts

, ab

rasi

ves,

adh

esiv

es a

nd

oth

er

ind

ust

rial

ch

emic

als

Rep

air

serv

ices

an

d

wh

ole

sale

an

d n

on

-

wh

ole

sale

dis

trib

uti

on

Tra

nsp

ort

ati

on

Eq

uip

men

t M

an

ufa

ctu

rin

g

Ra

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ad

Ro

llin

g S

tock

Ma

nufa

ctu

rin

g

Aer

osp

ace

Pro

du

ct a

nd

Pa

rts

Ma

nu

fact

uri

ng

Mo

tor

Veh

icle

Ma

nu

fact

uri

ng

Mo

tor

Veh

icle

Bo

dy

an

d T

raile

r M

an

ufa

ctur

ing

Mo

tor

Veh

icle

Pa

rts

Ma

nu

fact

uri

ng

Ship

an

d B

oa

t B

uild

ing

Oth

er T

ran

spor

tati

on

Eq

uip

men

t M

an

ufa

ctu

rin

g

Spec

ial d

ies,

mo

lds,

to

ols

and

jigs

Figu

re 5

.1 –

Tra

nsp

ort

atio

n E

qu

ipm

en

t M

anu

fact

uri

ng

Pri

mar

y In

pu

ts a

nd

Pri

mar

y Su

pp

ort

Se

rvic

es


Pri

ma

ry In

pu

ts

Pri

ma

ry S

up

po

rt

Lega

l, ac

cou

nti

ng

and

fin

anci

al s

erv

ices

Engi

nee

rin

g an

d

rese

arch

an

d d

esig

n

serv

ices

Mat

eri

al h

and

ling

equ

ipm

ent

Ind

ust

rial

co

ntr

ols

an

d

ind

ust

rial

pro

cess

inst

rum

ents

Man

agem

ent

of

com

pan

ies

and

ente

rpri

ses

War

eho

usi

ng

and

sto

rage

Pla

stic

, met

al a

nd

pap

erb

oar

d p

acki

ng

Tru

ck, r

ail a

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co

uri

er

tran

spo

rtat

ion

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A third opportunity for cluster organization could include electrical equipment, controls and components. As

many of these products are used heavily in transportation equipment and in some types of machinery, they could

be considered as a specific component within a transportation equipment or machinery-based industry cluster.

For instance, the ship building industry is increasing the role of automated controls and computerized monitoring

systems related to navigation, engine control, watch-keeping, ship management, and cargo handling. Similarly,

electronic sensing, communications, and control systems are important to aircraft manufacturing. However, the

concentration of firms producing electrical equipment and components in the region and the Industrial Corridor

itself (such as DRS Technologies Inc. and Astronautics Corporation of America), could warrant a separate cluster

organizational opportunity. Figure 5.3 examines the potential connections among primary inputs and primary

support services used by electrical equipment, control and component manufacturing.

From a labor force perspective, potential defense industry clusters require a mix of skill levels. For instance,

machinery manufacturing, transportation equipment, and electronic product manufacturing rely heavily on

computer programming, design and engineering occupations. In fact, computer and electronic product

manufacturing, machinery manufacturing and transportation equipment manufacturing have some of the highest

shares of manufacturing employment found in Job Zone 3, Job Zone 4 and Job Zone 5 (Chart 5.3).12 However,

many of the manufacturing industries that provide primary inputs for these industries have high shares of

employment in Job Zone 2. Specifically, fabricated metal product manufacturing; primary metal manufacturing;

plastics manufacturing and electrical equipment and appliance manufacturing have between 55% and 70% of

their employment traditionally found in Job Zone 2. Consequently, the job zone requirements for many industries

in defense-related clusters could present both opportunities for alignment and a potential mismatch for many

residents in the Transform Milwaukee Study Area.

Chart 5.3 – Manufacturing Employment by Job Zone

Source: O*NET, Bureau of Labor Statistics and Author’s Calculations. Distributions are based on national industry averages.

12

Job zones are detailed in Section 3.

0% 20% 40% 60% 80% 100%

337 Furniture & Related Product Mfg

336 Transportation Equipment Mfg

335 Electrical Equipment & Appliance Mfg

334 Computer & Electronic Product Mfg

333 Machinery Mfg

332 Fabricated Metal Product Mfg

331 Primary Metal Mfg

327 Non-metallic Mineral Product Mfg

326 Plastics & Rubber Products Mfg

325 Chemical Mfg

323 Printing & Related Support Activities

322 Paper Mfg

321 Wood Product Mfg

316 Leather & Allied Product Mfg

314 Textile Product Mills

312 Beverage & Tobacco Product Mfg

311 Food Mfg

Zone 1 Zone 2 Zone 3 Zone 4 Zone 5 N/A


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Implementation Considerations for a Defense Industry Cluster

While many companies in Milwaukee’s Industrial Corridor may be related to a potential defense industry cluster,

truly implementing industry cluster strategies requires engagement, cooperation and a shared identity among

these firms (Romanelli and Khessina, 2005). Again, until a number of firms agree to engage with each other at

some level, the region does not have an industry cluster, but rather a concentration of loosely related firms. That

is, potential cluster benefits such as joint-contract bidding; partnering on research and development; creating

custom labor force training programs; providing a unified voice on industry-wide issues; and improving the

industry’s visibility will not occur without some level of cooperation and engagement.

Conditions of success tied to cooperation and engagement require connections and networks among firms in the

region. However, these connections should be fostered by private sector champions, and not a government

agency. While government can provide a venue and resources for making these connections, local business

operators and non-profit leaders will likely need to make actual invitations and drive outreach efforts. Certainly

some of these connections already exist, but moving to a more formal cluster structure requires developing

additional trust among firms (which is not often easily established). Creating trust and encouraging collaboration

may seem counterintuitive to many firms as it may appear to undermine a company’s internal strategy and sales

potential. In fact, many economists are doubtful that appropriate arrangements will emerge as firm cooperation

is limited by incomplete information, rivalries and opportunistic behavior. Accordingly, a consensus for promoting

joint benefits will only occur when the total gains are expected to be large and when the distribution of costs and

benefits are clear to firms in the cluster (Barkley and Henry, 2001).

Furthermore, developing a defense cluster requires a proper means for identifying cluster membership. In many

initiatives, there is little initial consensus on the geographic and industrial boundaries for an industry cluster.

Typically, clusters face no predetermined rules on how strong the linkages need to be among industries; the

geographic concentration that clusters require; or what level of industrial specialization is necessary (Martin and

Sunley, 2003). Furthermore, if policies and revenues are used to support clusters, then many other industries also

may seek assistance, whether or not they do in fact constitute a legitimate cluster (Colgan and Baker, 2003).

Consequently, cluster implementation is perhaps the most challenging component of the cluster development

process. Implementation is process-intensive and requires developing a shared identity; a clear vision supported

by cluster members; and actions based on collaboration. In particular, economic development practitioners will

need to implement the formation of any defense cluster from the bottom-up rather than the top down. Firms

within the proposed cluster must be engaged in a manner that is driven by the needs of these firms (Osama and

Popper, 2006).

Initial cluster engagement can occur by meeting with a number of key firms on an individual basis. These one-on-

one meetings will help economic development practitioners to understand the dynamics among firms in the

region. These meetings can also be used to establish initial trust and identify some potential shared actions and

strategies that might be of value to firms in the cluster. After these initial meetings, a broader convening of

companies and local economic development organizations in a neutral setting can be used to start a cluster

conversation. Again, the invitation should come with support from champions and leaders within the sector. An

initial meeting should occur with no expectations for commitments from firms (especially financial commitments)

other than an opportunity to network; consider shared industry challenges and opportunities; and learn about the


potential advantages of formalizing a local defense cluster. However, a clear agenda for this meeting must be

articulated. Simply convening a meeting of industry leaders without tangible reasons for doing so will likely result

in failure. An initial meeting could consider whether a formal industry cluster initiative could address questions

commonly faced by interconnected industries. As suggested by Rosenfeld (1997), these include:

Human capital development – Are there opportunities to develop specialized training programs for the

cluster’s major occupations? Does the industry itself invest in training? Are there opportunities to better

partner with workforce development intermediaries?

Supply chain issues – Are primary inputs and primary support industries available locally or do they require

importation from outside the region? Are there notable gaps in industry supply chains? Do logistics or

transportation-related opportunities or challenges exist?

Capital availability – How well does the region’s lenders understand the capital needs of the industry? Do

local lenders meet the needs for various forms of capital needed at different industry stages?

Intensity of relationships and competition – Do firms in the industry already cooperate to some degree or does

existing competition preclude cooperation?

Innovation – How does the innovation process within the cluster operate? Are there opportunities to partner

with other firms or educational institutions on technology transfer or research?

Shared vision and leadership – If they choose to do so, how can firms develop a collective identity, create a

plan, or determine shared goals for the cluster? Are there leaders who can maintain a cluster’s collective

competitiveness and keep it organized?

To facilitate a potential conversation, a list of current DOD contractors related to transportation equipment

manufacturing, machinery manufacturing, and electrical equipment, controls and components is available. Lists

of DOD contractors who might provide primary inputs or primary support service to the cluster are also available.

In addition to leadership from firms, cluster success will also require support from local and statewide economic

development agencies. Consequently, involving organizations such as Milwaukee 7, WEDC and the Wisconsin

Procurement Institute (www.wispro.org) in initial conversations should be considered as well. If a cluster

conversation is pursued, local leadership may want to look to Milwaukee’s Water Cluster as a model for

convening this group of participants. If some consensus on formalizing a cluster alliance occurs among

stakeholders, subsequent shared issues and goals can be identified. While firms in the M7 Region should provide

the starting point, other companies in Wisconsin and the Chicago region eventually may be considered as well.

In addition to organizing cluster implementation meetings, other opportunities exist for supporting potential DOD

contractors in Milwaukee’s Industrial Corridor’s perspective. For instance, informational sessions could be hosted

for firms wanting to learn about the DOD procurement process or to connect with existing firms that may provide

sub-contracting opportunities (some of these activities are already occurring). These sessions could also be used

to caution firms about procurement. For instance, an over-reliance on government contracts can potentially

increase failure rates among small, inexperienced firms (see Section 4).


Educational sessions could also be used to expose firms in the Industrial Corridor to the Historically Underutilized

Business Zones (HUBZone) program and the 8(a) Business Development Program (Figure 5.4). The HUBZone

program assists small businesses located in urban and rural communities gain preferential access to federal

procurement opportunities. In comparison, the 8(a) Business Development Program offers a broad scope of

assistance to small businesses that have a majority ownership (at least 51%) by socially and economically

disadvantaged individuals. Ultimately, the program is intended to help these businesses gain a foothold in

government contracting. Many existing firms in the Corridor would likely meet the eligibility requirements given

their size, ownership structure, and location in one of the 112 census tracts designated as HUBZone eligible in

Milwaukee County (Map 5.2)

Figure 5.4 – HUBZone Program and 8(a) Business Development Program

HUBZone Program

Benefits

Competitive and sole source contracting;

10% price evaluation preference in full and open contract competitions, as well as subcontracting opportunities;

The federal government has a goal of awarding 3% of all dollars for federal prime contracts to HUBZone-certified small

business concerns.

Eligibility - To qualify for the program, a business (except tribally-owned concerns) must meet the following criteria:

It must be a small business by SBA standards;

It must be owned and controlled at least 51% by U.S. citizens, or a Community Development Corporation, an agricultural

cooperative, or an Indian tribe;

Its principal office must be located within a HUBZone and at least 35% of its employees must reside in a HUBZone;

More information is available at: www.sba.gov/content/understanding-hubzone-program

8(a) Business Development Program

Benefits:

Participants can receive sole-source contracts, up to a ceiling of $4 million for goods and services and $6.5 million for

manufacturing;

8(a) firms are able to form joint ventures and teams to bid on contracts, enhancing the ability of 8(a) firms to perform

larger prime contracts and overcome the effects of contract bundling;

The Mentor-Protégé Program allows starting 8(a) companies to learn the ropes from other experienced 8(a) businesses.

Eligibility:

The 8(a) Program offers a broad scope of assistance to small firms that are owned and controlled at least 51% by socially

and economically disadvantaged individuals.

Participation in the program is divided into two phases over nine years: a four-year developmental stage and a five-year

transition stage.

More information is available at: www.sba.gov/content/8a-business-development-0

Source: U.S. Small Business Administration


Map 5.2 – HUBZone Qualified Census Tracts as of October 2012


Conclusions

Forming a defense industry cluster in the Milwaukee region will take willing and active participation of existing

firms, both in the Industrial Corridor and the surrounding region. Forming a cluster may not necessarily drive

regional development, but it may provide a venue for firms to connect and identify shared growth opportunities.

While firms in the region contract with the DOD for a wide variety of products and services, industries related to

transportation equipment manufacturing; machinery manufacturing; and electronic equipment, component and

control manufacturing appear to have the greatest source of defense cluster concentration and alignment in the

region. Ultimately, a convening of potential current firms in these industries will need to occur as an initial step in

forming the cluster. The exact firms to involve and an initial agenda will need to be determined, but part of the

conversation should involve discussing the potential benefits offered to individual firms through a formal cluster

affiliation. Importantly, other DOD contractors not directly involved with the proposed cluster model may also

consider discussing loose affiliations with one another.

While future Department of Defense spending levels are unknown, Milwaukee County and the Balance of the M7

Region remain below national per capita levels of DOD contracting. Some of these differences are explained by a

mismatch in the DOD’s demand for specific goods and services and the lack of a large military installation.

However, the low levels in region suggest opportunities for increasing procurement. For instance, growing the

annual amount of current DOD contracts performed in Milwaukee County by 50 percent would contribute an

additional $71 million in revenues for local companies. Moving Milwaukee County to the median per capita

procurement value of the nation’s 100 most populous counties would add $579 million to local firms.

Opportunities to contract with other federal agencies could also be considered as part of a broader strategy to

increase the return of federal dollars to the region (Table 5.10).

Table 5.10 – Procurement Obligations by Federal Agency (FY 2012)

Contract Obligations by Agency Total (Billions) Percent of Total

Total $ 517.0 100.0%

Department of Defense $360.9 69.8% Department of Energy $25.2 4.9% Department of Health And Human Services $19.2 3.7% Department of Veterans Affairs $17.2 3.3%

National Aeronautics and Space Administration $15.2 2.9%

Department of Homeland Security $12.4 2.4% General Services Administration $9.9 1.9% Department of State $8.2 1.6% Department of Justice $6.5 1.3% Department of Transportation $6.4 1.2% Department of the Treasury, $5.9 1.1%

Department of Agriculture $5.2 1.0%

Agency for International Development $5.0 1.0% Source: FPDS extracted from USASpending.gov


Appendix 5A – Forms of Federal Aids and Transfers

Federal aids and transfers can be provided to communities in several forms. Below is an overview of federal aids

and transfers provided to Milwaukee County and comparison regions in FY 2010. Specific categories as reported

by the U.S. Census Bureau Consolidated Federal Funds Report include:

Retirement and disability payments – These payments include federal employee retirement and disability

benefits, social security payments of all types, selected Veterans Administration programs, and selected other

federal programs;

Other direct payments – Other direct payments include a wide variety of federal obligations and expenditures

including excess earned income tax credits, crop insurance claims, National Flood Insurance program claims,

interest subsidies for the Federal Family Education Loan program, Supplemental Nutrition Assistance Program

(SNAP) benefits, unemployment compensation, and Medicare payments;

Grants - Grant payments include both formula grants and project grants. Formula grants are allocations of

dollars based on a distribution formula prescribed by law for continuing activities such as community

development block grants (CDBG). In contrast, project grants are “funding, for fixed or known periods, of

specific projects or the delivery of specific services or products without liability for damages for failure to

perform. Project grants include fellowships, scholarships, research grants, training grants, traineeships,

experimental and demonstration grants, evaluation grants, planning grants, technical assistance grants,

survey grants, and construction grants”;

Procurement Contracts – As discussed throughout this analysis, these payments cover federal contracts with

businesses for goods and services. Procurement contracts are reported by agency and can be detailed by the

location of the awardee as well as place of performance for a given service. Specifically, a company physically

located in Milwaukee may execute the contract in another location. Conversely, some contracts may be

performed in Milwaukee despite the contract awardee being located elsewhere. With the exception of

contracts from the U.S. Postal Service, procurement contracts represent the obligations for contract actions

and do not reflect actual federal expenditures;

Salaries and Wages - Federal government salaries and wages are reported from four sources: Department of

Defense, USPS, U.S. Coast Guard (previously within the U.S. Department of Transportation and now a part of

the U.S. Department of Homeland Security), and the Office of Personnel Management.

Table 5.11 - Per capita federal aids and transfers – FY 2010

Area Milwaukee County Balance of M7 Region State of Wisconsin United States

Retirement and disability $2,767 $2,973 $2,960 $2,935

Other Direct Payments $2,699 $1,306 $2,340 $2,633

Grants $2,934 $791 $2,109 $2,187

Procurement $549 $343 $1,724 $1,605

Salaries and Wages $672 $245 $515 $1,099

Total $9,621 $5,657 $9,648 $10,460

Source: Federal Procurement Data System (FPDS) as summarized by the U.S. Census Bureau Consolidated Federal Funds Report.


Milwaukee County, the Balance of the M7 Region and the State of Wisconsin are all below the United States

average on a per capita basis for federal expenditures. While 2010 figures only provide a snapshot of payments

and transfers, these trends have remained somewhat consistent over the past decade or more. While each area

trails the overall national per capita expenditures, the composition of these payments and obligations varies

dramatically. On a per capita basis, retirement and disability payments are mostly similar across the Balance of

the M7 Region, Milwaukee County, the State of Wisconsin and the United States. However, expenditures for

other direct payments and grants in Milwaukee County somewhat exceed the state and national averages, and

are significantly higher than the values found in the Balance of the M7 Region.

Some of these differences reflect the economic structures of these areas. For instance, the higher per capita

values for direct payments in Milwaukee County are partially explained by greater expenditures for Medicare,

SNAP, Section 8 housing and Pell Grants. Higher values for grants are partially attributed to research and support

grants to Milwaukee’s higher educational institutions, medical facilities, and private sector companies. Grants in

Milwaukee County also include large line items for the Medical Assistance Program (Medicaid), highway

construction and planning, WIC, TANF, the National School Lunch Program, and temporary awards such as funds

from HUD’s Neighborhood Stabilization Program. Furthermore, the per capita values for federal salaries and

wages reflect a somewhat larger share of federal employees in Milwaukee County than the state and Balance of

the M7 Region. However, Milwaukee County also trails the national average as it does not have a large federal

military installation or large civilian facilities.

Section 5 Defense Industry Cluster Potential in the ... · Defense contracting levels performed in Milwaukee County could also be explained by a misalignment between the purchasing

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