Two years ago, Mike Jewell took over a Tukwila company that had gone big in forging equipment for a suddenly declining oil and gas industry. When the bottom fell out, he worried his company risked shutting down a forge that had been making heavy equipment since the Navy opened it in World War II.
That is when Jewell reached out to the governor’s office and offered Jorgensen Forge as a “guinea pig” for a public-private partnership that might help his company stay in business. It led to a special training program for his veteran workers and contributed to new ideas about how to speed up the forge’s deliveries.
“We’ve actually booked nearly as much for January nearly as we did in the first half of last year,” Jewell said. “We’re much healthier.”
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The company and Gov. Jay Inslee are touting the forge’s turnaround as a model for what the state can accomplish as it prepares for a long-anticipated retraction in the Northwest’s defense industry.
The biggest players — Boeing — can take care of themselves. Smaller companies, including Jorgensen, might need a lift in navigating the downturn, state officials say.
“When you’re a midsize company that probably isn’t paying a lobbyist $250,000 a year, this lets them know we are watching and we can help,” said state Military Affairs Director Kristine Reeves, who has been trying to map the state’s defense contractors for the past two years.
To get ahead of the decline, Reeves’ office in the Commerce Department developed a defense data tool that will help identify at-risk military subcontractors and move in to offer public resources. It illustrates a statewide military supply chain that Reeves says will help the Defense Department keep an eye on smaller companies that play important roles in national defense, such as Jorgensen’s work fashioning replacement submarine shafts.
Inslee showed off the new tool last week on a visit to Jorgensen Forge. Built with a $500,000 federal grant aimed at offsetting the Defense Department's impact on military communities, the tool pulls reports from federal spending databases, allowing state agencies and local governments to gauge economic impacts of specific defense programs in their communities.
Spending on defense contracts peaked at $9 billion in Washington state in 2012. It fell to $5.8 billion in 2015.
They can run different scenarios that could help understand what a reduction in a specific military program might mean for them, such as a drop in contracts at Joint Base Lewis-McChord or a decision to break a Boeing jet contract.
It “gives us exciting new forecasting capacity that will allow economic developers to work upstream to support companies like Jorgensen in advance of having to pull the fire alarm,” Inslee said in a news release about the visit.
That has been an elusive goal for the state Commerce Department since Inslee took office in 2013 anticipating a drop in spending on local defense programs.
Decisions about closing bases or awarding jet contracts receive a lot of publicity. Smaller cuts often go unnoticed.
For the first time in years, a decline in local defense spending is starting to show. Spending on defense contracts dropped to $5.8 billion last year in Washington, according to the federal contract database usaspending.gov. That is well below a peak of $9 billion in 2012.
Sizable construction projects at JBLM and at the region’s Navy bases are coming to an end. JBLM swelled during the Iraq war, when it added new houses, training ranges and even a Special Operations dog-handling facility.
A local Navy boom followed on the heels of the Army’s surge. The biggest expense was a multi-year $700 million project building a wharf for Trident submarines at Naval Base Kitsap-Bangor. It is expected to be finished later this year.
Now, most new money is flowing to two large Boeing jet contracts, one for the Navy’s submarine-hunting P-8 Poseidon and the other for a next-generation Air Force KC-46 Pegasus refueling tanker. Both are long-term deals expected to keep production lines moving for years.
They are the main reasons the state’s new defense contracting data tool reveals a surprising answer to the question of which county rakes in the most money from the Pentagon. It isn’t Pierce County with JBLM or Kitsap County with its network of Navy installations.
King County took the biggest share of defense spending in the state, pulling in about $5.1 billion in defense-related revenue in 2014. Renton is home to P-8 production. Snohomish County, home to other Boeing large production lines, brought in $2.8 billion.
Pierce, with the state’s biggest military base, received about $1.7 billion. Kitsap received about $775 million. Thurston County received $185.1 million, mostly in small service contracts and construction. Those figures include wages to employees and some projection of how their salaries trickle out to their communities.
There’s a lot of hesitation to rely on the state. Frankly, they just provided us resources and let us go to work.
Jorgensen Forge CEO Mike Jewell
Jewell initially approached the governor’s office for help in getting through a rough patch when the oil and gas companies that made up the bulk of Jorgensen’s revenue stopped ordering new equipment.
“We found ourselves in a situation where we had no sales,” Jewell said.
His outreach brought Jorgensen into a special program for defense manufacturers offering a state-sponsored outside look at ways to diversify revenue. It led the state to offer a $100,000 grant for machinist training at South Seattle Community College that benefited Jewell’s employees.
Jorgensen hired a private consultant and launched its own team to reevaluate the company’s contracts. His staff wanted to do away with efforts that took a lot of time, but rarely yielded profit.
“It wasn’t necessarily (state advisers from Inslee’s office) coming and saying this and this are wrong,” said Denara Vetkows, a Jorgensen executive. “We took a cross-functional team, pulled them into a room and really worked together. Someone said, ‘This is where I get stuck,’ and then we worked as a group to lean it out.”
Jewell bragged that the company now finishes its purchase orders at an average of 13 days, down from more than 100 days a year ago.
He admits he was apprehensive about asking the state for help, but found a lighter touch than he expected.
“There’s a lot of hesitation to rely on the state,” Jewell said. “Frankly, they just provided us resources and let us go to work.”