Gerald Dinkel, president and CEO of Cubic Defense Applications Group, says the company’s service business is growing. ‘Our business has shifted from being vertically integrated to relying more on commercial technology and subcontractors,’ he says. (photo/lambertphoto.com)

San Diego’s defense industry continues to drive San Diego’s economy and its future looks bright. That’s because the big players have kept pace with the Pentagon’s long-term shift from ground warfare to Internet-savvy information sharing.

“All of San Diego’s big companies are part of the Department of Defense’s plans for the future,” says Bruce Curran, an industry analyst with Frost & Sullivan in San Antonio. “That means stability and growth for the region.”

San Diego may have the largest concentration of military facilities and defense industries in the world, according to a report prepared by the Economic Research Bureau of the San Diego Regional Chamber of Commerce in 2003.

“San Diego County ranked as the sixth largest county for the total value of procurement contracts awarded by the DoD in Fiscal Year 2001 valued at $25,000 or more. Los Angeles County led all counties, receiving $7.58 billion, making southern California the prominent cluster for the nation’s defense procurement contracting,” the report concludes.

While the San Diego economy continues to benefit from traditional defense work – “metal-bending,” in industry parlance – much of the growth is grounded in computer and communication technology.

“The big thing in the Pentagon now is net-centric vision, called C4ISR,” says Curran, a senior industry analyst. “That stands for Command, Control, Communications and Computers – Intelligence, Surveillance and Reconnaissance.”

The Pentagon’s thinking is that massing equipment and weaponry is no longer the key to warfare and security, he says. Better distribution of weaponry and forces, made effective through communication and gathering sound intelligence, all at lightning speed, is the future.

“It means we can stay out of range or be moving so fast the enemy can’t target us,” Curran says. “The idea is thoroughly networked systems, using Internet-type protocols, allowing us to very quickly find a target, identify it and destroy it, while keeping our people out of harm’s way.”

The military has long had myriad systems at its disposal. What’s new is the big push to integrate all those systems.

“We have to fuse all those techniques together to give us serious, reliable situational intelligence that lets us make split-second decisions based on up-to-the minute data,” Curran says. “That’s the future.”

The boom in commercial computer, wireless and Internet technologies is helping drive the defense industry evolution. It’s a twist on all the consumer products, from microwave ovens to laser surgery, that evolved from military development.

“The military is a relatively small buyer compared to consumers, so the DoD has to fall in line with civilian standards — especially where Internet protocols are involved,” Curran says. “And security is even more vital when you have the DoD using Internet protocols.”

That means the industry has evolved to keep up. Gerald Dinkel, president and CEO of Cubic Defense Applications Group, says the company’s service business is growing, a trend reported by other defense contractors.

“Our business, like many other defense companies, has shifted from being vertically integrated to relying more on commercial technology and subcontractors,” Dinkel says. “We make less of what we deliver now, and have much larger subcontractor content in our systems.”

Mark Dankberg, CEO of ViaSat, says the Department of Defense emphasis on Internet protocol technology will help his company.

“The DoD emphasis on Internet protocol technology has been a strong point for ViaSat and has helped ignite and sustain our defense communications business over the past five years," says Mark Dankberg, CEO of ViaSat. "We expect that our defense contracting work will continue to grow significantly in the next three years because of that.”

San Diego County’s large defense contractors are working on gathering and integrating a multitude of information and weapons systems — as well as metal-bending at the shipyards and manufacturing plants. And the big companies report that they are hiring in the county. For example, General Atomics has 200 open positions; ViaSat has 60.

Filling the jobs isn’t always easy. Company officials say the high cost of housing is the biggest challenge to attracting employees.

“An engineer at the top of our industry makes maybe $100,000 a year, good money until you look at $800,000 houses that are near the schools and amenities families want,” says John Pettitt, lead executive of Northrop Grumman in San Diego. “People are reluctant to move here.”

But most companies say they plan to stay.

“There’s a huge, very important customer base here, with SPAWAR and operations services, three Marine bases, the Navy in Coronado and National City,” Pettitt says. “And there’s 100,000 servicemen and women here – just a huge DoD presence.”

Not only does San Diego have the highest concentration of military installations in the nation — which means good access to the people they are serving — but company officials say there’s plenty of talent here.

“We have great universities here and we are able to fill a lot of our hiring requisitions from the pool of graduates,” says Pettit. “But you do have to recruit from other places, nationally and internationally, to keep fresh ideas coming.”

Science Applications International Corp., founded in 1969 and long owned by its employees, has grown to 43,000 employees in 150 locations around the world — including more than a dozen sites in San Diego County.

The company was ranked the second best systems integrator by Federal Computer Week in 2005 and landed third on the Government Executive list of top 50 technology contractors in August 2005.

“SAIC is a great company where the major focus is on systems integration,” Curran says. “It’s a company full of thinkers, PhDs and retired military who understand the Department of Defense goals and stay a step ahead.”

Because the company is in the process of becoming a publicly held corporation, its officers declined to comment for this article.

Northrop Grumman has been in San Diego for 60 years (it acquired Teledyne Ryan Aeronautical in 1999). Its 4,500 employees in San Diego do everything from ship repair and maintenance — including the Navy’s nuclear aircraft carriers — to designing and developing unmanned aerial vehicles, producing software to link radio networks and developing datalink systems.

The company has two big campuses, in Kearny Mesa and Rancho Bernardo, as well as a smattering of locations throughout the county, including the former Continental Maritime Shipyard.

“The future looks very good here for Northrop Grumman because we are very diversified and we are nimble enough to adjust to the market,” says Pettit. “Our goal is to be the company of choice for brainpower.”

John Pettit is lead executive in San Diego for Northrop Grumman, which is chasing non-defense contracts. (photo/lambertphoto.com)

Northrop is chasing contracts outside of the DoD. It just landed the county’s information technology contract, worth $700 million over the next decade. And it’s going after the border security program money being held out by the Department of Homeland Security, Pettit says.

“We are an upbeat, ethical and grounded company,” he adds.

BAE Systems Inc. has been in San Diego in some form for 45 years and now employs about 3,000 people at nine different sites in the county, says spokesman John Measell.

The company designs and develops advanced information-based systems for defense and intelligence applications including digital imagery, battle management and enterprise targeting software systems, and geospatial products. It also provides marine repairs, modernization and conversion services to the U.S. Navy, other government agencies and commercial customers.

Beyond that, BAE Systems has professional engineering services, program management support, IT operations and is developing and delivering integrated survivability technologies from body armor inserts to composite armor for ground vehicles at its facility in Vista.

“BAE is one of the more important companies because it’s based in the UK, which means it can coordinate with our allies and it shakes up U.S. companies,” says Curran.

Cubic Corp., founded in 1951, has about 1,250 employees in San Diego. The company is an industry leader in the areas of realistic combat training systems, mission support services and defense electronics. Its defense segment, the Cubic Defense Applications Group, is headquartered in San Diego and encompasses three business units: Training Systems, Communications & Electronics and Mission Support. Most of the design and development of its combat training systems and defense electronics products takes place here, as well as a large portion of its manufacturing. Some assembly work also is performed at its facility in Tijuana. The company recently won the U.S. Marine Corps Aircrew Training Systems contract, increasing its customer base to include Camp Pendleton and Marine Corps Air Station Miramar.

L-3 Communications Inc., the latest evolution of Titan, has been in San Diego since 1981. The corporate headquarters is moving to New York, but the company has a significant presence here, employing about 1,200 people, says spokesman Ralph Williams.

Among its specialties are satellite communications systems, imaging systems including those for the Predator drone aircraft, and signal interception systems, both for defense and homeland security.

“We are doing well here and will continue to prosper,” Williams says.

ViaSat employs about 750 people in the county at its two facilities in San Diego and Carlsbad. The company, which counts SPAWAR among its biggest clients, designs and builds satellite communication ground systems, tactical data link terminals, networking processors, information encryption products, and communication simulation, test and training systems. ViaSat is also well known for its system design and engineering expertise.

“They’ve been very active, making big contributions in Iraq with their joint network node, which is literally saving lives in Iraq by speeding up information sharing,” Curran says. “They are subcontracting with Cubic on common data link projects and were 22nd on the list of San Diego’s fastest growing companies — besides winning the Competitive Strategies Leadership award for 2006.”

General Atomics Aeronautical Systems spun off from General Atomics in 1993, and employs just under 1,200 people in San Diego County. The company, led by CEO Neal Blue, designs and manufactures unmanned aircraft and high resolution surveillance and radar imaging systems, including the Predator UAS series and the Lynx SAR/GMTI sensor system.

Business is booming at General Atomics. Its workload has tripled in the past five years, says Executive Vice President Frank Pace. “The award of a major U.S. Army contract last year, as well as our first procurement contract with the Department of Homeland Security, produced many new job opportunities — in 2005 we grew our employee base by over 40 percent,” he says. “With the addition of recent contracts from the U.S. Army and the Department of Homeland Security, we expect our work to continue to grow. We currently have 200 open positions that need to be filled to keep up with current contracts alone.”