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August 2008

JULY REVENUE (in millions): SALES TAX: $1,874.9 OIL PRODUCTION: $158.5 NATURAL GAS: $337.6
MOTOR FUELS: $250.1 MOTOR VEHICLE SALES: $293.2 TOBACCO: $137.7


Defense Industry Flies High

Texas ranked second among states for total defense contract value in 2007, with the lion’s share going to aerospace.

by Bruce Wright

Contracts Pour
Billions into State


The first airplane manufactured in Texas, a trainer, rolled out in July 1940. Then came Pearl Harbor – and a torrent of orders for aircraft and related parts and equipment. Enormous plants constructed near Fort Worth and Dallas began churning out thousands of airplanes as part of the most rapid industrial expansion in history. And Texas entered a new age.

March Along, Sing Our Song

The might of the U.S. Army rings strong in Texas. Fort Hood, located near Killeen, helps drive a brisk state economy by contributing billions of dollars annually. The military installation, one of the largest in the world, also distinguishes itself in a number of other ways:

  • Fort Hood is the largest single site employer in Texas, with more than 52,000 assigned personnel and 9,600 civilian employees
  • The base directly contributes more than $3 billion to the Texas economy each year
  • In 2005, the Texas Comptroller estimated the direct and indirect impact of Fort Hood in Central Texas at more than $6 billion
  • The base occupies more than 335 square miles in Central Texas
  • One out of every 10 active duty soldiers in the U.S. Army is assigned to Fort Hood
  • Fort Hood is ranked No. 1 among the Army’s 97 installations in terms of future capability

Source: U.S. Army

Defense spending in Texas has risen dramatically in recent years, jumping by more than 202 percent since 2000.

Today, defense is one of Texas’ most important industries. According to the Web site Government Contracts Won, which collates public records concerning defense spending, 11,658 Texas companies contract with the Department of Defense (DOD), earning a whopping $197.1 billion from 2000 to 2007, $39.5 billion of that amount in 2007 alone. Texas ranked second among states for total defense contract value in 2007, behind only Virginia’s $40.9 billion.

“Being in the central part of the country, goods could be moved to the East and West coasts in roughly the same timeframe,” says Keith Graf, director of the Texas Governor’s Office of Aerospace, Aviation and Defense. “Businesses just stayed here.”

Building the Arsenal

Texas defense contractors make an incredible array of products, from engine parts to sophisticated electronics and software. Not all of it is related to aerospace and aviation. At BAE Systems’ facility in Sealy, near Houston, for instance, about 2,400 employees turn out about 40 “medium tactical vehicles” (trucks, to the civilian) for the Army each day, as well as mine-resistant and ambush-protected vehicles.

In keeping with its origins, however, the Texas defense industry is dominated by aerospace.

“The aerospace industry employs roughly 200,000 employees in Texas,” Graf says. “I’d say defense makes up the largest section of that, with major defense contractors like Lockheed Martin, Boeing, Raytheon and Vought Aircraft all located here.”

High-profile defense aviation projects based in Texas include the tilt-rotor V-22 Osprey, a joint project of Boeing and Bell Helicopter Textron.

“The Osprey program is extremely important to North Texas, both in Fort Worth, where they manufacture some of the components, and in Amarillo, where it’s a hugely important employer,” Graf says.

Bell Helicopter employs about 1,070 people in Amarillo and 6,000 in the Fort Worth area. Work on the Osprey program was buoyed by the March 2008 announcement of a five-year, $10.4 billion contract for 167 V-22s.

Also in Fort Worth is Lockheed Martin. The company’s enormous facilities, which once produced B-24 Liberator bombers, now assemble both the frontline F-16 fighter and its potential replacement, the F-35 Lightning II, a stealthy fifth-generation fighter expected to play a leading role in airborne defense for decades to come (see Lightning Built in Texas).

Lockheed Martin F-16 - Photo courtesy of Lockheed Martin

Lockheed Martin’s footprint in the Dallas-Fort Worth Metroplex is huge, with a Tactical Aircraft Systems unit headquartered in Fort Worth and a Missiles and Fire Control unit based in Grand Prairie. Lockheed Martin is the area’s second-largest employer, with more than 14,000 positions.

Defense Titans

In 2007, Texas ranked second among states in the value of defense contracts won.

State2007 Contract Value
Virginia $40,851,321,392
Texas $39,480,651,081
California $38,914,099,311
Florida $15,335,818,286
Maryland $13,121,392,252
Massachusetts$11,885,973,889
Pennsylvania$10,949,831,217
Missouri$10,105,630,157
Arizona$8,098,949,893
New York$7,947,143,473
All Other States$104,819,533,626
TOTAL$301,510,344,577

Billions for Defense

Texas’ defense contractors have earned more than $197 billion from contracts with the U.S. Department of Defense over the past eight years.

Texas Defense Contracts Won, 2000-2007
YearNumber of ContractsTotal Contract Dollar Value
20005,651$13,064,499,348
20015,936$9,989,353,612
20028,485$14,151,186,044
200311,133$27,532,343,511
200414,671$30,286,159,699
200527,290$27,196,338,837
200625,695$35,442,516,835
200733,620$39,480,651,081
TOTAL132,481$197,143,048,967

Source: Government Contracts Won, www.governmentcontractswon.com

V-22 Osprey - Photo courtesy of Bell Helicopter Textron Incorporated.

Keep ’Em Flying

In addition to defense manufacturing, many Texans work in operations that maintain military air fleets, called “MRO,” which stands for maintenance, repair and overhaul.

The largest of these is the Boeing Support Systems’ Aerospace Support Center in San Antonio, which employs about 1,625. The 1.6 million-square-foot center, Boeing’s largest MRO facility, provides maintenance and upgrades on a variety of military aircraft.

About 300 of the Aerospace Support Center’s employees work on maintaining the Air Force’s aging KC-135 tanker, which first flew more than 50 years ago.

“It’ll take awhile to replace those aircraft,” Graf says. “I think they’re looking at keeping those in the air for another 10 to 20 years.”

In September 2007, Boeing won a $1.1 billion contract for continued KC-135 maintenance and announced plans to add 200 more San Antonio employees to support the program. Boeing recently announced that the center will also perform some finishing work on the first 10 to 15 of the company’s new commercial liner, the 787 Dreamliner, and these numbers could grow.

Another Texas MRO operation is L-3 Communications’ Waco Integration Center, which employs about 1,620 and hosts several hundred federal government employees and other contractors. “They do MRO work for the P3 Orion, maintaining that fleet for the Navy and U.S. Customs, and for the C-130 Hercules,” says Graf.

Metroplex Leads Defense Contracting

Nine-tenths of Texas’ defense contract funding goes to operations based in six metropolitan areas. Between them, the Dallas and Fort Worth metropolitan statistical areas (MSAs) accounted for about half of all defense contracts in the state from 2000 to 2007.

Texas Map
Defense Contract Values by Metropolitan Statistical Area, 2000-2007
Texas MSAs2000-2007
Contract Values
Share of Total
Austin-Round Rock$10,572,548,7255.4%
Dallas-Plano-Irving$31,658,630,85616.1%
Fort Worth-Arlington$67,200,529,65134.1%
El Paso$4,000,563,1902.0%
Houston-Sugar Land-Baytown$49,630,042,26225.2%
San Antonio$19,857,896,59410.1%
TOTAL$197,143,048,96792.8%

Source: Government Contracts Won, www.governmentcontractswon.com

Broader Benefits

Texas defense contracts carry a number of benefits that ripple throughout the state’s economy. For one thing, they tend to create high-skill, high-wage positions.

“The great thing about these jobs is that they pay quite a bit higher than the average state wage,” says Graf. “The average [defense industry] wage is somewhere around $50,000 a year.”

Graf notes that these manufacturing jobs tend to have a high multiplier effect because they attract other suppliers. For instance, a few weeks after Bell Helicopter Textron and Boeing received the V-22 Osprey contract, they signed a $400 million deal with Dallas-based Vought Aircraft Industries to supply tail parts for the craft. And BAE Systems reports that its Sealy vehicle plant partners with nearly 350 Texas vendors who sold the plant $541 million worth of goods and services in 2007.

Major defense contracts such as these produce a great deal of additional work for subcontractors and suppliers, creating jobs at dozens, hundreds or even thousands of smaller companies and thus greatly magnifying their economic impact.

Boeing has estimated that its 5,200 Texas employees working on government and commercial programs support about 20,000 jobs in the state and contribute more than $3.5 billion to the economy annually. Northrop Grumman, with about 1,800 Texas employees, estimates its annual economic impact on the state at $364 million. And BAE Systems, which employs 3,600 in Texas, claims its annual impact on the state economy exceeds $891 million.

“Aerospace jobs are highly important to Texas,” Graf says. “It’s a critical industry for the state, and the outlook for its future is quite positive.” FN

For more information on Texas defense contractors, visit www.governmentcontractswon.com.

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