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COLUMN ONE : Big Guns Aren't Sole Casualties : From saxophone sellers to landscapers, small contractors feel the Pentagon's knife, Times study finds. But federal retooling may not help this often overlooked mainstay of the defense economy.

Big Guns Aren't Sole Casualties. FIRST OF TWO PARTS

May 23, 1993|MELISSA HEALY and GLENN F. BUNTING and DWIGHT MORRIS | This story was reported and written by Times staff writers Melissa Healy, Glenn F. Bunting and Dwight Morris

WASHINGTON — Brad Boyajian, a burly, mustachioed landscaper who runs Golden Bear Arborists out of an industrial park in Monrovia hardly fits the image of a typical defense contractor.

Neither does Don Holloway, the manager of Russo's Music Center, a low-slung brick storefront tucked into a strip mall in Trenton, N.J., its walls adorned with rock star posters and its floor packed with musical instruments.

But as the U.S. military budget continues to sink in the aftermath of the Cold War, both men are part of an often-overlooked wave of defense contractors that is beginning to feel the crush.

These smaller service firms and suppliers are spread throughout the country. They represent virtually every segment of American business--from clothing manufacturers, machine shops, hotels and halfway houses to family farms, movie studios and bakeries, a Times computer-assisted study of government procurement data shows.

Although some have client bases outside the Pentagon and could trim operations or expand into private markets, others rely heavily on the military and face more fundamental challenges if they are to survive.

Unlike large aerospace firms that pay handsomely for lobbyists in Washington, most of these smaller businesses cannot spare the time or expense for a well-orchestrated political campaign to save their funding. Chances are that this hidden world of contractors will be largely forgotten as Congress shapes a $1.7-billion conversion program this year to retrain defense workers and help companies shift their technology and know-how to commercial applications.

"Actually, I don't think we've looked at the specific problems of (defense contractors) that are supplying goods and services that in effect are not weapons kind of stuff," said Rep. George E. Brown Jr. (D-Colton), chairman of the House Science, Space and Technology Committee, who has played a leading role in defense conversion legislation. "I guess we just assumed . . . that if they lost that market, they could expand into civilian areas they are already into."

Moreover, the buying decline of defense goods and services threatens to work at cross-purposes with President Clinton's economic agenda: His Administration wants to create 8 million jobs by the end of 1996, but lower Pentagon spending is expected to eliminate nearly 2 million jobs over the next five years, according to the Bureau of Labor Statistics.

Many of those disappearing jobs, including those generated by some of the less obvious defense contractors, are exactly the kind of high-wage, high-skill work that Clinton is hoping to make a staple of the nation's economy.

Last year, the Defense Department spent more than $123 billion on goods and services ranging from ballistic missiles to saxophones to psychological studies, according to The Times' computer analysis, which reviewed more than 1.7 million contract awards issued by the federal government from fiscal years 1989 through 1992.

More than $26 billion--a staggering 21% of money spent on defense contracts nationwide--was pumped through the California economy, the study showed. This is a proportion far larger than the state's population, which is about 12% of the national total.

Predictably, the largest defense contractors nationwide were huge aerospace firms such as McDonnell Douglas, the federal government's No. 1 supplier, which garnered nearly $5.3 billion in prime contracts during 1992, with major aircraft, space and electronics business in Southern California.

But the study found a surprisingly large share of Pentagon spending on enterprises that are not commonly thought of as defense related. Nearly half of the purchases went for non-armament products and services such as food, furniture and janitorial work. About 6.3 million U.S. workers, more than half of them employed in the private sector, owe their livelihoods to Pentagon spending, according to the Bureau of Labor Statistics.

Although the largest cuts will not occur until later in the decade, the early effects are apparent. The Times' study found that after adjusting for inflation, defense purchases last year totaled $24.8 billion less than in 1989, a decline of 18.5%.

In California, defense procurement fell nearly $4.2 billion last year, after adjusting for inflation, from 1989 levels. That is a 15% decrease in a state where total Pentagon spending accounts for 9.5% of total state output, according to the Congressional Budget Office.

Small retailers will feel the pinch acutely, largely because as defense budgets exploded in the 1980s, the Pentagon increased its reliance on small service-related companies to conduct the growing day-to-day business on bases and in military communities.

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