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An Uneasy Peace : Small Defense Contractors Have a Tough Time Competing With the Big Guns for Government Dollars in a Brave New World


In cramped quarters almost hidden in a Torrance industrial park, Polar Power Inc. has slugged it out for years against the big guns of aerospace, hoping to land the elusive military contract.

It's been no easy task. Mounds of paperwork are stacked on President Arthur D. Sams' desk, and he spends hours on the phone trying to convince military officials that his company's generators are the best available for submarines and aircraft.

So when the Clinton Administration launched a grant program last summer to help defense contractors convert their technology to civilian use, Polar Power jumped at the chance. The company teamed up with Martin Marietta Corp. to seek a grant for production of an electric generator to charge batteries in low-emission vehicles.

The grant would have allowed Sams to give his 15 employees long-delayed raises and add as many as 20 workers to the payroll. Most important, it would have been a giant leap into the commercial marketplace.

But the big guns, Sams says, came out ahead again. After Martin Marietta won the $1.1-million grant, the defense giant chose another company to supply the generator parts.

"The bottom line is, everyone says that it will be the small businesses that will create jobs," Sams said. "But it is hard to compete with the big guys, with their bid and proposal machines."

When the winners were announced late last year, President Clinton hailed the program, called the Technology Reinvestment Project, as a way to stimulate innovation that would lead to new jobs.

But in the South Bay, the federal program has come under fire for giving most of the grants to giants like TRW, Hughes Aircraft, Northrop and Allied Signal Aerospace, while bypassing smaller firms.

The Technology Reinvestment Project "is not going to be the answer," said Rohit Shukla, director of aerospace and high-technology business for Los Angeles County Economic Development Corp., a nonprofit group that promotes business growth. "It is a boondoggle of a program."

But advocates say many complaints about the program come from companies whose names were not among the winners.

"This isn't pork; it's merit," said John Chernesky, executive director of the California Manufacturing Technology Center at El Camino College, which won a $1.5-million grant to help small- and medium-sized businesses convert to commercial markets and improve their production. "It was based on the ability to provide and deliver a product in a timely and efficient manner," he said.

In many cases, grants went to projects proposed by dozens of companies, large and small, or to research institutions such as UCLA and Cal State Long Beach. Such efforts, while led by big aerospace firms, often involve smaller companies, Chernesky said.

For example, the technology center helped Ace Clearwater Enterprises, a Torrance defense contractor with 170 employees, perfect techniques to increase its production of aircraft components for Boeing.

And some small businesses won grants on their own. Hi-Shear Technology won $800,000 to develop a lightweight, more powerful version of the Jaws of Life, a device paramedics use to cut open cars when rescuing accident victims. Called the Live-Shear, it will be developed with the Torrance Fire Department.

Dana Spencer, a member of Hi-Shear's product design team, came up with the idea for Live-Shear after watching a television episode of "Rescue 911." Within days, the company was adapting the pyrotechnics used to create missile and military aircraft components. The result: a tool that rips through a car's metal frame in milliseconds.

The 110-employee company has shifted to such products in the wake of defense cutbacks. It has lost about a third of its work force in the past three years and a large chunk of its factory space is vacant so budgets are tight.

When traveling to meet potential customers, Spencer and designer Walt Smith always took the Continental Airlines "old-timer's" special, which offers reduced air fares for those 55 and older.

"We can be more efficient, lower cost, and more flexible in executing the product (than a larger company)," said Don Novotny, Hi-Shear's vice president for business development.

Large military contractors, however, have more money to spend to get the grants.

Northrop applied for two dozen grants for projects ranging from a lightweight electric vehicle to a sophisticated monitoring system to measure toxic emissions. It won for two projects: It is part of the team working with TRW on developing a precision laser for manufacturing, and another team will assist UCLA in a transportation engineering program.

So far, about $415 million has been awarded nationwide, with another $50 million to be announced later this month. Applicants had to prove they could finance at least half of their projects, and the government would generally pick up the tab for the rest.

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