Agencies battle for military work amid spending reviews

Military spending has been a hot-button topic over the past decade - from the Afghan and Iraq wars to hefty defense company contracts. But now it has become an issue at the forefront of policy debates in the private sector and government agencies.

Firms have long sought to work as vendors for military agencies, whose scope of work ranges from the Army's billion-dollar spend on recruitment to the various support programs that have been established for military families in the US.

Yet, as Secretary of Defense Robert Gates continues to speak publicly about reviewing the Pentagon's budget and President Barack Obama continues to address the budget deficit, it raises questions for agencies that derive both fees and account security from military clients.

The Pentagon's annual budget is estimated to be around $500 billion, not including spending in Iraq and Afghanistan.

Bill Garber, SVP and senior partner at Fleishman-Hillard, says that while he hasn't seen a dive in opportunities, he also hasn't noticed explosive growth with its government contracts, including those with current or potential military clients.

"We haven't felt a big impact," he notes, adding that it's still "a specific trend that we're all watching closely."

The Army's coveted recruiting contract came up for bid this summer as Gates' comments drew press scrutiny, the US withdrew from Iraq, and General David Petraeus went on a media tour to "sell" the war in Afghanistan. The integrated communications account was worth $1.35 billion when it was awarded in 2005 to McCann Erickson and its IPG sister agencies, including Weber Shandwick.

"The pressure on defense spending could be pretty substantial in coming years," says Stan Collender, MD at Qorvis Communications. "It won't come up by huge amounts and there will be pressure on contractors to come up with lower costs or lower bids."

Collender notes that despite possible changes in spending, Qorvis still views government contracts, including those with military agencies, as part of its strategy for business growth during the firm's second decade.

"We've made a strategic decision to start trying to do more work with the government," he says. "There's probably not another place that's going to spend $500 billion anywhere in the country this year."

Garber notes that Fleishman has seen an uptick in the number of government and military agencies that have requested presentations about social media and its impact on communications programs. He emphasizes, however, that it's too early to tell if social media work for the military is a growth area for firms.

Other agencies, such as Gibraltar Associates, GolinHarris, and Jones Public Affairs, have received US General Services Administration certification in the past six months.

Gibraltar, in particular, sought both its advertising and integrated marketing and small business services certifications. Jim Lake, president of the firm, says that while the agency plans to pursue government work relating to transportation, health, and treasury departments, it may pitch for military contracts if they are in line with the services that Gibraltar can offer.

"We also considered looking at military contracts if the scope of the project is something that we can deliver on," he says, "but chances are a lot of those are huge recruitment contracts."

Lake notes that as government agencies look at ways to cut spending, they may look to small businesses, which was one reason why Gibraltar aimed for its small business certification, as well as the advertising and integrated marketing certification.

"There's a lot more effort, from the government agency's point of view, to tap into the expertise of the private sector," explains Lake.

UP FOR GRABS

US Army

The five-year, $1.35 billion recruitment account, awarded in 2005 to McCann Erickson, is up for review. Interested vendors include McCann, Young & Rubicam, Qorvis Communications, and MS&LGroup.

Issued a solicitation in September seeking agencies for an advertising services contract to support its recruiting efforts. Qorvis Communications is listed as an interested vendor.