When it comes to federal defense contracts, Virginia is always gifted a grand opportunity to both build America’s new generation of warships, and be paid a pretty penny for doing so. In fact, a large portion of the Commonwealth’s workforce and annual gross domestic product (GDP), 4.4 percent to be exact, depends upon defense contracts, which can sometimes create economic problems for the state.
For example, Virginia’s employment stalled and took an economic hit in 2013 when the Pentagon unveiled their budget plan to cut $487 billion in spending over the next decade, mothballing ships and other materiel to create a smaller, agile force with a new strategic focus as the wars in Iraq and Afghanistan wound down. In the aftermath, the state’s economy only grew at an anemic 0.7 percent, as opposed to the nation’s 1.6 percent growth.
The year prior, to address Virginia’s dependence on defense contracts, the U.S. Department of Defense’s Office of Economic Adjustment awarded Virginia a grant to create a tool that gave the state and localities an understanding of the regions and industries that would be adversely affected by cuts in Defense Department spending. According to the Jefferson Policy Journal, this tool was created to allow users to estimate the impact of reductions in defense spending on localities so that mitigating strategies could be carried out.
Though, in 2012, Virginia received more defense contracts, $43.2 billion worth, than any other state. That was during a time of heightened military activity and intervention overseas.
Virginia slipped to number two in the most recent fiscal year as California was awarded $34.9 billion in contracts, whereas Virginia performed $34.6 billion. The number is still a decrease of 19.9 percent from its peak production numbers.
Governor Ralph Northam announced last week that the Office of Economic Adjustment provided Virginia with another grant to release the next generation of the Defense of Department contract spending impact tool on Virginia. It is quite a useful feature as 5.5 percent of the state’s workforce are directly or indirectly dependent on defense contracts, with many employees working in professional, scientific, and technical services.
With the latest year’s figures, Northern Virginia was awarded $22.0 billion in defense contracts, the most of any region in the state. Over 60 percent of these were performed in the aforementioned areas of professional, scientific, and technical services firms.
The second largest region-to-spending portion of Virginia was Hampton Roads, which in total received $9.7 billion in contracts, $4.2 billion of which was to build the Navy’s new fleet of ships.
President Donald Trump has called for a 15 percent increase in defense spending from the current fiscal year through September 30, 2023. Therefore, the next five years look great for defense contractors in Virginia, where analysts are forecasting a 12.6 percent increase in contracts for through next year.