The 2009 NorTh CaroliNa DefeNse asseT iNveNTory aND … · North CaroliNa Military FouNdatioN July...

North CaroliNa Military FouNdatioN

July 2009

The 2009 NorTh CaroliNa

DefeNse asseT iNveNTory aND

TargeT iNDusTry ClusTer aNalysis

a Str ategy For growiNg North CaroliNa’S

deFeNSe aNd hoMel aNd SeCurit y eCoNoMy

BoarD of DireCTors

Chair

general william F. “Buck” Kernan, uSa (ret.)

viCe-Chair

Fred N. day, iV, Former President and Ceo, Progress energy Carolinas

DireCTors

george Baldwin, Managing director, legislative and Community affairs, Piedmont Natural gas

lieutenant general Martin r. Berndt, uSMC (ret.)

rear admiral Paul e. Busick, uSCg (ret.)

Brett Carter, President, duke energy Carolinas

herb Crenshaw, executive director, government affairs, at&t North Carolina

Major general robert C. dickerson, uSMC (ret.)

lieutenant general Buster C. glosson, uSaF (ret.)

general dan K. McNeill, uSa (ret.)

walter S. Price, Senior Vice President, director, government relations, wells Fargo Corporation

lieutenant general robert d. Springer, uSaF (ret.)

John Suttle, Vice President of Communications, Bae Systems land & armaments

gene upchurch, Vice President, external affairs Progress energy

Michael walsh, President, Parsons Corporation Commercial technology group

emeriTus

general James J. lindsay, uSa (ret.)

sTaff

will austin, executive director

tad dunn, deputy director

T h e 2 0 0 9 N o r T h C a ro l i N a D e f e N s e a s s e T i N v e N T o ry a N D Ta rg e T i N D u s T ry C l u s T e r a N a lys i s

a s T r aT e g y f o r g r o w i N g N o r T h C a r o l i N a’ s D e f e N s e a N D h o m e l a N D s e C u r i T y e C o N o m y

July 8, 2009 1

eXeCuTive summaryThe North Carolina Military Foundation (“the Foundation”) is leading a unique partnership to support the development of a statewide economic development strategy to grow the state’s defense and homeland security economy.

The Foundation—launched in 2006 by then-Lieutenant Governor Bev Perdue—is a not-for-profit, privately funded, business development organization focused on growing the state’s defense and homeland security industry and generating new long-term investment and job opportunities for North Carolina citizens. In carrying out its mission, the Foundation identifies emerging defense and homeland security priorities that fall within the state’s core strengths, and works with leaders in government, business, and academia to capitalize on them.

Totaling 7 percent of gross state product in 2007, North Carolina’s military installations and related industry have a $23 billion impact on the state’s economy. Through the addition of U.S. Army Forces Command and Army Reserve Command to Fort Bragg; Marine Corps Special Operations Command to Camp Lejeune; and the addition of 11,500 Marines through the Grow the Force initiative, North Carolina’s defense footprint is growing strongly and will have an even greater impact on the state in future years. This growth, together with emerging defense and homeland security needs, provides the state the opportunity to grow its defense economy by focusing on areas that fall within North Carolina’s core strengths.

After identifying emerging priorities, the Foundation and its partners—the North Carolina Department of Commerce (“Commerce”), the North Carolina Community College System, the University of North Carolina General Administration, and RTI International (“RTI”) undertook a high-level study to identify North Carolina’s industry, research and development (“R&D”), and academic capacity within six market areas, and then grouped each market according to its relative stage of maturity. As part of the data collection, Duke University and Wake Forest University provided information on programs relevant to the market areas.

The six identified market areas include:

Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance (“C4ISR”)•Fuel and Power Sources•Human Factors•Performance Materials•RESET Support Activities•Unmanned Systems •

Of the six markets, C4iSr, Performance Materials, and reSet Support activities are considered mature markets because they have the highest level of industry, academic, and R&D strengths in North Carolina, and thus present promising economic development opportunities to support expansion and company recruitment.

Fuel and Power Sources and unmanned Systems are considered emerging markets. Both have significant academic and R&D capacity, yet neither has industry clusters as developed as those considered mature. Underscoring the economic development potential, North Carolina has capacity to support certain elements of unmanned systems, and has significant R&D and growing industry capacity to support niche areas of alternative energy.

human Factors is an evolving market within the Department of Defense (“DoD”) and Department of Homeland Security (“DHS”) and is expected to be a strong market in future years. North Carolina has existing industry and academic capacity to support Human Factors and should become a national leader in this nascent market area.

North Carolina’s defense

footprint is growing

strongly and will have an

even greater impact on

the state in future years.


2 July 8, 2009

The Foundation recommends the following course of action to facilitate the growth of each market:

develop a statewide cluster strategy to build North Carolina’s defense and security industry, starting with 1. the six market areas analyzed for this study.

leverage the unique strengths of existing economic development organizations to support the growth of the 2. target markets.

attract more public and private r&d funding to the state and increase in-state participation in the Small 3. Business innovation research (SBir) and Small Business technology transfer outreach Program (Sttr) programs.

develop a system, with both human and technological 4. networks, permitting ready access to accurate information on higher education capacities.

develop actionable intelligence on dod and dhS 5. opportunities in the target market areas.

Support and encourage existing companies to remain and 6. grow in North Carolina.

recruit companies from out-of-state that will fill 7. important gaps in North Carolina’s supply chains encompassing the target market areas.

Communicate North Carolina’s assets and priorities in 8. each of the target market areas to a variety of audiences.

Communicate North

Carolina’s assets and

priorities in each of the

target market areas to a

variety of audiences.


July 8, 2009 3

TaBle of CoNTeNTs

BOARD OF DIRECTORS............................................................................ Inside Front Cover

ExECUTIvE SUMMARy ............................................................................................................. 1

INTRODUCTION .......................................................................................................................... 4

STUDy METHODOLOGy............................................................................................................ 5

OvERALL FINDINGS .................................................................................................................. 5

SPECIFIC MARKET AREA FINDINGS ...................................................................................... 7

Mature Market Areas

Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance ....................... 7

Performance Materials ........................................................................................... 10

RESET Support Activities .......................................................................................13

Emerging Market Areas

Unmanned Systems ................................................................................................ 17

Fuel and Power Sources .........................................................................................20

Nascent Market Area

Human Factors ..........................................................................................................23

RECOMMENDATIONS ..............................................................................................................26

ACKNOWLEDGEMENTS ..........................................................................................................28


4 July 8, 2009

iNTroDuCTioNPresent-day and emerging defense and homeland security needs offer North Carolina the opportunity to grow a sector that already has an estimated annual $23 billion statewide economic impact. Between the state’s military installations and related industry, the defense sector comprises 7 percent of North Carolina’s gross state product.

Building on this presence, the Foundation—a non-profit organization established in 2006 by then-Lieutenant Governor Bev Perdue—is leading a unique partnership to support the development of a statewide economic development strategy to grow the state’s defense and homeland security economy. The partnership includes government, business, and academic leaders and has been working to pinpoint where North Carolina’s industry and research and development (“R&D”) capacity intersects with defense product and technology priorities for the 21st century. Understanding this capacity will enable the state to develop a more forward-looking and robust strategy to support existing defense and homeland security industry, as well as recruit new businesses to fill in capability gaps.

As a first step, the Foundation undertook a high-level study to establish a baseline of intelligence regarding North Carolina’s industry, R&D, and academic strengths and weaknesses as they relate to current and emerging defense and homeland security priorities. Utilizing the expertise of its retired senior-level military and corporate board members, its relationships and knowledge of the federal government’s priorities and defense industry trends, as well as previous studies including the Defense Industry Gap Analysis Study conducted for the North Carolina Military Business Center and the State of North Carolina in 2005 by Angelou Economics, the Foundation identified the following market areas for analysis:

Command, Control, Communications, Computers, Intelligence, •Surveillance, and Reconnaissance (C4ISR)

Performance Materials•

RESET Support Activities•

Unmanned Systems•

Fuel and Power Sources•

Human Factors•

the 2009 North Carolina defense asset inventory

and target industry Cluster analysis

A Strategy for Growing North Carolina’s Defense and Homeland Security Economy

As a first step, the

Foundation undertook a

high-level study to establish

a baseline of intelligence

regarding North Carolina’s

industry, R&D, and

academic strengths and

weaknesses as they relate

to current and emerging

defense and homeland

security priorities.


July 8, 2009 5

Study partners included: the North Carolina Department of Commerce (“Commerce”), the North Carolina Community College System, the University of North Carolina General Administration, and RTI International (“RTI”). The team collected North Carolina industry, R&D, and education program data to determine the capacity of the state to support future work in these six market areas, although the framework the Foundation formed to conduct this analysis represents a process that can be repeated for additional defense and homeland security market areas in the future. Additionally, this study can be used by regional organizations as a starting point to delve deeper into local assets that can support the defense and homeland security industry. Building on the tremendous growth around Fort Bragg, the BRAC Regional Task Force has one such study underway. As part of the data collection, Duke University and Wake Forest University provided information on programs relevant to the study areas.

Determining North Carolina’s capacity and core defense strengths to support current and emerging defense and homeland security priorities was a key driver for undertaking this study. The analysis and resulting recommendations will better enable the state to develop an economic development strategy to build on North Carolina’s strengths, and address perceived and real weaknesses in order to grow, strengthen, and expand the state’s defense and homeland security industry.

The Foundation recommends herein a course of action to facilitate the growth of the six market areas and coordination of resources among state government, higher education, and economic development organizations to support this growth.

As a next step, the Foundation will partner with the Office of the Governor, Commerce, other defense-oriented economic development organizations, and the university and community college systems to support the development of a statewide strategy to strengthen the existing business base within these target industry clusters.

sTuDy meThoDologyAfter the Foundation identified the six market areas for analysis, RTI conducted research to determine the industries associated with the relevant technologies and products, and identified the six-digit North American Industry Classification System (“NAICS”) codes associated with these industries. These codes were then cross-checked through a review of NAICS used in existing DoD contracts in each market area. The most relevant three-to-six NAICS were chosen from each market area list. Commerce then analyzed the leading industries within each market area and produced detailed supply chain analyses for each industry in North Carolina, as well as a summary of each market area. Commerce and RTI identified specific companies in North Carolina within each industry based on their identified NAICS codes, including companies that have had defense prime contract awards and also those that had the potential capability to support work in each of the specific industries. RTI then interviewed a cross-section of companies within the six market areas (six to eight companies per area) in order to gain additional critical insight into North Carolina’s strengths and weaknesses. Interviews also yielded information on the companies’ ability and willingness to work within the structures of defense and federal contracting, provided insight into market area growth and opportunities, and offered suggestions on how to grow each market area.

Next, the University of North Carolina General Administration, Duke University, Wake Forest University, and the North Carolina Community College System identified education and research programs related to each market area while Commerce provided location maps of the companies, education programs, and research activities within the state for each market area. Finally, the project team reviewed the data and analysis, grouped the six areas according to their relative stages of maturity in North Carolina, and discussed strategies and next steps. This report reflects the analysis, conclusions, and recommendations that were derived from the study.

Determining North

Carolina’s capacity and

core defense strengths

to support current and

emerging defense and

homeland security

priorities is a key driver for

undertaking this study.


6 July 8, 2009

overall fiNDiNgsConfirmation of growth in Market areas: Research related to industry trends, growth expectations of in-state companies and academic capabilities, coupled with 38 industry interviews, confirm that the six areas selected by the Foundation for analysis are currently expanding and expected to grow in the future as DoD and DHS shift budget priorities. North Carolina has an opportunity to leverage the state’s competitive advantages and resources in a variety of industries to support the growth of these market areas.

Value of North Carolina: The high quality of life and low cost of living—coupled with proximity to Washington D.C. and military installations—are strengths that make North Carolina a desired location for defense and homeland security businesses. Companies are able to operate at a lower cost in North Carolina than in current leading defense markets, such as Boston, Metro Washington DC, and California.

Additionally, numerous companies credited North Carolina’s university and community college systems as being critical to sustaining a qualified workforce, in addition to offering opportunities to partner on new R&D opportunities from DoD and DHS. Companies benefit from the talent and expertise resident at 16 public university campuses across the state and numerous private colleges and universities, as well as from the more than 800,000 students at 58 community college campuses within the North Carolina Community College System. These higher education assets are tremendous economic development resources that distinguish North Carolina from the rest of the country. They offer defense and security companies that are expanding or relocating to the state free, tailor-made workforce development and training programs to meet their unique needs.

Finally, North Carolina hosts a significant number of operational forces, including special operations forces, which total more than 100,000 active duty military personnel. In 2008, more than 18,000 service men and women separated from active duty military service from installations in North Carolina, which represents a highly skilled and trained workforce ranging from aircraft technicians to engineers to senior level officers with executive management expertise. Combined with the addition of U.S. Army Forces Command and Army Reserve Command to Fort Bragg in 2011, locating in North Carolina offers defense companies the opportunity to take advantage of the state’s competitive business environment and workforce, while also being located close to the end-users and many decision-makers on future requirements.

level of existing in-state Capacity: The analysis assembled by the Foundation established that North Carolina has varying capacity in the six market areas and that each area offers opportunities and a path forward. The research located at least 202 small businesses and large corporations that work directly as prime contractors for DoD and DHS in the six market areas, and many more subcontractors. Additionally, many of the state’s public universities, in addition to Duke University, have ongoing programs and funding through DoD and DHS related directly to the market areas analyzed in this study (Note: Wake Forest University has significant funding through DoD for regenerative medicine, which was not a focus of this study). However, while many campuses have existing DoD and DHS relationships, the overall percentage of defense-sponsored R&D funding to UNC system schools is small relative to its other sources of federal research funding—only 5.1 precent of the total for Fiscal year 2008.

Among companies interviewed that did not have defense contracts, there was a general lack of knowledge about how to navigate the complex business development, contracts, and accounting processes associated with working on government contracts. Both experienced and inexperienced companies stated a need for in-house qualified contracts and procurement specialists. Although the state’s investment in the specialized economic development resources focused on the DoD and DHS market has helped businesses win billions in federal contracts and contributed to over $3.6 billion in DoD spending in North Carolina, businesses’ identification of this continuing need indicates an opportunity for further outreach by state government resources to educate and provide services to help companies navigate these cumbersome processes.

The industry, academic, and R&D capacity identified through the analysis are located throughout the state, with strong concentrations in large metropolitan areas that already have niche areas of strength in some of North Carolina’s legacy industries. Proximity to colleges and universities that provide a talented workforce and partnering opportunities appear to be an important factor regarding a company’s choice of location.

The high quality of life and low cost of living

are strengths that make North Carolina a desired location for

defense and homeland security businesses.


July 8, 2009 7

sPeCifiC marKeT area fiNDiNgsSummary: The project team reviewed the industry supply chain analyses, R&D, and academic information and assessed North Carolina’s relative capacity in each market area using the following criteria:

Industry growth expectations;•

Number of relevant companies in the state/location quotient (ratio of company concentration to that of the U.S.); •

North Carolina’s research and education assets; •

Known niche specialties; and•

Long-term sustainability in North Carolina.•

mature market areas: C4isr, Performance materials, and reseT

overall: Among the six market areas analyzed, the following three areas had the highest level of industry, academic and R&D strengths, thus promising economic development opportunities to support expansion and company recruitment.

Command, Control, Communications, Computers, intelligence, surveillance, and reconnaissance (C4isr)

definition: Systems, procedures, and techniques used to collect and disseminate information. This includes intelligence collection and dissemination networks, command and control networks, and systems that provide the common operational/tactical picture. C4ISR also includes information assurance products and services, as well as communications standards that support the secure exchange of information by C4ISR systems (digital, voice, and video data to appropriate levels of command).

Example technologies include hardware, such as radios, receivers, satellites, relays, routers, computers, and other information technology infrastructure. For Intelligence, Surveillance, and Reconnaissance (“ISR”), examples include the use of remote sensors (infrared, optical, radio frequency sensors) placed on platforms such as satellites and unmanned vehicles. For Command and Control, technologies require computing power and computer algorithms to fuse multiple sensor inputs and data streams into decision-support software to provide situational awareness. Other software algorithms and programs applied to C4ISR include those that ensure interoperability among disparate communications systems, encryption algorithms to ensure secure communications, signal detection and image processing methods, anti-jamming and low probability of signal intercept techniques, communications networking protocols, and inertial navigation. Threat warning systems and electronic countermeasures such as jamming techniques and decoys are also included in this technology area.

Skills and education critical to companies in this market area include computer, mechanical, electrical, programming and software engineering; information technology; mathematics; physics; statistics; and earth sciences.

growth Potential: Expected funding for this technology area is strong—buying more surveillance hardware and software is less expensive than employing human surveillance and continues to be a priority for Secretary of Defense Robert Gates. The DoD plans to invest over $28 billion through the

The DoD plans to

invest over $28 billion

through the next seven

years to develop,

procure, and modify

20 major airborne ISR

systems, and maintain

existing systems until

new ones are fielded (GAO, March 2009).


8 July 8, 2009

next seven years to develop, procure, and modify 20 major airborne ISR systems, and maintain existing systems until new ones are fielded (GAO, March 2009).

Business and industry Capacity: RTI identified at least 15 industries associated with C4ISR, and recommended three critical industries for initial supply chain analysis in North Carolina: Custom Computer Programming Services, Broadcasting and Wireless Communications Equipment, and Other Telecommunications. As of 2007, North Carolina had approximately 120,000 people working in these 15 industries, with Custom Computer Programming Services having the most well developed supply chain in the state among the other industries.

C4ISR has a strong level of involvement from existing industry in North Carolina, with more than 50 companies already engaged as defense prime contractors. General Dynamics Armament and Technical Products (GDATP), an operating unit of the General Dynamics Corporation, is headquartered in Charlotte and is a proven systems integrator of defense products for all branches of DoD. General Dynamics Advanced Information Systems has a presence in Greensboro, and develops systems integration, development, and operations support products for the military. Tactronics, located in Fayetteville, designs, develops and manufactures integrated PC-based mobility platforms for the U.S. Special Operation Forces, the U.S. Army and U.S. Navy.

North Carolina is also home to a number of small defense businesses engaged in C4ISR, including Raleigh-based vadum Inc., which provides products to a DoD task force focused on counter-improvised explosive device technologies; and RLM Communications, based in Fayetteville, which provides communications support services—spanning research to lifecycle sustainment support—to U.S. Special Operations Command and many other DoD clients.

North Carolina has strong competitive advantages in niche industries that can be leveraged to support the growth of this market area as well as strong employment growth. Within the Research Triangle region, companies such as IBM, Cisco Systems, Sony Ericsson, Nortel Networks, and SAS have core capabilities in computing, networking, and communications. Among the core industries analyzed under C4ISR, North Carolina has particular strength in the manufacture of broadcasting and wireless communications equipment compared to the nation as a whole. The Partnership for Defense Innovation (PDI)—a leading statewide defense development organization—directly supports C4ISR modeling, simulation, design, prototyping, testing, integration and exploration of emerging technologies. In addition to its existing wireless laboratory, PDI has been funded to build a state of the art C4ISR Lab which will help support the Information and Intelligence Warfare Directorate.

The state possesses existing niche strength in the Gaming/Simulation cluster in the Research Triangle region, which is supported by a variety of university and community college programs. There are more than 30 gaming companies that employ more than 1,000 people in the Research Triangle region, many of which support defense contracts. Examples of leading companies and organizations include Applied Research Associates, Emergent Games Technologies, Epic Games, RTI International’s digital solutions group and virtual Heroes.

From a workforce perspective, C4ISR likely has the largest need for personnel with security clearances among the six areas studied, which could be fed by transitioning military personnel from installations in North Carolina. Company interviews indicated that the state does not have a strong network of interconnected buyers and suppliers, and suggested networking events to build stronger in-state relationships within this market area.

Potential Crossover area: Cyber security has become a high priority for DoD and DHS due to the increasing number and costly cyber-intrusions into their computer networks. As a result, the federal government is increasing its demand for training, technology and personnel in cyber security. This rapidly rising priority for DoD and DHS represents a crossover area for North Carolina computer encryption and cyber security companies that support the sizable banking industry in the state.

North Carolina has

particular strength

in the manufacture

of broadcasting

and wireless

communications

equipment compared to

the nation as a whole.


July 8, 2009 9

higher education Capacity: C4ISR has among the greatest university R&D strength of the six areas studied. The UNC system has 54 undergraduate, graduate, and certificate programs in computer and information sciences, producing nearly 1,000 computer science graduates each year from 14 campuses across the state. Examples of post baccalaureate certificate programs include University of North Carolina-Greensboro’s Information Assurance and Security Certificate Program and East Carolina’s Geographic Information Science and Technology Certificate.

Leading research centers include the the Center for Rapid Product Realization at Western Carolina University and the Center for Human-Centric Command & Control Decision Making at North Carolina Agriculture and Technology State University (“NC A&T SU”) which provides sensemaking support models to the U.S. Army for the creation of networks. NC A&T SU is also engaged in development work on sensors for the Air Force Research Laboratory and the Army Research Laboratory. The University of North Carolina–Charlotte’s (“UNC-C”) leading efforts in integrated modeling and simulation for the Defense Intelligence Agency has attracted significant attention from other DoD contractors; and its visualization Center is already one of five Regional visualization & Analytics Centers for DHS. It won the recent competition for a DHS National Center for Command, Control and Interoperability, which will build on the center’s work for defense. UNC-C also hosts the Center for Optoelectronics and Optical Communications and has a Cooperative Research and Development Agreement with the Navy’s Space and Naval Warfare Systems Center related to computer encryption.

Additional key examples include the Renaissance Computing Institute at University of North Carolina–Chapel Hill (“UNC-CH”) and the Center for High Preformance Simulation at North Carolina State University (“NCSU”).

Within the community college system, there are over 25 campuses across the state that offer training in computer, electronics, and mechanical engineering technologies that can support the workforce needs of companies and industries under the C4ISR market area. Among these, Wake Technical Community College has a highly regarded degree program in Gaming/Simulation program development.

snapshot: C4isr industry Cluster analysis

Core industryemployment

(2007)employment growth

(since 1992)avg. annual wage (2007)

Value added lQ (2006)

employment lQ (2007)

Custom Computer Programming Services

17,363 253% $84,032 0.71 0.97

Broadcasting and wireless Communications equipment Manufacturing

3,737 54% $98,644 2.09 1.84

other telecommunications

29,191 37% $63,128 0.59 1.26

Note: For this and following charts, Location Quotients (“value Added LQ” and “Employment LQ” above) are ratios that compare the concentration of a resource or activity, such as employment, in a defined area to that of a larger area or base. Location quotients are used to compare North Carolina’s employment and value added (output) by industry to that of the nation. A location quotient of 1.0 suggests that the concentration of state employment (or value added) for a given industry in North Carolina is equal to the concentration experienced by the United states as a whole. An Employment Location Quotient greater than 1.25 indicates a core industry strength.

The UNC system has

54 undergraduate

and graduate degree

programs in computer

and information

sciences, producing

nearly 1,000 computer

science graduates each

year from 14 campuses

across the state.


10 July 8, 2009

Note: Companies mapped using the following NAICS codes and are indicative of capacity in these industries: 334220: Broadcasting and Wireless Communications Equipment Manufacturing; 517910: Other Telecommunications; and 541511: Custom Computer Programming Services

Performance materials

definition: The DoD’s goal for performance materials is to create lighter and stronger materials that are used in a wide variety of applications, including defense vehicles, electronic systems, protective gear, and uniforms. Example materials include composites, such as aramid, ultra-high molecular weight polyethylene, and S-2 glass-fiber reinforced polymers; thermoset fiber-reinforced composites for products ranging from body armor to armaments; nanomaterials using carbon nanotubes or nanoparticles for fuel cell catalysts; and multi-functional materials, such as fabrics combined with electronics for heating/cooling of protective clothing as well as “smart” uniforms that can relay data to a centralized network on the battlefield (a strong emerging area with high potential value globally). Metamaterials is a renewed field of interest as well, using plasma and electromagnetic fields to bend light to assist in stealth operations.

Critical skills and education required by companies in this market area include chemical engineering, materials science, chemistry, physics, and polymer processing technicians.

growth Potential: According to DoD, Defense Supply Center Philadelphia purchased approximately $2.2 billion in clothing alone during Fy 2008. This amount is expected to grow to $2.8 billion during Fy 2009, and increase as the Army and Marine Corps add to their end-strength. According to vector Strategy, advanced composites and ceramic materials for military ground vehicle armor could represent a $3 billion opportunity between 2010 and 2015 (inclusive) as these non-metal


July 8, 2009 11

performance materials represent a growing share of the total materials required to produce armor for military ground vehicles. Underscoring increased interest in metamaterials, the Fy 2009 DoD budget requested $35 million in plasma and metamaterials research.

Business and industry Capacity: North Carolina’s traditional materials manufacturing industries are a core strength for developing and manufacturing 21st century performance materials for the defense and homeland security industry. Within the industries analyzed for this study, there are more than 100 companies in North Carolina focused on plastics material and resin manufacturing, composites manufacturing, fiber manufacturing, and non-woven and woven textiles. According to North Carolina Textile Connect and as of 2006, North Carolina’s broader textile industry included more than 1,300 establishments that employed more than 120,000 people in 90 out of 100 counties.

For this study, RTI identified at least five core industries that comprise the Performance Materials market area, and recommended three critical industries for initial supply chain analysis in North Carolina: Nonwoven Fabric Mills, Carbon and Graphite Product Manufacturing (Advanced Ceramics), and Plastics Material and Resin Manufacturing. As of 2007, North Carolina had approximately 35,000 people working in these five industries. Among the three core industries previously listed, the supply chain for Carbon and Graphite Product Manufacturing is significantly larger than the other two core industries when measured by employment and number of establishments. In spite of North Carolina’s traditional strengths in textiles and other materials, all three supply chains have development potential, with none of them measuring a link share ratio above 55 percent in the state compared to the nation as a whole.

Many of North Carolina’s traditional textiles and materials firms have transitioned to developing products for the military. Examples include PPG Industries, which now provides fiberglass reinforcements for composite materials to the military as well as to defense contractors. Location quotients for traditional textiles, non-wovens, and composites manufacturing are far higher in North Carolina than the national average, with employment in the non-wovens industry growing by 48 percent between 1992 and 2007. Employment has also grown strongly in two other core industries: Plastics Material and Resin Manufacturing (30 percent versus a decrease of 21 percent nationally from 1992 to 2007) and Scientific Research and Development Services (127 percent versus 30 percent nationally from 1992 to 2007).

Underscoring the state’s strengths in composites, Spirit Aerosystems will invest $500 million and create 1,000 jobs to build and operate a Composites Center of Excellence at the North Carolina Global Transpark in Kinston. DSM Dyneema, a Dutch company that produces its patented fiber for use in bullet resistant armor in Greenville, has invested millions in recent years to increase its capacity and employees in North Carolina. Other examples of job creation and new investment include leading defense companies such as BAE Systems Tensylon High Performance Materials, based in Monroe, and vx Aerospace, which operates the company’s composites manufacturing facility in Morganton.

higher education Capacity: The strength of this market area in North Carolina includes preeminent R&D and workforce programs. Among the leading resources at NCSU, the Institute for Maintenance Science & Technology at NCSU supports materials projects at Fleet Readiness Center East, aboard Marine Corps Air Station Cherry Point for a variety of vertical lift aircraft. The Thermal Protection and Comfort Center has constructed an 11’x18’ fire resistant room to hold Pyroman, which has been used by the Army and Marine Corps to study the impact of intense heat and flames on combat uniforms. The Nonwovens Institute, a part of the College of Textiles also at NCSU, is engaged in R&D for new Army combat uniforms

North Carolina’s traditional

materials manufacturing

industries are a core

strength for developing and

manufacturing 21st century

performance materials for

the defense and homeland

security industry.


12 July 8, 2009

that would help protect against chemical and biological attacks. The Center for Advanced Materials and Smart Structures at NC A&T SU has partnerships with DoD’s Center for Nanoscience and Nanomaterials, the Air Force Research Laboratory, the Army Research Laboratory, and the Office of Naval Research to support ongoing research into advanced materials and coatings. NC A&T SU Center for Advanced Composite Materials currently provides reverse engineering support to MCAS Cherry Point, as well as several aviation companies and major defense contractors. Illuminating an important and growing area of interest for DoD, researchers at Duke University have simulated a device fabricated from metamaterials—which are manmade materials that gain their properties from their structure rather than composition—that they claim can render objects, such as submarines, invisible to sonar.

UNC-CH and NCSU offer a baccalaureate and graduate degree programs in material science. NCSU’s College of Textiles graduated 163 students alone in Fy2008 in focus areas including textile engineering and fiber & polymer science.

Within the community college system, many campuses offer training programs related to materials and advanced machining, including Wilkes County Community College, which supports the Northwest North Carolina Advanced Materials Consortium, and Lenoir County Community College, which operates the Advanced Machining Training Center. Additionally, Catawba valley Community College hosts the Center for Emerging Manufacturing Solutions, which provides education and training related to 21st century manufacturing technologies, including for performance materials.

snapshot: Performance materials industry Cluster analysis


(2007)employment growth

(since 1992)avg. annual wage

(2007)Value added lQ

(2006)employment lQ

(2007)

Plastics Material and resin Manufacturing

1,319 30% $56,160 0.52 0.71

Nonwoven Fabric Mills

3,089 48% $46,696 7.19 6.98

Carbon and graphite Product Manufacturing

584 -48% $40,300 2.30 2.46


July 8, 2009 13

Note: Companies mapped using the following NAICS codes and are indicative of capacity in these industries: 313230: Nonwoven Fabric Mills; 325211: Plastics Material and Resin Manufacturing; 335991: Carbon and Graphite Product Manufacturing. NAICS codes used to identify North Carolina performance materials companies were geared toward the DoD’s current advanced materials interest areas, primarily composites and nanomaterials. Companies on the list included those working with polymers, carbon products, and nonwovens, but not those in metals, metal fabrication, or traditional woven mills. While the total number of companies does not appear to be numerous, a comparison of states shows that North Carolina is third in the U.S. in the total number of companies within the NAICS codes used for performance materials.

reseT support activities

definition: RESET encompasses maintenance, refurbishment, recapitalization, and supply activities to restore military operational units to a desired level of readiness for future missions. RESET thus includes vehicle component supply, vehicle manufacturing, and armaments—ground and mobility armor manufacturing and components supply. RESET also includes maintenance, repair, and parts replacement for aircraft, ground vehicles, munitions, communications and electronic equipment, and other equipment and supplies needed by the military.

Critical skills and education required by companies engaged in this market area include technicians skilled in aircraft and automotive parts repair; electrical, mechanical, chemical, and computer engineering; computer programming and operation; materials science; supply chain and logistics management.

growth Potential: As a result of sustained military operations in Iraq and Afghanistan, the Army and Marine Corps predict annual RESET costs will continue to total $13 billion for the Army and $5 billion for the Marine Corps annually for as long as operations continue, and for two to three years thereafter.


14 July 8, 2009

Business and industry Capacity: RTI identified at least 32 industries that comprise the RESET Support Activities market area and recommended eight critical industries for initial supply chain analysis in North Carolina:

Other Motor vehicle Electrical and Electronic Equipment Manufacturing•

Aircraft Engine and Engine Parts Manufacturing•

Other Aircraft Parts and Auxiliary Equipment Manufacturing•

Aircraft Manufacturing•

Guided Missiles and Space vehicle Manufacturing•

Military Armored vehicle, Tank, and Tank Component Manufacturing•

Light Truck and Utility vehicle Manufacturing•

Other Ordinance and Accessories Manufacturing•

As of 2007, North Carolina had approximately 21,000 people working in these eight industries, and well-developed supply chains for several of them, including Aircraft Manufacturing and Other Aircraft Parts and Auxiliary Equipment Manufacturing. The core industries associated with aircraft and aircraft parts manufacturing have experienced strong employment growth, although these industries are far less concentrated in North Carolina than the national average. The Guided Missiles and Space vehicle Manufacturing industry had no linkages in the state and, surprisingly, the Light Truck and Utility vehicle Manufacturing had the second lowest linkage, indicating that trade and income is being sent out of state in this industry.

Military and Coast Guard installations in North Carolina, in partnership with the private sector, provide various levels of RESET support for the Army, Marine Corps, Navy, Coast Guard and National Guard. Fleet Readiness Center East (FRC East), a Navy depot located at Marine Corps Air Station (MCAS) Cherry Point, provides maintenance, repair, and overhaul services for multiple vertical lift aircraft platforms, including the Mv-22 Osprey and in the future, the vertical lift version of the Joint Strike Fighter. FRC East employs over 4,000 civilians and active duty personnel, and is the largest single employer in North Carolina at a single location east of Interstate 95. The U.S. Coast Guard Aviation Center in Elizabeth City includes the Coast Guard’s only aviation depot in the nation, and has resulted in strong partnerships with the private sector locally to support its mission. Leading contractors in this area include DRS Technologies, Sikorsky, and Lear Siegler Services. Lord Corporation, a company with global operations and headquartered in Cary, provides vibration, shock, and motion control solutions for rotary and fixed wing military aircraft. Outside of Camp Lejeune, OshKosh Trucks has a facility to repair trucks and other Marine Corps vehicles. At Fort Bragg, the Army Sustainment Command provides maintenance and repair support through partnerships with the private sector, including Lear Siegler Services, Stanley Associates, and ITT Industries.

In addition to supporting the ongoing mission of these facilities through workforce development and R&D partnerships, North Carolina may be positioned well to serve a critical need as troops start returning from Iraq in larger numbers. Given the number of America’s operational forces based in North Carolina, the state should explore avenues to partner with in-state installations, as well as Army Forces Command, Army Materiel Command, and Marine Corps Logistics Command to address logistical and other challenges that will result from troops returning home.

Finally, opportunities for RESET should also be viewed in terms of the need for new technologies and products where the state has the greatest strength, e.g. performance materials and vehicle supply chain—and target out-of-state original equipment manufacturers (OEMs), as well as emerging procurements that align with these strengths. Industry interviews underscored the opportunity to target OEMs given that many supply replacement parts for RESET. For example, in addition to a handful of major composites suppliers to defense vehicle manufacturers, North Carolina has several businesses that produce wheeled vehicles or components for vehicles for government use, including Lord Corporation, Force Protection, American Growler, Carolina Growler, and Indigen Armor. Given the close proximity to large deployment installations, there are strong potential savings to DoD through reduced logistics and transport costs that would result from serving RESET needs through North Carolina resources.

Potential Crossover area: The state’s motorsports industry represents an opportunity to identify potential linkages to the military and defense industry original equipment manufacturers that supply wheeled vehicles and personnel equipment. Several motorsports companies have provided products and technologies for the military and defense industry to provide rapid

The core industries associated with aircraft

and aircraft parts manufacturing have experienced strong

employment growth…


July 8, 2009 15

and cost-effective solutions to operational challenges to wheeled vehicles. In many cases, the desired technology or equipment already exists in the motorsports community. Examples of technologies and products that were developed for the motorsports industry and later applied to defense vehicles include suspension systems for mine rollers and vehicles, rapid refueling/repair procedures, windshield tear-offs for helicopters, and seating protection infrastructure. Additional opportunities for crossover application include restraints, communications systems and synergies between clothing and performance textiles. The Foundation is presently working to increase these linkages between DoD and the state’s motorsports cluster.

higher education Capacity: Significant university and community college capacity exists to support a variety of RESET activities, ranging from technicians trained in reverse engineering of obsolete parts for aircraft to engineers who develop high performance materials and technologies used by wheeled vehicle defense companies. Over 3,000 engineering students graduate from seven UNC campuses annually, many of whom contribute to the RESET workforce in North Carolina. Several UNC campuses also offer Master, MBA and certificate programs in Project Management and Supply Chain Management, training students in the skills necessary to coordinate globally distributed RESET efforts.

Further, the state has multiple R&D programs that support new technologies and supply products for defense wheeled vehicles. Examples include the Motorsports Engineering program and the Center for Precision Metrology at UNC-C, and the Integrated Manufacturing Systems Engineering Institute at NCSU. As discussed earlier, NC A&T SU and NCSU have ongoing collaborations with in-state military installations and throughout DoD related to reverse engineering and the development of performance materials, both of which have strong application to RESET. The Industrial Engineering Department at NC A&T SU also supports logistics requirements for the Army and multiple Depots.

The North Carolina Community College System has multiple programs at campuses across the state that can support RESET workforce and other requirements, including aviation maintenance programs at both Craven Community College and Guilford Technical Community College, an aircraft technician program at the College of the Albemarle, and programs related to performance materials mentioned above.

Finally, the Institute for Defense and Business, based in Chapel Hill and affiliated with the UNC System, manages the Depot & Arsenal Executive Leadership Program and the Center of Excellence in Logistics and Technology for the Army Materiel Command. These executive development programs are utilized by senior level military and civilian personnel throughout the DoD.

snapshot: reseT industry Cluster analysis


(2007)empl. growth (since 1992)

avg. annual wage (2007)



other Motor Vehicle electrical and electronic equipment Manufacturing

17,181 5% $44,743 0.86 0.92

aircraft engine and engine Parts Manufacturing

2,319 68% $85,072 0.99 0.9

other aircraft Parts and auxiliary equipment Manufacturing

527 32.40% $86,774 0.31 0.18

aircraft Manufacturing 459 1047% $61,587 0.05 0.07

guided Missiles and Space Vehicle Manufacturing

0 0% NA NA NA

Military armored Vehicle, tank, and tank Component Manufacturing

* NA NA 0.003 0.55

light truck and utility Vehicle Manufacturing

524 -38.6% $44,876 0.04 0.09

other ordnance and accessories Manufacturing

165 27% NA 0.37 0.35


16 July 8, 2009

Note: Companies mapped using the following NAICS codes and are indicative of capacity: 336412: Aircraft Engine and Engine Parts Manufacturing; 336413: Other Aircraft Parts and Auxiliary Equipment Manufacturing; 336322: Other Motor vehicle Electrical and Electrical Equipment Manufacturing; 336411: Aircraft Manufacturing; 336414: Guided Missile and Space vehicle Manufacturing; 336992: Military Armored vehicle, Tank, and Tank Component Manufacturing; 332995: Other Ordnance and Accessories Manufacturing.

emerging market areas

overall: Unmanned Systems and Fuel and Power Sources can be considered “emerging” market areas in North Carolina. While certain sub-sectors of Unmanned Systems (i.e., aerial) are dominated by other U.S. states and companies, North Carolina has potential to grow certain segments, including the areas where the state has strengths under C4ISR, and unmanned boats and ground vehicles in particular.

Fuel and Power Sources is a priority focus area for the federal government and numerous states, including North Carolina, are competing heavily to invest and become a leader in this industry. The DoD and each of its military services have either recently established or are currently establishing task forces and leadership personnel to develop strategic plans related to alternative energy. This focus applies to both warfighter technology and military installations. This is an area where North Carolina has significant R&D capacity but not as much industry capacity, although it is growing in niche areas of alternative energy.


July 8, 2009 17

unmanned systems

definition: Unmanned Systems are vehicles (air, land, sea) that utilize C4ISR technologies, replacing on-site human presence in their operations. Unmanned Systems include four main components:

Platform: Aerostructure, chassis, or hull, which is the vehicle that carries the command and control electronics, •sensors, and weapons for the unmanned system. This includes ground vehicles, such as small wheeled off-road vehicles or large tanks; aircraft, including small hand-launched devices, vertical-launched systems, such as helicopters, and traditional aircraft systems; and water-based platforms, such as underwater vessels and surface ships.

Control: The electronics, communications, and computer systems required for navigation, guidance, and control of •the vehicle. This includes communications systems required for tele-operation, robotic mechanical mechanisms, sensors for motion and proximity detection for mobility, and intelligent systems algorithms and programs for autonomous operation and human-robot interaction.

Propulsion: The engines or fuel cells needed to move the system. •

Payloads: The equipment that the unmanned system carries in order to fulfill its mission. Examples include remote •sensors for reconnaissance, communications links, and weapons. Unmanned rescue systems carry humans as payloads out of hazardous situations.

For purposes of this analysis, the Unmanned Systems technology area focuses on the first two components, since propulsion is covered under Fuel and Power, and payloads are covered under C4ISR.

Critical skills and education required by companies engaged in this market include aerospace, electrical, mechanical (vehicle and robotics), and marine engineering; automotive and mechanical technicians; computer science; computer programming; and information technology.

growth Potential: In 2000, the U.S. military had fewer than 50 unmanned aircraft in its inventory; as of May 2008, the number surpassed 6,000 (GAO, November 2008). From 1999 to 2009, U.S. military unmanned aircraft procurement grew from $500 million to $3.5 billion–a seven-fold increase that represented an average combined annual growth rate of 21 percent during this period of new investment (Military & Aerospace Electronics, December 2008). Current funding plans for unmanned systems reflect their growing importance to the military. In Fy 2009, the DoD requested approximately $3.5 billion for unmanned systems procurement and R&D—approximately $1 billion more than the department’s Fy 2008 request. In recent statements about shifting defense budget priorities, Secretary Gates stated that unmanned systems will continue to be a priority and will receive increased funding.

Business and industry Capacity: For the elements of Unmanned Systems not covered under C4ISR and Fuels and Power Sources, RTI identified at least 24 core industries that comprise the Unmanned Systems market area and recommended the following six critical industries for initial supply chain analysis in North Carolina: Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; Scientific Research and Development Services; Boat Building; Military Armored vehicle, Tank, and Tank Component Manufacturing; Aircraft Manufacturing; and Semiconductor and Related Device Manufacturing. As of 2007, North Carolina had approximately 26,000 people working in these six core industries.

Current funding plans for

unmanned systems reflect their

growing importance to the

military. In FY 2009, the DoD

requested approximately

$3.5 billion for unmanned

systems procurement and

R&D—approximately

$1 billion more than the

department’s FY 2008 request.


18 July 8, 2009

Given the concentration of relevant industries in the state and the emergence of several key companies directly engaged in this area, the best opportunities for the state include supporting payload requirements of Unmanned Systems through C4ISR products and technologies and exploring further the growing market for the development of unmanned ground and underwater systems.

For ground systems, from the top-level industry analysis, no companies were identified that were already in this market, though North Carolina has some potential capability to support related programs from existing elements of the motorsports industry and vehicle supply chain. Regarding unmanned underwater vehicles, North Carolina has one company—iRobot—and a large boating industry that may be able to crossover and support this sub-sector. In late 2008, a leading unmanned systems company based in Massachusetts, iRobot, acquired Durham-based Nekton Research, and has designated them the lead in developing unmanned underwater vehicles for the parent company. A-B-Sea Research is a young start-up company based in Raleigh that makes underwater navigation and GPS “satellites” that also contributes to this market. In partnership with the U.S. Navy, Kinston-based Spatial Integrated Systems, Inc. has developed a robotics system that will allow any waterborne vessel to become fully autonomous and able to complete a vast number of missions without a human in control. Finally, 3 Phoenix, with a presence in Wake Forest, has developed on-board navigation and surveillance computer systems for unmanned underwater vehicles that has been recognized nationally as a small business success story by the DoD. Sensor fusion and sensor manipulation are niche growth areas for North Carolina companies that expand the usefulness and scope of Unmanned Systems.

The state has some existing activity in the niche area of “lighter-than-airships” (LTA) in the region around Elizabeth City. TCOM is the only LTA company in the world with a facility, located near Elizabeth City, devoted to aerostat and airship manufacture, assembly, flight test and training operations. Additionally, Guardian Flight Systems LLC has developed a prototype unmanned airship for persistent surveillance that can be launched, operated, and recovered with a four-man ground crew.

While North Carolina has experienced tremendous growth in Aircraft Manufacturing (1047 percent employment growth versus a decrease of 36 percent nationally from 1992-2007), the leading sub-sector of unmanned aerial systems is relatively established by existing aerospace companies with little activity in the state. While North Carolina does not have strong access to restricted air space for testing, which is a disadvantage over the western U.S. states, the state is highly competitive in terms of manufacturing costs. Underscoring the limited access to restricted airspace, MCAS Cherry Point’s aerial vMU-2 Squadron faces annual challenges to gain approval from the Federal Aviation Administration to fly unmanned systems in local airspace.

Potential Crossover area: Interviews and research for this study indicate that underwater testing facilities are critical to companies that are developing unmanned underwater vehicles. EUE Screen Gems Studios (located in Wilmington) possesses one of the largest special effects water tank facilities in North America. This existing facility presents a potential crossover area where unmanned underwater companies could utilize this 60' x 60' x 10.5' tank for underwater testing — including saltwater—of their vehicles.

higher education Capacity: Leading R&D centers for this technology area include the Center for Autonomous Control and Information Technology as well as the Center for Cooperative Systems—both located at NC A&T SU; and the Center for Robotics and Intelligent Machines at NCSU. The UNC-C Mechanical Engineering Motorsports Center recently constructed the fifth largest water tunnel in the United states, putting it in a league with those operated by the U.S. Navy and MIT. Water tunnel research applications include the study of vehicle aerodynamics, fuel efficiency, aerospace experiments, and submarine/surface vessel efficiency. Seven UNC campuses offer a variety of engineering degree programs, including mechanical engineering degree programs at NCSU, NC A&T SU and UNC-C. Elizabeth City state University supports local industry through a degree program in Aviation Science. UNC campuses produce roughly 3,000 engineering graduates annually, roughly 500 of which are mechanical engineering degrees. Within the community college system, there are at least 16 campuses across the state that offer training in mechanical engineering technology and aviation systems technology, which could support the workforce needs of business and industry in this market area.

Seven UNC campuses

offer a variety of

engineering degree

programs...


July 8, 2009 19

Charlotte

Raleigh

Cary

DurhamGreensboroWinston-Salem

Fayetteville

Concord

Gastonia

High Point

Asheville

Jacksonville

Wilmington

Greenville

Unmanned Systems Industry, Research, and EducationCapabilities in NC

Map Created January 2009

0 50 100 150 20025Miles

LegendEducation and Training

Companies

Research Capabilities

Note: Companies mapped using the following NAICS codes and are indicative of capacity: 336992: Military Armored vehicle, Tank, and Tank Component Manufacturing; 336612: Boat Building (includes remotely operated); 336411: Aircraft Manufacturing (includes drones, helicopters); 334413: Semiconductor and Related Device Manufacturing; 334511: Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; 334513: Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process variables; 541712: Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology); 335314: Relay and Industrial Control Manufacturing.


20 July 8, 2009

fuel and Power sources

definition: Ensuring access to fuel and power sources in support of the forces are critical to the operations of the DoD. Fuel and power sources provide energy to vehicles, electronic equipment, buildings, and temporary structures. The DoD Energy Strategic Plan outlines the reduction of the use of fuel through energy efficiency as well as shifting dependence on non-domestic sources such as oil to renewable and alternative sources.

Technologies in this area include research into alternative sources of fuel including biomass, wind, solar, geothermal, wave power, vibration power, and Fischer-Tropsch processing of coal. Lighter, longer-lasting fuel cells in support of mobile missions using solid oxide batteries and solar cells are included, as well as power distribution software and energy demand management. This area also includes efficient engine technologies such as hybrid engines.

Critical skills and education required by companies engaged in this market include chemical, mechanical, and electrical engineering; materials and environmental science; physics; information technology; and computer programming.

growth Potential: Underscoring the growing investment in energy security and related projects, the DoD’s budget in these areas has grown from $440 million in Fy 2006 to $1.3 billion in Fy 2009. The American Recovery and Reinvestment Act provides $300 million to DoD for energy-related R&D. However, many states across the country are investing in alternative energy R&D. Therefore, North Carolina should focus on its areas of strength with direct military application such as biofuels and battery sources.

Business and industry Capacity: RTI identified at least 16 core industries that comprise the Fuel and Power Sources market area, and recommended three critical industries for initial supply chain analysis in North Carolina: Storage Battery Manufacturing; Other Electric Power Generation, Transmission, and Distribution; and All Other Miscellaneous Electrical Equipment and Component Manufacturing. As of 2007, North Carolina had approximately 13,000 people working in these three core industries.

The analysis shows that Fuel and Power is an area where North Carolina has significant R&D capacity, but the industry is not as well developed as in other areas analyzed, such as C4ISR and Performance Materials. The cluster analyses suggest that North Carolina has the industrial presence to support the development of select aspects of products and services under this market area, especially in the manufacturing industries related to batteries and motors/turbines. These two industries are far more concentrated in North Carolina than the national average.

snapshot: fuel and Power industry Cluster analysis






Storage battery manufacturing

657 -34% $52,624 1.44 1.42

Other electric power generation, transmission, and distribution

11,106 -53% $81,592 0.71 0.92

all other miscellaneous electrical equipment and component manufacturing

1,022 382% $37,232 0.98 1.17

North Carolina should

focus on its areas of

strength with direct

military application—

such as biofuels and

battery sources.


July 8, 2009 21

Note: Companies mapped using the following NAICS codes and are indicative of capacity 335911: Storage Battery Manufacturing; 221119: Other Electric Power Generation; 335999: All Other Miscellaneous Electrical Equipment and Component Manufacturing.

Underscoring this potential, in recent years North Carolina has experienced new investment in the development of alternative energy—primarily through biofuels, solar, wind, and fuel cell technologies. North Carolina ranked as the fifth leading state nationwide in 2008 for new corporate alternative energy investment, totaling 44 new projects (Conway Data, April 2009). According to the Energy Center at Appalachian State University, over 2,200 new jobs have been announced along with $800 million in new investment to support alternative energy projects in recent years. As of December 2008, North Carolina was home to over 100 companies involved in either manufacturing or developing green energy technology.

The jobs associated with this market also tend to be well-paid: of the 16 core industries associated with this market area, 12 of them have wages that are significantly higher than the state average. In addition to North Carolina’s attractive manufacturing and business climate, the state’s increasing focus on developing alternative fuels and energy efficiency technologies has spurred development of new projects and attracted

North Carolina ranked

as the fifth leading state

nationwide in 2008 for

new corporate alternative

energy investment,

totaling 44 new projects (Conway Data, April 2009).


22 July 8, 2009

investors. In 2007, Microcell opened a new fuel cell manufacturing facility in Eastern North Carolina to produce its patented microfiber design to take advantage of the state’s talented workforce and competitive cost structure.

In addition to new energy technologies for vehicles and other equipment, the DoD continues to define alternative power and energy reduction initiatives for military installations. The large-scale expansion of Army and Marine Corps installations in North Carolina may provide opportunities for alternative power technologies and products.

higher education Capacity: North Carolina has significant education and R&D capacity to support this technology area. Leading R&D centers include the Energy Center at Appalachian state University, which was established in 2001 to conduct energy research and applied program activities in the areas of energy efficiency, renewable energy technology, biofuels, policy analysis, forecasting, and economic development. In April 2009, UNC-CH announced a major award through the Department of Energy and American Recovery and Reinvestment Act funding to advance the development of solar fuels and next generation photovoltaics. Expected to total $17.5 million over five years, the UNC center is the only Energy Frontier Research Center funded in North Carolina, and one of 16 nationally that received Recovery Act funds for job creation.

Supported by a five-year, $28.5 million investment, NCSU announced in 2008 that it will lead the Future Renewable Electric Energy Delivery and Management Systems Center, which is a national research center that aims to revolutionize the nation’s power grid and speed renewable electric-energy technologies into every home and business. In 2007, RTI, UNC-CH, NCSU, and Duke University launched the Research Triangle Energy Consortium to address major technical, environmental, economic, societal, and public policy problems related to the use of energy. Finally, the North Carolina A&T Center for Energy Research and Training collaborates on projects with Army installations, including Fort Bragg, as well as the Army Engineering Research & Development Center.

In addition to major research efforts, the UNC system offers a variety of degree programs in areas that contribute to a fuel and power source workforce. UNC-C, in particular, is focused on producing a new generation of highly trained energy professionals by building the Energy Production and Infrastructure Center, which will train students to manage traditional and emerging energy sources and infrastructures. The North Carolina Community College System launched the “Code Green Initiative” in 2009 to provide enhanced curriculum and training for “green collar jobs” and is working with the UNC system to outline a comprehensive curriculum for green job training.

Industry growth is also supported by innovative statewide programs, such as North Carolina GreenPower, an independent nonprofit corporation with a goal to supplement the state’s existing power supply with more green energy. Finally, the state is investing heavily in the development of alternative fuels. The Biofuels Center of North Carolina, established by the North Carolina General Assembly in 2007, seeks to develop a statewide biofuels industry to reduce the state’s dependence on imported liquid fuels. The Center’s goal is to source 10 percent of North Carolina’s liquid fuels from biofuels locally produced by 2017.

The Biofuels Center

of North Carolina,

established by the North

Carolina General Assembly

in 2007, seeks to develop

a statewide biofuels

industry to reduce the

state’s dependence on

imported liquid fuels.


July 8, 2009 23

Nascent market area

human factors

overall: Human Factors is an area that is still evolving within the DoD and DHS. It is expected to be a strong market area in future years, with cross-cutting application across many technology platforms in addition to informing how our government will undertake intelligence activities and prepare for the battlefield.

definition: The DoD’s new interest in Human Factors (Mapping the “Human Terrain”) is in understanding the social, cultural, and behavioral aspects of potential enemies in order to detect threats, as well as the ability of the warfighter to adapt to and communicate with other cultures and societies through the assistance of rapid training methods and translation technology. The DHS’s Human Factors Division is focused on social/behavioral threat analysis, personal identification systems (such as biometric sensors), traditional human/systems integration and human performance, and modeling and simulation of human behavior to predict threats.

Underscoring the utility and effectiveness of employing human factors analysis on the battlefield, Colonel Martin Schweitzer, former Commander of the 82nd Airborne Division’s 4th Brigade Combat Team at Fort Bragg, testified before Congress in June 2008 regarding Human Terrain Teams and their impact on current operations in Iraq and Afghanistan. The objective of these teams, according to Colonel Schweitzer, is to discern “soft power” means of achieving desired effects. A highly successful “graduate” of the North Carolina Defense & Security Technology Accelerator, K3 Enterprises was founded in 2005 and is a Fayetteville-based small business providing support to these Army Human Terrain Teams with training and in-theater support.

Critical skills and education required by companies engaged in this market include computer science, information technology, electrical and mechanical engineering, anthropology, biology, sociology, political science, international relations, behavioral science, psychology, linguistics, instructional design, and education.

growth Potential: Human Factors is a nascent industry with a new focus for research funding—most notably through DoD’s establishment in 2008 of the Human Social Culture Behavior Modeling Program (HSCB), the MINERvA Research Initiative administered by the Army Research Office in Research Triangle Park, and as seen through several recent solicitations issued by the Intelligence Advanced Research Projects Activity. As one industry representative stated during an interview for this study, “It is the right time and right place for human factors work in North Carolina.”

Underscoring the cross-cutting nature of Human Factors research and application, the HSCB program is vertically integrated across three categories of Research, Development, Test, and Evaluation funding: Applied Research, Advanced Technology Development, and Advanced Component Development & Prototypes. It addresses military capability needs centered on modeling for Irregular Warfare and Security, Stability, Transition, and Reconstruction Operations and on using computational models to support operations analysis, intelligence analysis, training and joint experimentation.

Business and industry Capacity: This market area spans the spectrum from innovative social sciences research to the development and application of new technologies—areas where North Carolina has strong competitive advantages within academia and industry. RTI identified at least five core industries that comprise the Human Factors market area, and recommended two critical industries for initial supply chain analysis in North Carolina: Scientific Research and Development Services; and Computer Terminals and Other Computer Peripheral Equipment Manufacturing. As of 2007, North Carolina had approximately 35,000 people working across these five core industries.

Given the strength of the state’s computer and information technology sector, coupled with the establishment of the Institute for Homeland Security Solutions (“IHSS”) and the state’s virtual simulation and gaming sector, North Carolina has strong advantages in developing this growing market area.

snapshot: human factors industry Cluster analysis






Computer Terminals and Other Computer Peripheral Equipment Manufacturing

12,733 -24% $111,540 1.36 6.99

Scientific Research and Development Services 17,597 127% $88,868 0.92 1.00


24 July 8, 2009

Note: Companies mapped using the following NAICS codes and are indicative of capacity: 541720: Research and Development in the Social Sciences and Humanities; 334119: Other Computer Peripheral Equipment Manufacturing.

The core industries that support this market area are highly compensated and growing in North Carolina. Examples include Computer Terminals and Other Computer Peripheral Equipment Manufacturing, with a location concentration nearly seven times the national average and an average annual salary of $112,000; and Scientific Research and Development Services, whose North Carolina growth, as noted earlier, has far outpaced national growth and has an average salary of roughly $89,000.

Established by the Foundation, RTI, Duke University and UNC-CH; IHSS is partnered with the Human Factors and Behavioral Sciences Division of the DHS to conduct research to improve our understanding and analysis of homeland security threats. On the other end of the spectrum from social sciences research, this market area is supported by North Carolina’s vibrant information technology industry and niche strengths in gaming/simulation. The opportunity exists to develop targeted research programs in partnership with technology companies in order to pursue not only DoD and DHS contracts, but also intelligence opportunities.

The opportunity exists to

develop targeted research

programs in partnership

with technology

companies in order to

pursue not only DoD and

DHS contracts, but also

intelligence opportunities.


July 8, 2009 25

The proximity of the Special Operations Forces community at Fort Bragg and Camp Lejeune, which have a focus on training and education in areas related to Human Factors in order to more effectively carry out their mission, offers a potential opportunity for North Carolina-based industry and academia to partner on future requirements.

higher education Capacity: North Carolina has strong higher education capabilities to support this market area, particularly with respect to social sciences research and area studies. Eight institutions are home to diverse degree programs such as International Studies, Linguistics programs, Bioinformatics and GIS training programs, which produce skills valued in Human Factors work. For example, East Carolina University recently introduced a certificate program in Global Understanding, focused on developing students’ ability to elicit change in a culturally-divergent, global community. Centers actively working with DoD and DHS include the Center of Excellence for Battlefield Capability Enhancement and the Center for Human-Centric Command & Control Decision Making—both located at NC A&T SU; and, as discussed above, the IHSS. North Carolina Central University operates the Institute for Homeland Security & Workforce Development, which educates students about issues related to terrorism and criminal justice. UNC-CH is recognized nationally for the strength and diversity of its area studies programs and centers, which have an important role in supporting Human Factors.

Fayetteville Technical Community College operates the Advanced visualization and Interactive Design Center that is unique for North Carolina and a strong asset that has the potential to serve Human Factors-related applications, in addition to many of the other technology areas under this study. Under this program, students acquire the skills of a simulation-modeling technician, receiving hands-on training and experience in interactive 3-D modeling and simulation, computer-aided design and development, geographic-information systems, and simulation and gaming programming.


26 July 8, 2009

reCommeNDaTioNs

It is clear that North Carolina has significant industry, academic, and R&D capacity to support the growth of each of the market

areas identified in the study. These market areas cut across many of North Carolina’s leading industries, and represent an

opportunity for further development by the state in its long-term efforts to grow and sustain a defense and homeland security

economy that builds on statewide strengths and competitive advantages. In order to capitalize on this opportunity, the

Foundation recommends:

develop a statewide cluster strategy to build North Carolina’s defense and security industry. 1.

The state should develop this strategy in coordination with the University of North Carolina General

Administration, the North Carolina Community College System, the Foundation, and other partners.

Efforts should be made to identify industries that overlap within the six market areas, as well as those that

overlap with Commerce’s separate supply chain analysis of North Carolina’s Aerospace/Aviation cluster.

leverage the unique strengths of existing economic development organizations to support the growth of 2.

the target market areas.

North Carolina has a number of specialized economic development and industry resource initiatives currently

supporting job and investment growth through defense and homeland security. Increased coordination among

these organizations to apply the unique expertise and resources at their disposal—at both the regional and state

level—will jump-start the process of accelerating growth in the target market areas, maximize the return on existing

resources and funding beyond the successes already currently gained through their efforts, and provide critical

strategic guidance to all organizations focused on growing the state’s defense and homeland security industry.

attract more public and private r&d funding and increase in-state participation in the SBir and Sttr 3.

programs.

Over the last five years, only 149 of the 15,700 DoD and DHS SBIR awards have been won by North Carolina firms.

Much like the North Carolina Biotechnology Center facilitated greater investment in biotechnology R&D to help

grow related product development and manufacturing industries—thus maximizing investment and job creation

so that now North Carolina has the third largest biotechnology cluster in the country—the state’s plan should

establish this objective within the target defense and homeland security market areas.

develop a system, with both human and technological networks, permitting ready access to accurate 4.

information on higher education capacities, particularly as related to these six target areas.

Several ideas have been explored in partnership with the UNC system, including regular communication with

research leadership across the system, strategic hires focused on translating university research and training

capabilities towards defense needs, and the development of searchable databases that provide faculty expertise

according to industry sector. Model community college partnerships, such as the one that has developed over the

past 15 years between Coastal Carolina Community College, University of North Carolina-Wilmington, and MCB

Camp Lejeune and MCAS New River, offer opportunities for replication and extension as well.

develop actionable intelligence on dod and dhS opportunities in the identified market areas. 5.

By focusing on markets and industries of greatest potential as identified herein, the state can better identify

emerging, funded opportunities through DoD and DHS that will benefit North Carolina’s academia, industry and

R&D base. The state could, for example, track trends within DoD and DHS projected budgets as they relate to

the target markets. The state could also track emerging funded opportunities through relevant procurement

Commands and research offices in North Carolina and throughout DOD and DHS—that fall within the target

markets, and communicate these opportunities to North Carolina industry and academia.


July 8, 2009 27

Support and encourage existing companies to remain and grow in North Carolina. 6.

Commerce, North Carolina-based universities and community colleges, with support from the Foundation and

other business development organizations, should facilitate opportunities for companies to expand in-state

business partnerships.

recruit companies from out-of-state that will fill important gaps in North Carolina’s supply chains 7.

encompassing the target market areas.

Identify leading companies within the target market areas that are not present in North Carolina, or which have

only a small presence in North Carolina, and develop targeted recruiting/expansion efforts.

Communicate North Carolina’s assets and priorities in each of the target market areas to a variety 8.

of audiences.

Priority audiences include private sector clients, economic development search firms, federal agencies,

the North Carolina Congressional Delegation, and the legislative and executive branches of North Carolina

state government.


28 July 8, 2009

aCKNowleDgemeNTsThe Foundation would like to thank the following individuals for their hard work and commitment to the study as members of the Project Team:

Leslie Boney, Associate vice President for Economic Development Research, Policy, and Planning, The University of •North Carolina General Administration

Timothy Cole, Economist, North Carolina Department of Commerce•

Bo Gregory, Statewide Economic Developer, North Carolina Department of Commerce •

Chris Harder, Director of Economic Analysis, North Carolina Department of Commerce•

Stephanie McGarrah, Assistant Secretary for Policy, Research and Strategic Planning, North Carolina Department of •Commerce

Sara Nienow, Policy Analyst, North Carolina Department of Commerce•

Caroline Ranghel, Project Support Specialist, RTI International •

Kirsten Rieth, Senior Research Director, RTI International•

Courtney Thornton, Research Director, UNC General Administration•

Linda Weiner, Special Assistant to the President for Engagement and Economic Development, North Carolina •Community College System

Dan Winfield, Senior Research Director, RTI International •

Amy Witsill, Technology Project Manger, RTI International•

The Foundation would like to thank the following individuals for providing feedback on earlier drafts of this report.

Marjorie Benbow, Director, Greater Charlotte Office, North Carolina Biotechnology Center • Jay Bender, Interim Director, Eastern Region Military Growth Task Force • Ronnie Bryant, President/CEO, Charlotte Regional Partnership • John Chaffee, President/CEO, NC’s Eastern Region • Mark Cramer, President, Institute for Defense and Business • Scott Daugherty, Assistant vice Chancellor, UNC System, Extension, Engagement and Economic Development and Executive Director, Small Business & Technology Development Center • Brigadier General Paul Dordal, USAF (Ret.); Executive Director, BRAC Regional Task Force • Scott Dorney, Executive Director, North Carolina Military Business Center • Mickey Finn, Strategic Programs, North Carolina Military Business Center • Scott Hamilton, President/CEO, AdvantageWest Economic Development Group• Charles Hayes, President/ and CEO, Research Triangle Regional Partnership; Member, UNC Board of Governors • Jim Kainz, Principal Engineer, Applied Research Associates, Inc. • Don Kirkman, President/CEO, Piedmont Triad Partnership •Debbie Lilly, vice President of Client Services, Research Triangle Regional Partnership • Dr. Ron Lingle, President, Coastal Carolina Community College • Kenneth Marks, Chair, Partnership for Defense Innovation • Joan Myers, Director, Cyber Technologies, Applied Research Associates, Inc. • Lisa Owen, vice President and General Manager, BAE Systems Tensylon High Performance Materials, Inc. • Scott Perry, President, Partnership for Defense Innovation • Marcia Price, President, vector Strategy, Inc. • vann Rogerson, President/CEO, NC’s Northeast Commission • David Swenson, vice President, Economic Development Services, Charlotte Regional Partnership • Tom White, Director, Economic Development Partnership, North Carolina State University • Steve yost, Director, North Carolina Southeast

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