Congress may have brought the U.S. back from the brink of the fiscal cliff last week, but the stopgap deal has companies that make Humvees, helicopters, boats and weapons for the Department of Defense plenty worried. And that 's resulted in boom business for public-affairs shops enlisted to help them hold on to their multibillion-dollar agreements.
Facing threats of budget cuts, the Department's procurement processes are more cost-oriented, forcing defense contractors to communicate a better value proposition. The government agencies also have time to price-shop now that the country is no longer in the thick of two wars, so the reviews are not only more cost-oriented, they're more competitive.
After a decade of war-fueled boom years, "we're moving into a period where budgets will be much tighter," said Nate Tibbits, the former executive secretary of the National Security Council, who was hired by WPP's Burson-Marsteller as chair of its U.S. public-affairs practice. "People understand we have to bring more resources to these battles as each of these program bids become more competitive."
That presents an upside for the public-affairs agencies working with big contractors such as Lockheed Martin, Boeing or Textron. With these companies now looking for every advantage in winning new contracts and keeping old ones, the accounts are more abundant and can be as big as $80,000 to $100,000 a month, not including out-of -pocket costs for media buys, according to a number of industry executives. The work can last as long as two years, depending on how long the contractors are in competition for the government bid.
Mr. Tibbits old Ad Age his group has already won three pieces of business from defense contractors this year, with another big contract in the works.
Tod Donhauser, exec VP-manager of Edelman's defense practice group in D.C., pointed to an example of a Humvee replacement called the Mine-Resistant Ambush Protected vehicle. Five years ago, he said, the Defense Department would "rush [these vehicles] to the field to save lives. Now, there's more evaluation of whether it's the right vehicle or there's something better for troops being used in a different capacity that might be more affordable while still providing safety to war fighters."
His team has already doubled this year. It recently hired Jonathan Litchman, previously a senior VP at Science Applications International Corporation, a top defense contractor.
Contractors now have to place more of an emphasis on why their offer matters, said Mr. Tibbits, including messaging about "what it brings in terms of jobs in the U.S., how their winning bid will affect their local communities and how the solution they bring is ... the cost-effective solution."
A Northrop Grumman spokesman told Ad Age that since January 2010, when Wes Bush was appointed as CEO, "he has focused Northrop Grumman on performance and cost-reduction activities, with great success."
"To reinforce the new focus, we revamped our earned and paid-media messages and campaigns to highlight value and performance," said the Northrop Grumman spokesman. The company might communicate these messages through executive speeches, video messages and syndicated stories in intra-company magazines and newsletters.
Don Goldberg, co-founder and partner at Bluetext, said that his firm has begun to think beyond the typical D.C. metro-stop domination and traditional advertising to help defense contractors stand out. For example, it partnered with a military-vet-staffed food-truck company called Dogtag (the organization donates a portion of proceeds to veterans' families) and parked the client-branded trucks near the government agency its client was targeting. Many of the big U.S.-based defense contractors also build weapons and vehicles for foreign governments—under strict regulation, of course. And now, as many of these contractors face heightened competition and imminent budget cuts in the U.S., they're likely to get more aggressive abroad, said Gordon Johndroe, director in APCO's D.C. office. "That's really where our focus has been over the last couple of years and going into the future."
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