HONOLULU – The State of Hawai‘i’s Department of Business, Economic Development and Tourism (DBEDT) has released its Hawaii Defense Economy (HDE) Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis Report and Action Plan, which identifies the strengths, weaknesses, opportunities and threats to Hawai‘i’s defense sector, as well as proposes strategic initiatives to expand opportunities for more local businesses and contractors to engage in, and benefit from military contract spending.

“Hawai‘i’s military defense sector continues to remain strong and is helping to stabilize our economy during this pandemic,” said Mike McCartney, director of DBEDT. “As the second largest sector of the State’s economy, military procurement spending has generated $4.5 billion in economic impact this year, with $2.3 billion in federal contracts throughout the state, helping to sustain more than 30,000 jobs statewide. Our Hawaii Defense Economy project SWOT Analysis Report and Action Plan allows us to identify and determine initiatives that will help us to diversify and strengthen our state’s economic resiliency, which is now more important than ever.”

Major highlights from DBEDT’s HDE SWOT Analysis Report include:

Strengths & Opportunities

• Financial Health (overall financial performance) and Defense Market Outlook (market growth potential) received the highest survey ratings, indicating that Hawai‘i’s defense market has been, and is expected to continue to be financially rewarding with more opportunities in the future.

Weaknesses & Threats

• Market Flexibility received the lowest rating indicating difficulty for defense firms to serve both public and private (commercial) markets, with an exception to construction, which appeared to be more resilient in its ability to serve both defense and private sectors.
• DoD Dependency ranked relatively high (46% among all respondents), indicating a potential threat should there be a downturn in defense spending in Hawai‘i.
• Business Climate (of the defense market) and Labor Market (skilled labor availability) were considered significant challenges and threats, especially in the professional services sector, like IT services and cybersecurity, ship building and repair, and program/project management across many industries.

Focus Areas

The following were identified as sectors with the greatest potential for sustaining Hawai‘i’s defense industry and building economic resiliency. All areas have experienced growth in military contract awards over the past five years.

• IT Services & Cybersecurity is an important industry sector given the: size of annual defense spending ($128 million in 2020 contracting awards and $240 million in economic impact); high growth rate (+32% in terms projected from 2018-2028); relatively high-paying occupations; and DoD mandates for cybersecurity.
• Engineering Services receives large annual defense spending ($293 million in 2020 contracting awards and $569 million in economic impact), offers high paying occupations within the state, and opportunities beyond missile defense, including system repair, maintenance and facility construction.
• Ship Building/Repairing plays a vital role in supporting Pearl Harbor Naval Shipyard (PHNSY) – the nation’s largest most comprehensive fleet repair and maintenance facility between the U.S. West Coast and Asia, and the state’s largest industrial employer – and provides the opportunity for local workers to work in high paying trade and technical fields and pursue additional career opportunities.

The SWOT analysis survey was deployed to 507 military prime and subcontractors in Hawai‘i. Responses were gathered online from February through April 2020. DBEDT received 107 responses (21% response rate) from a wide range of industries, including small businesses (89%), service providers (84%), DoD business contractors for 10+ years (77%) and prime contractors (65%). For detailed survey results, and to view the full SWOT analysis report, visit here .

Utilizing data from the SWOT Analysis Report, HDE website and additional stakeholder surveys, a comprehensive Action Plan was developed to propose and guide strategic areas of focus for a potential Phase III of the HDE project. The main initiatives proposed in the Action Plan include:

• HDE DoD Industry Alliance: Establishing a Hawai‘i-focused DoD industry-specific organization to identify current and future industry challenges and develop solutions and actionable initiatives that may include, but not be limited to: workforce/curriculum development; small business mentorship and support; and regulatory/legislative advocacy to improve the business climate of the defense sector.
• Cybersecurity Compliance Support: Partner with the State’s NIST Manufacturing Extension Partnership (MEP) National Network Center, INNOVATE Hawaii, to provide outreach, support and technical assistance to Hawai‘i-based DoD contractors and small businesses to ensure they meet new cybersecurity mandates required to do business with the DoD.

The DoD Office of Local Defense Community Cooperation (LDCC) has funded the previous Phase I and current Phase II of the Hawaii Defense Economy (HDE) project as part of its mission to support the readiness and resiliency of states and communities invested in the defense mission. DBEDT is currently in the process of applying for an OEA grant to support a Phase III of the project to implement proposed initiatives and select deliverables based on the Action Plan recommendations. To access the Action Plan, visit the HDE project website or click here.

For more information about DBEDT’s HDE project, and to access data and information about Hawai‘i’s military defense sector, visit http://defenseeconomy.hawaii.gov/.