Bolstered by two wars and a focus on high-end military research and development, the defense industry in Massachusetts has flourished over the past decade to remain a “pillar” of the state’s economy in the face of a pair of recessions, according to a new report.

Bolstered by two wars and a focus on high-end military research and development, the defense industry in Massachusetts has flourished over the past decade to remain a “pillar” of the state’s economy in the face of a pair of recessions, according to a new report.



Bay State defense contractors have tripled the value of their contracts to $15.6 billion since 2001 and almost doubled their employment rolls, which now support almost 116,000 workers, according to a new report funded by a grant from major defense contractor Raytheon.



The report, published by Associated Industries of Massachusetts and the University of Massachusetts Donahue Institute, found the defense industry accounted for 85 percent of all federal contracts awarded to Massachusetts, ranking the state fifth nationally in Department of Defense contract awards and seventh in contracts from the U.S. Department of Homeland Security.



Total defense-related economic activity in Massachusetts increased from $10.6 billion to $26 billion between 2001 and 2009, a period during which the United States has been involved in wars in Iraq and Afghanistan. Payrolls generated by Bay State defense companies now total a record $8.93 billion, according to the report.



“Even in the recession, we’ve seen this industry remain stable and reliable,” said Dr. Lynn Griesemer, of the UMass Donahue Institute.



The report found nine of the top 10 products sold to defense agencies are related to technology and research, just the type of defense work that Bay State employers are best suited to perform and a market position that could insulate the local defense industry from reductions in defense spending outlined by President Barack Obama.



Asked why the industry sector had proven to be largely recession proof, Griesemer said, “Partially war, but more importantly because of what we do in Massachusetts with research and development, high-end manufacturing and services.”



As the United States works to disentangle itself militarily from Iraq and confronts pressure to reduce its footprint in Afghanistan, researchers said the defense industry’s ability to sustain growth should not be dramatically curtailed.



“I don’t imagine a Department of Defense that wouldn’t continue to invest in (technology) even if we aren’t in a full state of war,” Griesemer said.



Economic officials and researchers did caution that Massachusetts’s ability to retain its market status will be closely linked to the state’s ability to protect both Hanscom Air Force Base and the U.S. Army Natick Soldier Systems Center from closure. Though the next Base Realignment and Closure Commission process isn’t supposed to start again until 2015, some experts predicted it could occur sooner given the pressure to reduce federal spending.



The late U.S. Sen. Edward Kennedy played a vital role in protecting Natick and Hanscom from closure or relocation during the last so-called BRAC process in 2005, leaving behind a leadership void that will have to be filled by U.S. Sen. John Kerry and U.S. Sen. Scott Brown, who serves on the Armed Services Committee.



“(Kennedy) was so critical, but I do think you’ve seen both our senators, one very senior senator in Kerry and Sen. Brown, step up to the plate and are aware of the importance of this industry,” Griesemer said.



Griesemer described the relationship between the military bases and the industry as symbiotic, each feeding one another’s success. She said that argument helped saved both bases from closure during the last BRAC process, and will be the focus of the state’s pitch moving forward.



Chris Anderson, president of the Massachusetts High Technology Council and Defense Technology Initiative, said regional coordination for the next BRAC has already begun as leaders will look to quantify the value of the technological assets in all New England states and importance of maintaining proximity to that research and development.



Anderson said Kennedy “was one of the most important reasons we succeeded in the last BRAC, because he was the most effective communicator of our strategy, but today the government’s reliance on innovative technology, I think, will be much more valuable than the politics involved.” He said, “The region that can communicate and demonstrate value around the defense mission is going to prevail and we have no reason to believe that outcome should be any different.”



Economic Development Secretary Greg Bialecki called Kennedy’s death a “huge loss” given his commitment to the defense industry in Massachusetts despite being a vocal critic of Bush-era policies in the Middle East, arguing that the future of Natick and Hanscom will become “tremendously important” to the ability of the sector to continue to grow.



Bialecki also said a reduction in domestic defense spending will likely spark renewed debate over whether to ease restrictions that would allow American defense contractors to sell technology and equipment to friendly foreign governments.



The number of employees supported by the defense sector in Massachusetts has grown by nearly 50,000 jobs since 2001, an increase of more than 70 percent that saw jobs grow from 67,615 in 2001 to 115,563 in 2009. Four organizations raked in $10.1 billion in defense contracts in 2009, led by Raytheon with $4.58 billion in awards and followed by General Dynamics, Massachusetts Institute of Technology and General Electric.



“This is an industry that has a wonderful diversity of small and large businesses in Massachusetts,” said Bialecki, who cited the defense sector as one area of the state’s economy where businesses have successfully moved past research and development to create well-paying manufacturing jobs for blue-collar workers.



Bialecki also noted the geographic diversity of industry employers stretching from Greater Boston and the Merrimack Valley to Pittsfield, and said some of the engineering and manufacturing expertise being developed at these defense companies could someday be transferable to other sectors such as biotechnology.



“We can make things here, not just come up with ideas, but make things as well or better than anyone else,” Bialecki said.



While large contractors like Raytheon have been successful in attracting multi-billion dollar defense contracts, that funding trickles down through the economy, according to the report, supporting a large number of smaller manufacturers.



“We actually have a very vibrant group of second and third tier manufacturing,” said Richard Lord, president and CEO of Associated Industries of Massachusetts.

