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Bay State firms could gain from more defense spending

The election of Ronald Reagan cheered up Massachusetts defense contractors. They're uncertain just how much the new administration plans to step up armaments spending and where that money will go. But they suspect most of their firms stand to gain.

"If there's an increase in defense spending, we ought to be affected favorably," says John Severance, spokesman for Raytheon, the state's largest defense contractor.

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"With the state of the art in weaponry getting more and more sophisticated, an increase in spending would have an impact on the area's high-tech firms," affirmed Albert J. Kelley, president of the program management systems division at Arthur D. Little.

The defense industry in Massachusetts, like the civilian industry, reflects the state's growth in high technology. With guidance systems, semiconductors, lasers, electronic instruments, computerized navigation equipment, high-altitude optics, and sonar systems to buy, the Department of Defense is a frequent caller here.

The only thing that could keep Massachusetts from gaining quite as much from increased defense spending would be a heavy emphasis on manpower over technology. But even this, company spokesmen and analysts say, would help, since today's soldier is provided with much more sophisticated communications equipment, weapons aiming devices, and optical equipment.

With one particular radio system, a "soldier in a foxhole anywhere in the world can have instantaneous communication with the Pentagon," notes William Sevigne, director of office planning and management at the DEfense Contract Administration (DCASR) regional office in Boston. This Pentagon agency administers about 80 percent of the defense work done in the state.

The state's defense contractors "know there is supposedly more work coming down the line," says Col. Charles E. Wheeler, the commander of DCASR.

"How much we get all depends on what they [the Reagan administration] work on ," Colonel Wheeler added. "If it's things like the MX, there will be some benefit." That controversial missile system, awaiting a review by President Reagan of the "racetrack" deployment system approved by former President Carter, could benefit several prime contractors and subcontractors in the state, including Avco Corporation, Sylvania, and Raytheon. While the racetrack may lose in the stretch, the MX will probably be approved in some form, Dr. Kelley said.

The fact that so much of the work awarded to prime contractors in Massachusetts may be done by subcontractors spread all over the country makes it difficult to add up just how many defense dollars come into the state. DCASR officials estimate their agency handled approximately $11 billion in defense work last year. Adding non-DCASR work might push the total to $13 billion or $ 14 billion. This would include approximately $60 million a year worth of ship repair work, according to Commander Wes Boer of the Navy's information office in Boston.

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While a growing share of the defense work going on here is in high technology , there is still work in a few of the state's more traditional industries. There's a shoe company making boots and shoes, a textile company making blankets , and a clothing company making uniforms.

Perhaps the only thing that surpasses the ability of firms in the state to make things is the ability to think about things. The state's universities, led by Harvard and the Massachusetts Institute of Technology, do a big business in research and development.

Private research firms like Arthur D. Little do a big business in R&D and systems management. Dr. Kelley's department, for instance, designs systems that help "pull together" the various pieces of a project. "All the complicated pieces of complicated weapons systems all have to come together into something that works," Dr. Kelley said.

One concern the defense industry has, especially some of the high technology firms, is the same thing that concerns civilian industry in the state: the possible loss of business to companies located in the Sunbelt, particularly California and Texas.

"The companies here haven't failed to notice that those are the home states of the President and Vice-President," one former state economic official noted. The former official, who is now in private (nondefense) industry, pointed out that these and other states in the Sunbelt "will do a lot more" for companies that want to locate or expand there, which means new contracts awarded to Massachusetts-based firms may not necessarily result in a big increase in jobs here. Still, he added, "I see Massachusetts holding its own in defense contracts."

The former official also expressed his belief that, despite the presence of a Republican in the White House and a Republican-controlled Senate, an important Massachusetts Democrat, House Speaker Thomas P. (Tip) O'Neill Jr., will be very important to the President's legislative goals.

"Reagan needs Tip even more t han Carter did," he concluded.

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