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Small technology companies find federal business outside Washington

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Print this page by Richard Foster

Like many defense contractors, Francois Chenard launched his fledgling fiber-optics company in Northern Virginia. But in 2009, three years after starting IRflex Corp., Chenard moved from Fairfax County to Danville.

This September, following five years of research and development funded by a $2.5 million grant from the Department of Defense, IRflex began production on mid-infrared devices and components that will be used to deflect shoulder-fired missiles from low-flying U.S. military helicopters and planes in combat zones.

Though IRflex is no longer headquartered near the Beltway, Chenard says his office in the Dan River Business Development Center is close enough to D.C. that he and his military clients can easily drive to meet each other in person when needed.

Federal contracting is a major economic driver for the technology sector in Virginia, primarily driven by defense spending. Between 2000 and 2010, the Department of Defense awarded at least $398.9 billion to contractors in Virginia (not including classified spending). While the lion’s share of that business remains centered in Northern Virginia among major contractors such as Northrop Grumman, there are a host of small and mid-size technology businesses performing federal contract work across Virginia. And many choose by design not to be in D.C.

Virginia has more high technology workers per capita than any other state, according to Cyberstates, a study completed by the TechAmerica Foundation.

“The cost of doing the business in Northern Virginia is quite expensive for a startup,” says Chenard, who employs 10 workers and hopes to expand to 30 within the next two years. He also finds the quality of life better in rural Danville, when compared with the traffic snarls and higher cost of living in the D.C. area.

Richmond and other localities in Virginia are not far from Washington, D.C., and thus are increasingly attractive as data-storage markets for federal agencies and contractors seeking off-site backup for data recovery. So notes Chris Oberkfell, vice president of business development and sales operations for Quality Technology Services, a data services firm that provides off-site data backup for defense contractors and federal agencies.

Richmond’s far enough away from D.C. that it sits outside blast zones for possible terrorism and nuclear attacks, but it’s close enough that clients can drive from D.C. to access their data in person, Oberkfell says.

State and local governments are doing their part to encourage defense contractors to branch out of Northern Virginia as well. At the urging of Henrico County economic development officials, the General Assembly passed legislation this year to establish Local Defense Production Zones. Similar to Local Enterprise Zones, the defense zones allow localities to offer incentives to prospective businesses, such as accelerated permitting and reduced taxes on machinery.

Virginia also benefits from having a significant number of federal satellite facilities that are a magnet for small technology businesses, such as Albemarle County’s U.S. Army National Ground Intelligence Center. Another example of this is the Naval Warfare Center in Dahlgren. It attracts contractors such as Fredericksburg-based SimVentions, which provides systems engineering, modeling and simulation, and software engineering services to the center. Research universities such as Virginia Tech are also a draw for private technology businesses for a variety of partnerships on defense and aerospace contracts.

However, there are concerns that forthcoming defense spending cuts could negatively impact growth in Virginia’s technology sector. For an in-depth look at how this could affect the information technology sector, see story on page 25.

Still, technology industry boosters across Virginia remain optimistic about federal projects. RichTech, an association for Richmond-area technology businesses, recently formed a committee to disseminate information about federal technology contract opportunities to member businesses.

“As technology continues to grow, the time and distance between Washington and Richmond continues to shrink. The [technology] contracts from the federal government are more readily available in Richmond than they have been in the past,” says RichTech executive director Robby Demeria. “Richmond’s market for the federal government … will definitely grow.”

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