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The Business of War: Apparel Firms Benefit From Pentagon Orders

The war means more business for some domestic apparel and textile firms, but others are vying to get in on the more than $1.6 billion in military orders.

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WASHINGTON — The U.S.-led war against Iraq is translating into more business for the domestic apparel and textile companies, which are getting a piece of the more than $1.6 billion in military orders for U.S.-made textile products expected this year.

In recent years, the business of outfitting the troops — by law the military has to try to buy American — has grown in importance for a cadre of U.S. mills and apparel makers, many of which covet military orders as a cushion against a fashion business lost to low-priced import competition.

In times of war, military wardrobe needs can change and increase, which for the Iraqi conflict means adding desert camouflage battle uniforms, as well as hats, anti-chemical garb and rucksacks, which were not stockpiled in sufficient quantities before the war’s start.

The military in many ways functions like a small department store, where its customers — soldiers in the various services — are given a $760 to $1,100 annual clothing allowance.

The Iraqi conflict is expected to generate U.S. apparel business in excess of the $1.6 billion in fiscal year 2003 funds allocated for regular peacetime needs to outfit the 1.5 million-person U.S. armed services. There are 270,000 troops deployed in the Iraqi conflict and their wardrobe needs will be tied to the conflict’s length and duration of U.S. occupation. In addition, there are also 10,000 troops still in Afghanistan, following last year’s conflict there.

"Right now, we really don’t have figures" on the number of new orders, said a spokesman for the Defense Logistics Agency, the military’s buying arm. "But I can say there are a lot of orders that will probably push that number."

Last week, Congress signed off $78 billion to be spent on the Iraqi conflict, $4.24 billion of which is targeted for procurement, or supplies for the troops, including battle garb.

Companies competing for military contracts are large and small, which also, by law, have to compete with federal prison factories, operating as Federal Prison Industries. Much to the dismay of the U.S. apparel industry’s dwindling ranks, contracts from prisons are required by Congress to be given preference, making the entity the largest military apparel supplier with $44.7 million in 2003 contracts thus far. Other non-industry competitors given contract preferences include number-two military apparel supplier the National Center for Employment of the Disabled, with $44.5 million in contracts this government fiscal year. Goodwill Industries and the National Industries for the Blind are also apparel producers.
Among DuPont fibers going to war are its nylon used in the cotton blend fabric in battle uniforms, Teflon used in chemical protection overcoats and Kevlar in body armor suits. Milliken & Co. and Greenwood Mills are the leading commercial suppliers of gray goods for the battle uniforms, while two finishers, Delta Woodside Mills and Bradford Dyeing, are the leading printers of these and other textiles, which are then made into actual garments or other war accoutrement by about two dozen mostly smaller, privately held apparel makers. The DLA spokesman said a couple of hundred other apparel makers have been certified to bid on contracts.

Even in peacetime, military sales can be a fairly reliable niche that includes underwear, socks, dress shirts and formal uniform sales. The government-outfitting sector is also growing in other areas, like Customs and other agencies adding personnel for homeland security.

"It’s a great business," said Martin W. Mankowski, Jockey International’s director of marketing services and military sales. "You know going in what you’re in for. You know that if business gets tough, the government isn’t going to come back to you with markdowns, request for fixture money or co-op advertising."

But longtime military contractors like Jockey can lose out in the bidding process, like what happened recently when it lost a renewal contract to supply T-shirts. Even though Jockey had the lowest bid, it lost to a small business. Small companies get preferential treatment if their bids are within 10 percent of the lowest.

So Jockey is sitting out the Iraqi war.

"We’ve been around for 127 years," Mankowski said. "In just about all the wars, Jockey has been involved. We’ve made tents and underwear for them over the years. It’s a little bit frustrating because when they need you, you’re there. When you need them, they’re not."

Once a firm gets the contract, the DLA can be as demanding as any retailer that wants inventory just when they need it. Contracts also have surge clauses that require a company to double production on the spot, which is happening now in many cases.

"When you bid a contract, you have to keep that capacity ready, willing and able to perform for as long as a year," said Rick Cepille, president of American Apparel Inc., with four factories and 1,500 workers in Alabama devoted entirely to producing battle uniforms, raincoats, utility coveralls and other military apparel, its primary business.
American Apparel’s initial 2003 contract for battle trousers with a woodland camouflage print called for producing 6,000 a week. That amount was increased to 10,000 and then again to 15,000 to supply the Iraqi effort. Of that amount, 5,000 trousers have been switched to desert camouflage.

So far, for the fiscal year starting Oct. 1, American Apparel has been awarded $20.5 million in military contracts, according to the DLA, which doesn’t have figures on how much apparel makers spend on textiles. The largest private military apparel supplier is Puerto Rico-based Propper International, with $35.3 million in contracts.

Michele Goodman, president of Atlas Headwear in Phoenix, turned to military contracts as competition from low-priced foreign imports displaced fashion customers, which now represent 40 percent of her business. Atlas’ 140 employees just finished an order of 200,000 camouflage floppy hats for soldiers in Iraq.

Goodman said it’s a tricky balance to manage her regular customers with the military contracts, but "if you have a domestic plant and want to do domestic business, there’s not a whole lot of choice out there."

Domestic producers like Goodman are fierce about holding the government to its buy-America rules. She successfully sued the Air Force two years ago to stop buying caps in China that it gives recruits. Now Goodman has a $400,000 contract to produce the item.

The buy-America rule, also known as the Berry Amendment, is intended to maintain what’s called by the military a "warm industrial base," or a stable of manufacturers ready to supply the military in peacetime or conflict.

Exceptions to buy-America are made if the military declares an item not commercially available. It’s a standard tightened last year by Congress after a scandal erupted over the military buying $22 million worth of black berets from foreign sources, including 600,000 in China. The berets were added to active and national guard wardrobes in October 2000 and the military claimed only one domestic supplier was available to provide 1.2 million berets for $7.6 million. The berets are now being produced exclusively in the U.S.

Ken Mazer, director of business development at Lee Fashions in Lylesville, N.C., is angling for a military contract "in the low-seven figures" to produce high tech boot linings to compete with ones produced in Europe by DuPont under the Cambrelle trademark.
"What we’re trying to tell the military is ‘there’s an American-made, just-as-good, but inexpensive substitute,’" Mazer said.

With the U.S. dropping tariffs and quota on an increasing number of apparel imports, domestic companies are increasing pressure on the military to adhere to the Berry Amendment.

"The Berry Amendment is crucial," said Jay Self, executive vice president of Greenwood Mills. "It ensures a domestic supply base."

William Garrett, president and chief executive officer of Delta Woodside Mills, says there’s plenty of U.S. textile capacity to meet the military’s needs, but he worries about the dwindling apparel factory ranks.

"It’s more than adequate during peaceful times and adequate during minor surges, but it does get strained," Garrett said.

Nick Griseto, executive vice president of sales and marketing at Westerly, R.I.-based Gradford Dyeing frets that continued import competition will mean more foreign military apparel contracts. If that happens, companies like Bradford, relying solely on military contracts, will also have a rougher time getting defense business.

"It is a critical situation the government has got to watch," he said.