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Small firm sees up, down sides to national defense

St Petersburg , Florida , February 21, 2003

Nancy Crews' company is caught squarely in the cross hairs of America's current military buildup in the Persian Gulf.

Custom Manufacturing & Engineering Inc.™ (CME™) , the firm she established nearly six years ago as a spin-off from Lockheed Martin Corp., won $15.5 million worth of defense contracts last year to produce an intelligence sensor system. The vast majority of Custom Manufacturing's business comes from the U.S. government.

While an impending war against Iraq creates opportunity for the 131-employee company, another problem could crop up in the process, Crews said.

At least 10 percent of her personnel are members of armed forces reserve and National Guard units who could be called into full-time active duty if the military effort escalates.

So far, only one of the affected employees has been called into duty, and another has given notice that his unit might be activated soon, said Crews. Another dozen employees are Guard members and reservists, she said.

Crews' management team already has met to determine how those jobs can be temporarily back-filled if necessary, but doing so isn't as simple as posting a "help wanted" ad, she said.

"The biggest problem you have is with skill sets," Crews said. Not all of Custom Manufacturing's reservist employees are engineers, but those that are possess the kind of knowledge and experience that is as necessary to a war effort as to a designer and maker of instrumentation devices.

Further complicating the process is the fact that the replacement workers for nine of the 14 positions would require security clearances from the Department of Defense to work on its contracts, Crews said. Those workers would need prior clearance before going to work at Custom Manufacturing, or go through the time-consuming department process, she said.

"You lose a little momentum going forward," said Crews, whose firm nearly tripled its annual revenue to $7 million in 2001. Custom Manufacturing was ranked at No. 27 among the top 75 women-owned businesses in The Business Journal 2003 Book of Lists.

Guard and reserve call-ups have the potential to hit smaller firms like Custom Manufacturing the hardest.

Larger corporations can get by without hundreds or even thousands of employees for extended periods, but such losses take up a greater percentage of the work force for small, independent companies.

For example, United Parcel Service Inc. has 561 employees mobilized so far among a group of 4,000 to 5,000 who are reservists and that's out of a total of 320,000 U.S. employees. And Marriott International Inc. has had only 62 of 12,250 reserve-member workers called up, a report in The Wall Street Journal shows.

However, small firms tend to be a little more resilient in adjusting to such lengthy absences, say local experts.

"Small businesses run very lean and mean," said Irene Hurst, director of the University of South Florida's Small Business Development Center in Tampa. "They are more flexible than bigger businesses, and they cross train."

Big or small, companies are bound by the same federal regulations regarding protection and reinstatement of reservists and Guard members who are called into active duty.

The Uniformed Services Employment and Re-employment Rights Act of 1994 provides protection against adverse employment actions by an employer if the action is motivated by a worker's military service. Employees have a five-year cumulative service limit under which they can leave for voluntary military service and still return to their jobs.

Employers are not required under USERRA to pay an employee on a military leave of absence, though many companies offer to pay the difference between a reservist's full-time salary and the amount received from the military for active duty.

Custom Manufacturing is able to allow time off for reservist employees during training periods but has never had to plan for potential long-term absences, said Crews. "We're looking to see what we need to provide for them," she said.

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