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Analysis: Arkansas officials say failed pursuit of defense contract offers lessons for future

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LITTLE ROCK, Arkansas — Arkansas' failure to land a major military vehicle contract is a disappointment for officials who hoped to tout another "superproject" in the state. But it's not the setback that other missed economic deals have been, nor will it prompt the same level of soul-searching.

The Army announced last week it was awarding a $6.7 billion contract to develop the joint light tactical vehicle to Wisconsin-based Oshkosh, passing over Lockheed Martin's bid to build the vehicle at its Camden facility.

The decision came despite the Arkansas Legislature, at Gov. Asa Hutchinson's behest, approving an $87 million incentive package with the hope that the state funding would help Lockheed win a project officials said would lure an additional 600 jobs to the state.

The bonds that lawmakers approved would have only been issued if Lockheed won the contract, so the state hasn't spent any money. Hutchinson said he doesn't have any regrets about how the state approached the project.

"The worst thing we could have done would have been to do nothing," Hutchinson said last week. "We put Lockheed Martin in a competitive position and we supported the industry to bring those jobs and that program to Arkansas. We were not selected, but we put them in a position to win that. I think we did the right thing."

It would have been the second time the state issued bonds under a 2004 voter-approved constitutional amendment aimed at helping land major economic deals. Lawmakers two years ago approved $125 million in bonds for a steel mill under construction in northeast Arkansas.

The JLTV contract isn't the first time Arkansas has missed out on a major deal, but it's not likely to bring about major changes other projects have prompted in the state's economic development approach. The state missing out on a $3 billion steel mill in 2007 prompted state officials to take a new look at workforce training, and past efforts to land major deals led to former Gov. Mike Beebe's push for a "quick action closing fund" that the state still uses today.

The JLTV project would have been a major step forward for Arkansas, which failed to land vehicle assembly projects that Toyota announced in 2003 and 2007.

State economic development officials say Arkansas still emerged strong from the latest proposal, saying the technology that Lockheed added at its Camden site will be a boost to the area. They said the pursuit also means Arkansas has an even stronger relationship with the defense contractor.

The project also showed how easily Hutchinson can mobilize support for incentives, especially from those within his party who have campaigned repeatedly against government spending and debt. Big River faced heavy lobbying in opposition from a competing steel mill in northeast Arkansas and the opposition of conservative activists, something that Lockheed's project didn't encounter.

"A takeaway for us on this project is we, as a state, are able to compete on superprojects, and we can turn them around on a moment's notice," Arkansas Economic Development Commission Executive Director Mike Preston said, noting the incentive package sailed through the Legislature in three days.

"A lot of states were envious about how quickly we could pull that together," Preston said.

Whether Hutchinson could easily win support like that for another incentive package again remains to be seen. This time, he had the benefit of this being a defense-related project by an established employer in the state. He also was seeking a more limited incentive package than what was offered Big River.

Hutchinson said he believes the state will have another chance to land a major employer, arguing the Lockheed pursuit shows businesses the state is willing to invest.

"Industry as a whole across the United States knows that Arkansas stepped up to the plate and is a good partner," Hutchinson said. "I think that in and of itself will help us down the road."


Andrew DeMillo has covered Arkansas government and politics for The Associated Press since 2005. Follow him on Twitter at http://www.twitter.com/ademillo

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