Gregory Celestan’s military contracting business focuses on consulting and IT. CELESTAR Top Secret Gregory Celestan, 48, a Niagara Falls, N.Y., native, came out of the U.S. Military Academy at West Point with a bachelor’s in engineering and Russian studies when America’s biggest threat was the Soviet Union. During the second Iraq war, he led Central Command’s coalition intelligence coordination center in Qatar and later was chief of the team responsible for developing intelligence against Al-Qaida and Taliban targets in the war in Afghanistan. He has called Florida home since 1999 and, though he founded his consulting and IT business, Celestar, in 2001, he built it in earnest only after retiring in 2004. “I used our savings. I used credit cards. I used my daughter’s college fund,” he says. Business took off only after the company established a good reputation. He builds for the long haul. Debt-free, the company has been profitable since its second year. Celestan covers 100% of all employee benefits, including healthcare for employees and their families. Ernst & Young named him its 2010 Florida Entrepreneur of the Year in the distribution, defense and manufacturing category. [Photo: Mark Wemple]

Just about every employee at Gregory Celestan's Tampa company holds top-secret security clearance. On a typical day, employees report for work at a military base. Some comb through data, looking through a haystack of 20,000 phone records for the needle that will lead to a terrorist group. Others train an ally country's police in anti-terrorism. Some use brand-name intelligence software — there is such a thing — to analyze data for a report to military leaders. "It's really a lot of painstaking work," Celestan says. "It's really not as sexy as you see on TV."

$9.4 billion - Military spending in Florida on payroll for active duty personnel, reserve and retired personnel and civilian personnel $13.2 billion- Military expenditures on contracts, including information technology, research, construction and supplies 5th - Florida’s rank among states in contract awards, after California, Virginia, Texas and Massachusetts Source: Department of Defense, 2009 figures [Photo: Harris Corp.]

Celestan and his consulting and IT business, Celestar, have taken off since 2004, when he retired from the Army as a lieutenant colonel. From its start as "a one-person subcontract and I was that person," the company has grown to $14 million in revenue this year and 100 employees — 70 in Florida and the rest elsewhere in the states and in Iraq, Afghanistan and the United Arab Emirates. The company made Inc. magazine's list of fast-growers in 2009 and 2010.

After 9/11, the military increasingly turned to private contractors such as Celestar to augment its forces quickly and provide specialized expertise in fields that the services lack or would find expensive to develop — many of the Florida companies provide highly specialized information technology services, for example. Contractors also free military personnel for missions and, unlike civil service employees and troops, can be let go quickly when no longer needed. The widespread use of contractors has made the Iraq and Afghan wars the most privatized in U.S. history. And it has spurred growth at Celestar and other firms in Florida that have emerged post 9/11 to flourish in the orbit of the state's military bases. Indeed, No. 3 nationally on Inc.'s fastest-growing company list is Merritt Island-based Luke & Associates, a 6-year-old firm that's grown to $100 million in revenue providing doctors, nurses and other healthcare workers at military bases worldwide.

The trend shows how far defense contracting has evolved from its traditional image of selling jet fighters or janitorial supplies to a local base. Some young Florida defense contractors do classified work. A Washington Post series this year counts Celestar among 67 Florida-based contractors working in the top-secret field. It found 218 contractors doing top-secret work for the three U.S. unified commands based in Florida (Central and Special Operations in Tampa and Southern in Doral).

The presence of the young companies also highlights the increasing importance of the military as a recession-proof prop to the Florida economy — what some see as a fourth leg for Florida's traditional three-legged economic stool of agriculture, real estate and tourism. Even as the state vies to lure tech and life science research outfits as job-creating clusters, no investment so far has the proven record of a military base. MacDill alone provides jobs for 13,000 military and civilian government workers and contractors. The base means $1.5 billion annually in payroll and local purchasing and indirect jobs, according to Lt. Col. Brian Kehl, 6th Comptroller Squadron commander.

67 Florida-based contractors doing business with the military do top-secret work. [Map: Jeff Papa]

The privatization pendulum can swing in both directions, however, and Celestar and the other firms now are facing their first headwind. Defense Secretary Robert Gates last year called for big changes in procurement and contracting to free up money in his budget. His plans for major weapons systems, such as halting production of the F-22 fighter, received widespread attention. But Gates also wants to cut the percentage of service support contractors in the defense workforce from 39% to the pre-2001 level of 26%.

He wants to cut some 33,000 contractor personnel by 2015, converting them, when necessary, to civilian government employees. "I think Secretary Gates has notionally got it right — that we've outsourced too much and the pendulum needs to swing back," says Todd Harrison, senior fellow, defense budget studies, at the Center for Strategic and Budgetary Assessments in Washington.

Florida contractors have employees all over the world, including in Iraq and Afghanistan. The military has turned to contractors for expertise that would be difficult or expensive for it to develop quickly. [Photo: AP]

For contract workers, converting to civilian government jobs can mean swapping higher pay for more long-term job security. For the contracting company, however, it means less revenue. Alexandria, Va.-based Cambridge International Systems, which supplies intelligence analysts, database managers and programmers to the military, some on top-secret work as far away as Afghanistan, had 13 workers on a contract at MacDill — until the government converted four, says Eric Garnier, vice president of Cambridge's systems and technology solutions unit. "They can be converted anytime the government wants," Garnier says.

In August, Gates ramped up the pressure, saying the military was "overreliant" on contractors and announced a 10% per year cut in funding for service contractors for three years. Gates also has called for a 10% cut in funding for intelligence advisory and assistance contracts.

Lockheed Martin’s F-35 Lightning II simulator (above) will be used to train pilots at Eglin Air Force Base. Its Combat Convoy Simulator (below) uses lessons learned on the battlefield to train soldiers. [Photo: Lockheed Martin]

Prime Military Contract Awards in Florida Between 2002 and 2009, the amount of military contract awards increased by 85%. Amounts are in billions of dollars. Source: Department of Defense

"Obviously that's creating some angst and creating some uncertainty," says Hugh Campbell, president of contractor Advanced C4 Solutions. Advanced C4, a communications and IT contractor in Tampa, has increased revenue 30% to 40% annually and employs 230, half in Florida at MacDill and at Eglin Air Force Base and Hurlburt Field in the Panhandle.

Even absent Gates' comments, contractors say they know defense spending will draw down as troops exit Iraq and Afghanistan. The landscape, however, isn't all bleak. Garnier was interviewed in the midst of taking celebratory calls after the firm won a new contract from the Department of Homeland Security for a border project. "It's a big win," Garnier says. A 10-year veteran of the Air Force, he began working for Cambridge from his garage in Sarasota. The company now has 45 employees in Tampa.

Most contractors predict a continuing military need for their services. "What general and what colonel are not going to want to know what the enemy is going to do?" says Roger A. Swinford, who co-founded his information technology and consulting company, Calhoun International, in 2005.

But they also plan to diversify. Celestar plans to move more into the IT field and, over the next five years, the commercial market, calling it a "natural progression for us as a company. I have long-term goals," Celestan says, "and I want the company to be around for many years."