Hawaii’s Small and Not-So-Small Businesses Beware-Navy UARC at U.H. Equals Zero to Minimal Dollars, Maximum Red Tape

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Members of the small business community told a special faculty committee last year that they supported the establishment of a Navy-embedded University Affiliated Research Center at the University of Hawaii because it would promote economic growth.

But they hadn’t viewed the “Small Business Subcontracting Plan.” Only last week did U.H. administrators release the eight-page plan dated Aug. 8, 2005, explaining they had simply forgotten about it.


Perhaps Hawaii’s small and not-so-small businesses should also forget about it and the 87-page contract to which it is attached because these documents promise to subcontractors so few, if any dollars, and a lot of red tape. The Board of Regents will soon decide whether to sign the contract with its attachments and thus commit U.H. to establishing a unique UARC that embeds the Navy research amidst existing university facilities to fulfill classified and unclassified military “task orders.” This first-of-its-kind UARC would be Navy’s fifth nationwide and its first since World War II.

”$50 Million Morphed Into Zero Dollars”

If approved, U.H.’s binding contract with the Navy promises much less than UH has publicly touted. At first U.H. trumpeted that the UARC would bring in $50 million over five years. But in “Revision G,” the latest version of the contract released on Jan. 19, the five years of the contract have morphed into three years with a two-year option that the Navy unilaterally decides whether or not to exercise.

Moreover, the contract contains no dollar amount to document what U.H. will be paid by the Navy. Instead, the contract guarantees a minimum of only 1,000 staff hours over the first three years of the contract; the maximum number of staff hours is described as “TBD” — to be determined. The dollar amount for those hours are also listed as “TBD.”

If the two-year option is exercised, another minimum of 1,000 staff hours is guaranteed. The maximum number of staff hours and dollar amounts are again listed as “TBD.” U.H. would have to jumpstart setting up the UARC with about $3.5 million in its own scarce funds. In short, the UARC is an expensive, high-risk venture for U.H. that provides virtually no assurances of incoming dollars.

”Minimal Subcontracting Dollars – With Luck”

Interestingly, the Small Business Subcontracting Plan presumes that U.H. will be receiving the $50 million that the contract fails to document.

“Of the proposed contract amount of $50 million, only 17 percent or $8,056,584 is available for subcontracting,” the plan states. “The remainder of the proposed contract is budgeted for salaries, overhead,