AMZN Amazon.com Inc

By Doug Cameron 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 8, 2018).

Amazon.com Inc.'s plans to add twin new regional headquarters will intensify already deepening rivalries between the Seattle giant and U.S. defense firms.

Amazon's short list includes a site in the Crystal City area of Arlington, Va., on the doorstep of the Pentagon and the Washington defense establishment, where companies such as Boeing Co. employ thousands of staff.

The emergence of Dallas as a contender would put Amazon into another big industry cluster that includes Lockheed Martin Corp., which produces F-35 jet fighters and missiles in the region.

Amazon plans to establish twin headquarters that would grow to 25,000 staff apiece in each of the two chosen cities, The Wall Street Journal reported this week. The company was also in late-stage discussions with New York City, the Journal reported.

While the e-commerce giant hasn't revealed what type of work it plans to pursue, Amazon is also chasing deals related to the defense and intelligence sectors, according to industry executives.

Amazon declined to comment. The availability of trained workers, transport links and other infrastructure have been central to its search.

Defense companies already face a tough labor market, especially in northern Virginia, home to most of the headquarters of the nation's military contractors and intelligence agencies.

"The competition for talent is now much broader," said Horacio Rozanski, chief executive of Booz Allen Hamilton Holding Corp., the government-services specialist based in McLean, Va., just north of Crystal City.

"When a cyber person at Booz Allen gets pinged, it's not just by the usual suspects. Bank of America will call them, Google will call them, Amazon Web Services will call them," he said at a recent investor event.

"We have been competing for technology talent now for a while, and we are, I think, more than holding our own," Mr. Rozanski said separately, in a recent earnings call when asked about Amazon's potential arrival.

Other established defense players with a big presence in the region declined to comment on the potential impact of Amazon's move.

Amazon is already in competition for sought-after workers because of its own push into Pentagon contracting. It is the front-runner for the Joint Enterprise Defense Infrastructure contract, a $10 billion cloud-computing deal expected to be awarded in the next few months, according to people familiar with the situation.

Silicon Valley behemoths like Facebook Inc. and Google parent Alphabet Inc. also are vying with defense contractors and government agencies to tap the same small pool of expertise in fields such as cybersecurity, artificial intelligence and autonomy.

A big hurdle for Amazon and any company looking to expand in the Washington, D.C., area is the huge backlog of almost 700,000 workers awaiting security clearances to enable them to work on sensitive projects.

If Amazon wins the Pentagon's JEDI contract, it will need hundreds or thousands of vetted staff, industry experts said.

Jon Barney, a senior client partner at recruitment specialist Korn Ferry LLC, said some defense companies report they have had to skip bidding on certain contracts because of staff shortages, even before Amazon makes any new moves into the area.

"D.C. is such a competitive market now," Mr. Barney said. "Hiring enough cleared people is a real barrier for growth for many companies with government business."

Companies are already getting creative to lure and retain workers, including boosting their profile by sponsoring sports teams.Government IT specialist Leidos Holdings Inc. sponsors the Stanley Cup-winning Washington Capitals, for example. And executives have said its backing of youth soccer teams in the Washington area helps boost its profile with potential new hires.

"There is a bit of concern. We're about at structurally zero unemployment, and that's going to at some point make it more difficult for us to hire, or hire at the rate at which we've been," Roger Krone, chief executive of Leidos, said on an investor call last month.

"We are looking at all opportunities, employee referrals, bonuses for hiring your friend and things like that, things that you're probably seeing in the industry writ large," Mr. Krone added.

Leidos and other companies are moving work outside the capital area to tap new pools of staffing in cities such as St. Louis, Mo, where the National Geospatial-Intelligence Agency is building a new facility.

Only New York City, the third contender on the Amazon shortlist, lacks a big concentration of defense workers. L3 Technologies Inc., a big Pentagon contractor, plans to relocate from its Manhattan headquarters to Melbourne, Fla., the home of merger partner Harris Corp.

Write to Doug Cameron at doug.cameron@wsj.com

(END) Dow Jones Newswires

November 08, 2018 02:47 ET (07:47 GMT)

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