WILSONVILLE-BASED FLIR Systems in late May inked the largest single defense contract in Oregon’s history — a $358.4 million deal with the U.S. Army for optical and infrared sensors.

To put that dollar figure in perspective, the total amount of defense spending in the state in 2006 barely topped $560 million. This new contract is an extension of an existing agreement with the Army, says Craig Stoehr, FLIR’s director of corporate development. The work will be performed in the company’s Portland facility.

Oregon is anything but a defense-contract powerhouse. In 2006 (the latest year numbers are available) it dropped from 40th to 43rd place — its lowest ranking in 10 years — when compared to federal spending in other states. That’s not to say there’s been no growth — contract dollars have increased 28% since the start of the Iraq War — it just hasn’t matched increases around the nation.

Stoehr says FLIR has been able to buck the trend by approaching military contracts with a commercial business model. The most important element of that approach is that the company funds its own research and development so that it can repurpose designs and products for other markets or defense contracts. For instance, the technology purchased by the Army in this latest contract is the same that FLIR sells to law enforcement.

In 2005, about 20 defense companies formed the Pacific Northwest Defense Coalition, of which FLIR is a member. Since then it’s grown to 110 members. Executive director Brice Barrett says other companies in the region are also learning to diversify their base as a way to grow contracts. FLIR, however, is probably unique.

“I would say this [contract] is indicative of a strong effort by FLIR to grow,” he says. “I’m not sure that it’s a sign of a trend, but it does show a company that’s getting sharper by the day.”                          

ABRAHAM HYATT