By SCOTT HADLY
NEWS-PRESS SENIOR WRITER

There are little sensors being built here that could one day be used to sniff out biological agents, while the super-secret Santa Barbara company Mission Research has created a device that soldiers may use in Iraq to detect roadside bombs and booby traps.

Life in wartime during 2004 — with conflicts in Iraq and Afghanistan and the ongoing war on terror — will mean opportunity and the steady demand for services from local defense contractors and small-time innovators.

But even with increased defense spending, Santa Barbara County will likely only see a small uptick in the number of jobs and business generated, economists say. Overall, the more than $500 million in prime defense department contracts awarded to local firms in an average year amounts to a drop in the bucket of the $17 billion nominal gross county product last year.

But with occasional spinoffs and a heavy emphasis in pure research, defense spending can have important side effects.

Known for producing sophisticated infrared devices used in everything from satellites to missiles, Santa Barbara County still benefits from the close proximity of the research expertise at UCSB and Vandenberg Air Force Base.

"There has been increased defense spending," said Dan Hamilton, director of economic forecasting for UCSB's Economic Forecast Project. "I'm a little bit bullish on Vandenberg employment and aerospace development in general, but we're not talking about big numbers."

There are fewer than 9,000 defense-related jobs in the county, and they tend to be high-paying technical and research positions. The two biggest employers here are Raytheon and Vandenberg.

Raytheon, which has offices in Goleta and a small one in Lompoc, remains the powerhouse for private defense contracting in the county.

The company locally generates about $500 million in revenue annually. It focuses on three main areas: electronic warfare systems, space systems, and remote sensing and infrared focal plane arrays for night vision and thermal imaging. About 40 percent of the prime defense contracts granted to area firms go to Raytheon, according to Department of Defense's latest data.

It is the largest private employer in the county, providing jobs for more than 1,900 people.

"We don't expect big changes in 2004 and we're happy about that fact," said Ron Colman, the company spokesman. "We're continuing on a stable basis."

The long-term trend in defense spending since its peak in the late 1990s has been downward. Locally that meant consolidation, closures and diversifying for companies which in the past had depended on military contracts. But Raytheon carved out a niche that it continues to fill.

The combination of good pay and attractive surroundings has given the company a stable workforce without a lot of turnover. The only downside to being here is the cost of housing. Last year, the company opened offices in Lompoc, and it will likely slowly increase the number of people working there.

In terms of contracts, last year the company landed one of its biggest from the Greek Air Force, a $242 million deal to provide complete integrated electronic warfare systems for the Hellenic Air Force's fleet of F-16 fighter jets.

Late in 2004, company officials hope to land a big contract for a radar warning receiver system for carrier-based F-18s, Mr. Colman said.

"But we're most excited right now by something that wasn't really a big contract at all," he said.

Raytheon produced a mini-thermal emissions spectrometer used on both the rovers that recently landed on Mars.

Vandenberg employs about 7,000 people, with private contractors, who manage missile launches and upkeep on several of the pads, amounting to about 2,200 jobs.

Most launches are defense-related, although there is an emerging private market and some rockets carry payloads for NASA or the National Oceanic and Atmospheric Administration. As the Bush administration moves forward with plans to activate a limited missile defense shield this year, the prospect for more jobs at Vandenberg or at least stable employment there will likely continue, local economists say.

The big private contractors at the base remain, Lockheed Martin, Boeing and now InDyne, which took over a launch operations contract from ITT last year.

The more unknowable impact of defense spending locally is what, if any, spin-offs will come from those contracts, said Tim Schwartz, of UCSB's Center for Entrepreneurial and Engineering Management.

Small defense department research grants could spark a whole new industry, or simply push the development of new discoveries that have very little to do with weapons systems or war fighting, Mr. Schwartz said.

"For instance there's a lot being done now with nanotechnology and the nano center being built here," he said. "I imagine we'll see something come out of that."

Some small companies with close associations with UCSB — their founders are teachers at the university or are former students — have diversified their work to include defense contracts. Last year, the Army promised $50 million, the school's largest federal research grant, to fund a biotech center at UCSB. Mr. Schwartz said the applied research, which is less focused on pharmaceuticals and more on biotechnology, will fund work looking at how researchers will examine natural systems and attempt to mimic them, to build better computers, sensors and communications equipment.

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