Life Without Blackwater?

The company's contract with the U.S. State Department has been at the center of a lot of unflattering media attention since a Baghdad shooting incident last year in which local authorities say innocent civilians and Iraqi police personnel were fired on and killed.

I thought these armed personnel protection details might become an artifact of history when I read the Associated Press story this week reporting that Blackwater Worldwide planned a shift away from the security contracting business and to focus on training, aviation and logistics.

But, as it turns out, I was wrong. Blackwater is not getting out of the security business. Most of the media focused on the news flash that AP sent out and did not carefully read the full story that followed.

Blackwater Worldwide spokeswoman Ann Tyrell said in a telephone interview that company President Gary Jackson was responding to questions about where he saw the future of the private market.

To the surprise of nobody who is even casually familiar with the private military contracting industry, he and company owner Erik Prince told the AP the use of security contractors was a small part of the market and not one that they would seek to focus on.

It has long been a myth, albeit a popular one, that the majority of private military contractors are gun shooters. In fact, the reverse is true, as has been pointed out, largely in vain, by trade groups such as the Professional Services Council and the International Peace Operations Association.

According to estimates from the IPOA, the total value of what it calls the global peace and stability operations industry is about $20 billion for all companies providing services in the field. Of that number, private security contractors make up only about 5 percent to 10 percent, or a maximum of $2 billion annually.

The normal peacetime number would be closer to 5 percent for PSCs, but Iraq has driven it up.

To understand the difference, one has only to follow the money. For example, compare two major contracts in Iraq, the World Wide Personal Protective Services and the Logistics Civil Augmentation Program.

The current WPPS contract, the second, was awarded in July 2005. The State Department utilizes it as an umbrella contract under which it issues task orders to the three contracting companies -- Blackwater USA, DynCorp and Triple Canopy. The bulk of the personnel come from Blackwater. The contract has a ceiling of $1.2 billion per contractor over five years -- one base year and four option years. That works out to $240 million per contractor per year.

LOGCAP, an Army program first established in 1985, is an initiative for the use of civilian contractors in wartime and other contingencies. It includes all pre-planned logistics and engineering/construction-oriented contingency contracts. It does everything from fixing trucks to warehousing ammunition to doing the laundry, running mess halls and building whole bases abroad.

When the Army announced the awarding of the fourth and latest LOGCAP contract back in April to DynCorp International LLC; Fluor Intercontinental Inc.; and Kellogg, Brown and Root Services, the total annual maximum value was $15 billion and the lifetime maximum value was $150 billion. That works out to $5 billion per contractor per year.

You don't need a Ph.D. to figure out which is the market segment with the greatest profit-making opportunities.

You can see similar trends at work in terms of actual numbers of contractors. The Los Angeles Times reported in July 2007 that the number of U.S.-paid private contractors in Iraq exceeded that of American combat troops. More than 180,000 civilians, including Americans, foreigners and Iraqis, were working in Iraq under U.S. contracts. The numbers include at least 21,000 Americans, 43,000 foreign contractors and about 118,000 Iraqis. That number, by the way, would still be bigger than U.S. military forces, even after the United States had increased the number of forces during its 2007 "surge." However, private security contractors were not fully counted in the survey, so the total contractor number was even larger.

By comparison, at the end of December 2007, the U.S. Central Command reported there were approximately 6,467 Defense Department-funded armed PSCs in Iraq. Of that number, 830 were U.S. citizens, 7,590 were third-country nationals, and 1,532 were local/host country nationals. This number, of course, was hardly the total PSC number, as it leaves out those working for the State Department and for the private companies doing reconstruction work. Still, it illustrates the point that the number of American PSCs is a small proportion of the total.

Thus, when Gary Jackson said Blackwater's security business is down to about 30 percent of Blackwater revenue now and it will go much lower, he was just acknowledging the obvious: that security work is a very small share of the overall private military market.

But there is one point worth considering. Blackwater founder and CEO Erik Prince told the AP, "The experience we've had would certainly be a disincentive to any other companies that want to step in and put their entire business at risk."

Time and history will deliver the ultimate verdict on Blackwater. And I would be the last one to argue that everything they have done has been done well, or even right. But it is also true that it has been made into a scapegoat and whipping boy for all those who are uneasy with the concept of outsourcing and privatization.

But the reality is that private contractors are on America's battlefields because the government, elected by the people, wants them there.

It is not difficult to understand why. Given the downsizing the U.S. armed forces underwent since the fall of the Berlin Wall, the military turned to the private sector for help.

If people don't want to use private contractors, the choices are simple: Scale back U.S. commitments or enlarge the military.