BAGHDAD, Iraq—It's Thursday, barbecue night at the Erinys compound. Someone has procured some festive lighting from the PX, and the kitchen staff is preparing a feast of barbecued chicken, kebabs, and burgers.
The barbecue is a chance for the staff to unwind—the mission roster for Friday is expected to be fairly light—but it's also a business occasion. At this week's gathering, Erinys, a British firm based outside the fortified enclave of the International Zone (the term "Green Zone" seems to have fallen out of fashion), is hosting a U.S. Army one-star general. Contractors schmooze with majors and lieutenant colonels, a company manager passes around cigars, and a female Army specialist with a frizzy perm snaps souvenir pictures with a pocket camera.
A few cases of cold Coronas are chilling on ice in a cooler. But out of deference to their American guests—alcohol is proscribed for U.S. troops in Iraq—the security guys keep their beer stash shuttered.
What is striking is the very normalcy of the scene. It could be a post-conference happy hour, where government contractors conduct business as usual: exchanging cards, collecting intelligence, and building personal ties. Except that we are inside an armed camp, surrounded by blast walls, concrete, and razor wire, and everyone is armed.
Erinys has a major contract to provide security escorts for the U.S. Army Corps of Engineers, and by that measure, it has done an excellent job. The company says it has never lost a client (though it has had some close calls, and four expatriate contractors have died on the job in Iraq). Still, it's not enough to ride on your reputation, and the company constantly scouts for new business.
In June, the company brought in a new country manager, Steve Bird, a veteran of British special forces. He was headhunted for the job, succeeding Andy Melville, who ran the operations until mid-2005.
"My remit is effectively driving it forward, finding new business, and developing what we've got, knowing full well that the whole piece is changing out here," says Bird. "And in the short time I've been here, it's changed considerably."
In the early days of the occupation, the security market was wide open. Previously unknown firms like Custer Battles, a start-up founded by two former Army Rangers, scored multimillion-dollar awards to provide security in the chaotic postwar environment. (As the Wall Street Journal reported, no banks would lend new firms money, and the Coalition Provisional Authority had to lend Custer Battles $2 million in $100 bills that one of the company founders stowed into a duffel bag and transported to a bank in Lebanon. The company now faces a whistle-blower suit in federal court over alleged billing fraud; the Journal's StartupJournal site still posts the 2004 story on Custer Battles under the heading "Success Stories.")
Now the private security providers are looking past what some call the "Baghdad bubble"—the Klondike for contractors rebuilding Iraq.
For one thing, the Bush administration has signaled that it will not request additional Iraq reconstruction funds from Congress. With 80 percent of the $18.4 billion reconstruction package already committed, that leaves a dwindling pool of resources for the security firms to win.
And it's an increasingly "U.S.-centric" market. Traditionally, British firms have dominated in the global private security and private military field. But with Americans now the primary customer in places like Iraq, there are growing advantages for U.S. firms—especially those that recruit U.S. citizens (particularly those with security clearances).
Two prominent U.S. companies, Blackwater and Triple Canopy, are pressing the advantage by moving closer to the Washington Beltway. Last year, Blackwater brought in former State Department counterterrorism coordinator Cofer Black to be vice chairman; its parent company, Prince Group, hired former Pentagon Inspector General Joseph Schmitz as chief operating officer and general counsel. Triple Canopy physically relocated to the Washington area, leaving its old location in Illinois for a new headquarters in Herndon, Va.
These companies are also branching out into new lines of work. In Azerbaijan, for instance, The U.S. government contracted Blackwater to help create a small naval special operations force trained to conduct maritime interdiction operations. The program, valued at a relatively modest $2.5 million, also included "infrastructure upgrades." Exactly what kind of infrastructure is easy to guess: Blackwater designs and builds "shoot houses" for weapons training, among other things.
Compared with the U.S. efforts to train and equip troops in neighboring Georgia, training Azerbaijan's commandos was a relatively low-profile program. It's understandable: The country is sandwiched between Russia and Iran, and sending a contingent of uniformed U.S. military trainers would be a provocative move. A private contractor helps keep things under the radar.
Firms looking to stay the course in Iraq, of course, can bid for contracts issued by the Iraqi government. But with corruption, inexperience, and political uncertainty, it's a riskier proposition.
Case in point: a messy payment dispute between the Iraqi transportation ministry and a U.K. security firm that guards Baghdad Airport. Global Strategies Group, which employs a force of more than 500 people to secure the airport, stopped work for several days in June and September in response to mounting pay arrears. The company's contract—worth a reported $4.5 million per month—had gone unpaid since the beginning of 2005. The work stoppage shut down international air traffic to Baghdad.
Erinys has also found the Iraqi government a less-than-perfect client. In August 2003, the Coalition Provisional Authority awarded Erinys a contract for the creation of an Oil Protection Force. Between August 2003 and December 2004, the company recruited and trained a 16,000-strong Iraqi guard force to protect the pipelines. But after the handover of power to an interim government, the Iraqi Ministry of Oil gave notice that it would to take the lead in securing the infrastructure. A second optional year of the contract was not exercised.
If the U.S. military draws down some of its forces, it may mean additional business. Security contractors in Iraq—in the view of U.S. Central Command—are noncombatants, restricted to "defensive" roles. But if you can hire someone to guard a convoy or provide site protection, why not outsource aggressive security patrols?
Erinys' Bird says that's a line his company won't cross, even in the quest to win more contracts.
"We're very, very clear on what we are as a company—we're a private security company, not a private military company," he says. "And if I have to look at a tender or solicitation that takes us across the line from defensive into offensive operations, then I will not even entertain it."
At the Erinys compound, the U.S. soldiers eventually take their leave. The cooler is opened, and ice-cold beer flows. Someone has rigged speakers to a laptop computer, and one of the Brits deejays for the small crowd.
Sousa's "Liberty Bell March"—better known to this crowd as the theme to Monty Python's Flying Circus—comes over the sound system. A company manager stands to attention, waving an imaginary conductor's baton.