Blackwater aims at new goal

Security contractor seeks to diversify into training, aviation, logistics

Associated Press

July 24, 2008

MOYOCK, N.C. - The world over, guns for hire are known as "Blackwater guys" - and that's the reason Blackwater Worldwide wants to move beyond the business of private security contracting.

But Blackwater's breakneck growth in the past decade has come largely from successfully protecting the nation's top diplomats on the world's most volatile streets. The company has earned more than $1 billion since 2001 in government contracts, much of it providing security and protective services for U.S. diplomats working in Iraq.

There's no guarantee a change in focus to more conventional contracting, including the privately held company's roots in combat training, will allow Blackwater to reach its revenue target of $1 billion a year by 2010. Meanwhile, the company faces federal investigations and civil lawsuits that could disrupt its work and the money it needs to expand.

"All we can do to save ourselves in crisis and to grow our business is to make sure that every contract we get, we execute flawlessly," said Bill Mathews, Blackwater's executive vice president.

The company's leadership team said this week that the current "crisis" stems from the damage its work in private security contracting has inflicted on the Blackwater name, and it blames the media and the politics of war. The company has become such a symbol for unruly contractors that television dramas have used variations of its name in their portrayal of security contractors.

More than a dozen federal agencies have investigated the company for its security contracting work, Blackwater said, a list that includes the Transportation Security Administration and the Department of Agriculture. Company officials don't mention the FBI, which is leading a probe into a September 2007 shooting at a crowded Baghdad intersection involving Blackwater guards. Seventeen Iraqis were killed.

"Their brand was damaged by the war," said John Pike, who tracks military policy as director of globalsecurity.org. "It seemed to me that they had a crisis communications problem without an evident crisis communications strategy. They just became radioactive."

Blackwater has two large protection contracts - one with the State Department and one that's classified - and company President Gary Jackson said they're not bidding for any others because the cost of doing business is too high.

Industry observers say Blackwater's decision to scale back security work is not a ruse to cover up a decline in business. Loren Thompson, a military analyst with the Lexington Institute in Arlington, Va., said Blackwater's work would be dearly missed if the company left the industry.

"There's a real possibility that if Blackwater exits the business, that some U.S. officials will receive inferior protection in war zones - and deaths will result," Thompson said.

Blackwater officials stress that the company will honor its current security contracts and take on those sought by the U.S. government.

But chief executive and founder Erik Prince said his company is focused on building its brand name in other businesses - each with its own challenges.

"The security business is what it is," Prince said. "I don't see that growing a lot. Iraq is getting progressively better. So, that total demand from the U.S. government will probably stay the same or decrease slightly. We're just growing other parts of the business around it."

Blackwater has designed prototypes for a vehicle for border patrol agents and has been pumping out versions of its Grizzly armored vehicle. A dozen sit next to its production plant, waiting for the first buyer as they compete in a marketplace dominated by established defense contractors.

Prince, a former Navy SEAL, launched Blackwater in 1998 in the swamps of North Carolina to provide better and more accessible training for commandos and other warriors. He told the Associated Press this week that Blackwater wants to continue to expand its training offerings.

But that could be a tough road. In a letter obtained Monday by the AP, Defense Secretary Robert M. Gates questioned why the military is relying on such contractors to provide "combat or combat-related security training." While 10 percent of Blackwater's training business comes from international governments, all must first be approved by U.S. officials.

"It's probably the most effective way of finishing the war on terror," Blackwater's Mathews said. "It's not by United States soldiers going out here, there and everywhere - although they're eminently capable of doing so. A lot more diplomatic way is to provide training and equipment to those foreign units, and letting them help us."

Blackwater is also building an air force of sorts. The company and its affiliates have more than 50 aircraft at its disposal, many with the flexibility to land in remote airstrips.

The fleet includes a Brazilian fighter plane - the Super Tucano - to be used in demonstration and training. Seamus Flatley, director for special programs at Blackwater affiliate Presidential Airways, said such an aircraft could one day be deployed in a war zone for pilots to run contract missions at a savings to the government.

"I think it makes perfect sense for counterinsurgency air warfare," Flatley said. "I think it has validity. But it goes back to the whole issue ... can you have a contractor in an airplane squeezing a trigger? In this day and age right now, I'd say the environment would not allow it."