Security Generates Multibillion Business

The scope of contracts widens as global demand booms.


Albuquerque-based ICx MesoSystems in 2000 sold about 10 of its air-sampling devices capable of sniffing out bioterrorism agents.

In the five years since the terrorist attacks of Sept. 11, the company has sold about 600 to federal, state and local agencies, driving up its sales this year to $7 million, or more than triple what they were in 2000.

"The events of 9/11 made everyone understand the importance of our product and sharpened their focus on homeland security," says CEO Chuck Call.

Five years after the terrorist attacks, the homeland security business is booming, and now it eclipses mature enterprises like movie-making and the music industry in annual revenue.

The business has moved from a frantic and often inefficient scramble in the wake of 9/11 to shore up security at airports to a much broader effort. The scope of security-related spending has expanded to include more sophisticated information technology and the protection of other vulnerable terrorist targets such as ports and nuclear reactors. And spending for anti-terrorism goods and services is expected to keep growing.

Governments and businesses worldwide expect this year to spend $59 billion to thwart terrorists, nearly a sixfold increase from 2000, according to industry tracker Homeland Security Research of Washington, D.C. By contrast, the motion-picture and music industries each generate about $40 billion annually. The research company expects homeland security spending to nearly double by 2010.

"It's one of the fastest-growing industries," says Tomer Amit, vice president of Homeland Security Research. Where the money is going:

*The companies benefiting range from big corporations such as Lockheed Martin to small companies such as ICx MesoSystems, which employs 35 people. Consultant Accenture has moved in five years from no involvement with homeland security to being one of the major contractors.

"The big winners of the homeland security windfall have, as usual, been the big contractors," says Dan Verton, founder of Homeland Defense Week, a website that broadcasts security news.

*Airport security was the initial focus, but the industry has expanded into a wide range of companies hawking all kinds of products and services for securing nearly every imaginable terrorist target.

The homeland security industry now includes chemical, biological and radiological detection, as well as border, rail, seaport, industrial and nuclear plant security. Other vendors include computer and human resources experts, boat makers for the Coast Guard, information and integrated technology companies, and myriad consultants.

*As the biggest customer in the field, the U.S. Department of Homeland Security, a post-9/11 creation, has played a major role in shaping the industry.

The agency has spent $28 billion over the 22-month period ended in August on security-related goods and services while issuing more than 115,000 contracts.

This year's contracts include: a $385 million award to Halliburton subsidiary KBR to establish temporary detention and processing capabilities in the event of an emergency influx of immigrants, and a $308 million to $750 million contract with Unisys to continue building, securing and managing the information technology infrastructure for the Department of Homeland Security and the Transportation Security Administration, one of its agencies.

*U.S. companies are benefiting most. The U.S. market will generate $29.1 billion in revenue this year from "the threat of terror," and U.S. companies will receive nearly all of it, Amit says. About 70% will come from federal, state and local government contracts.

$2 billion contract up for grabs

Five big corporations are battling for a $2 billion contract with the Homeland Security department to provide surveillance of the nation's borders, to be awarded this month. The government expects the winning contractor to develop a blueprint to protect the borders and to integrate the U.S. Customs and Border Protection agency's personnel, infrastructure, technology and rapid response capability.

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