After dramatic growth, ‘soft power’ contractors face more uncertainty

Small contractors that focus on the civilian tools of national security, such as diplomacy and law enforcement rather than weapons development, have found a valuable niche in recent years, growing exponentially as the Pentagon deployed these skills in Iraq and Afghanistan.

Yet, these contractors, which have helped troops work with civilian leaders in both countries, face a more uncertain future as the military makes its exit plans.

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Nick Dowling founded Arlington-based IDS International in late 2001, drawing on his experience working on policy and operations in Bosnia, Rwanda and Kosovo as a Pentagon defense fellow and as part of the White House’s National Security Council.

At the 60-employee IDS, he came up with a model to train Army and Marine Corps units before they’re deployed. In particular, the company’s employees coach and mentor officers, advising them as they participate in role-playing exercises. IDS personnel focus on helping commanders take into account the political and economic aspects of the military’s efforts and learn how to coordinate with civilian officials — a focus sometimes known as “soft power” as compared to traditional military “hard power.”

“We still have a military and a State Department and a [U.S. Agency for International Development] that are structured to do state-to-state, Cold War-type activities,” said Dowling. But recent conflicts with insurgents, rather than traditional government-sponsored militaries, have refocused the Pentagon and the U.S. government on stabilizing populations and rebuilding institutions. In many cases, contractors have assisted in those efforts.

“It’s these gaps in the U.S. government’s capability that are spurring this incredibly strong growth,” Dowling said. At IDS, for instance, the company posted revenue of $1 million in 2007; last year, sales reached $9.7 million.

Columbus, Ohio-based Mission Essential Personnel, which has a major office in Chantilly, was founded in early 2004. The company started by offering interpreters and translators to troops operating abroad but has expanded its range of services, said Chris Taylor, Mission Essential Personnel’s chief executive.

Now, the company offers linguists in Afghanistan, Europe, Africa and in the United States, has an intelligence services business and puts together training exercises for soldiers and civilians intended to ready them for what they’ll encounter abroad.

The 8,200-employee company posted revenue of nearly $630 million in 2010 — up 1,356 percent from $43.2 million in 2007.

“Our capabilities matched with the government’s demand,” said Taylor, noting that the company has about 7,000 employees in Afghanistan.

David Berteau, senior adviser and director of the Center for Strategic and International Studies’ defense-industrial initiatives group, said it’s not yet clear what role these contractors will play in other locales and, as budget cuts loom, what agencies will be able to pay for their services in the future.

The question is “how can we translate what has worked in Iraq and Afghanistan to successful policy approaches to apply soft power in other parts of the world,” Berteau said. “I think the potential is there for it to be much more broadly applied [but] the money may not be there at the volume it’s been there.”

Still, Dowling said he sees opportunities to provide support in unstable countries like Libya and Sudan.

“Certainly [in] the sector as a whole, you’re going to see not just reduction of growth, but you might see some shrinkage,” he said. “Even the best companies are going to have to fight a little harder in this environment.”