For Security in Iraq, a Turn to British Know-How

With U.S. Contract Up for Grabs, Congresswoman Requests Audit of Major Bidder

In the 1990s, there was the dot-com boom. Now, there's the Iraq bubble.

That's what British security contractors have come to call the business opportunity in the Middle East. The British may have lost their empire but they have quietly established a major presence in the distant outpost of Iraq, securing lucrative contracts to safeguard not just British interests but the U.S. military. And a private British firm may be poised to land the largest U.S. security contract in Iraq.

About 15 British security contractors have set up shop in Iraq in the aftermath of the U.S.-led invasion. Of the estimated 20,000 private security employees operating in Iraq today, about 4,000 come from Britain, according to the British Association of Private Security Companies, an industry trade group established last year to accommodate the burgeoning international security business concentrated in London.

More than half of the bidders and the two top contenders for the new U.S. contract, worth up to $475 million, are British firms, said sources who declined to be identified because of the confidential nature of the bidding process. The result: Policymakers in Washington have begun to question why the military, using U.S. taxpayers' money, has been delegating the task of protecting the lives of American commanders, troops and civilians in Iraq in large part to other nations' private companies.

Concerns have centered largely on the British firm Aegis Defence Services, a front-runner for the new contract, which is to provide intelligence services to the U.S. Army and protect the Army Corps of Engineers on reconstruction work in Iraq. Aegis is headed by a retired British military officer, Tim Spicer, who, after being hired to defeat insurgents in unstable countries, once wrote that his kind were "directly descended from the classic mercenary companies of antiquity."

Just don't call him a mercenary now. His current company is in the business of "security and risk management," and it comes with all the accouterments of a mundane accounting firm: press releases, lobbyists and diversified products, like a specialty in "Business continuity, crisis management and contingency planning." A major difference from the Fortune 500: The Aegis chief executive is handy with a Glock pistol, and employees in Iraq carry AK-47s.

Rep. Marcy Kaptur (D-Ohio), a member of the House Appropriations defense subcommittee, has requested that the Special Inspector General for Iraq Reconstruction audit Aegis. "It's a foreign contractor, that's number one," she said. She also questioned Spicer's past, in which he operated private military forces in such exotic locales as Papua New Guinea and Sierra Leone. "Spicer is such a swashbuckling guy for a mercenary," Kaptur said.

Aegis holds what until now has been the biggest U.S. security contract in Iraq, a $293 million, three-year deal that it won in 2004 . The inspector general criticized some of Aegis's operations in Iraq in a 2005 audit, finding for instance that the firm had not adequately vetted Iraqi employees to ensure they didn't pose a threat. The inspector general has granted the congresswoman's request to reexamine the British firm.

Aegis said it has addressed all of the concerns raised two years ago by the inspector general, and the firm touts its work there on behalf of the U.S. government. "None of our clients have been killed in over 3 million miles traveled" throughout Iraq, said Kristi M. Clemens, Aegis's executive vice president.

ArmorGroup International, a British firm with a major presence in Iraq, is considered the other top strong contender to win the U.S. security contract, sources said. A third British company, Erinys International, has presented an aggressive court challenge to win the contract after the U.S. military rejected its bid. Control Risks, yet another British security company, confirmed that the Americans rejected its joint bid with other firms.

British security contractors aren't only catering to American and British governments in Iraq. They have also cultivated commercial clients, including energy, engineering, investments and consulting firms. Work is so fruitful there that private security contractors are probably the largest British export to Iraq, according to the Economist magazine.

About 30 British private security companies operate in hot spots worldwide, including Afghanistan, though they haven't made many inroads in treacherous sectors of the Latin America market -- yet. "British companies are trying to break in, particularly in Colombia," said Sabrina Schulz, director of policy and research at the British trade group.