U.S. Pays Steep Price for Private Security in Iraq

By Walter Pincus
Monday, October 1, 2007

It costs the U.S. government a lot more to hire contract employees as security guards in Iraq than to use American troops.

It comes down to the simple business equation of every transaction requiring a profit.

The contract that Blackwater Security Consulting signed in March 2004 with Regency Hotel and Hospital of Kuwait for a 34-person security team offers a view into the private-security business world. The contract was made public last week by the House Oversight and Government Reform Committee majority staff as part of its report on Blackwater's actions related to an incident in Fallujah on March 31, 2004, when four members of the company's security team were killed in an ambush.

Understanding the contract's details requires some background: Regency was a subcontractor to another company, ESS Support Services Worldwide, of Cyprus, that was providing food and catering supplies to U.S. armed forces in Fallujah and other cities in Iraq. And ESS was a subcontractor to KBR, a subsidiary of Halliburton, which had the prime contract with the Defense Department.

So, Blackwater was a subcontractor to Regency, which was a subcontractor to ESS, which was a subcontractor to Halliburton's KBR subsidiary, the prime contractor for the Pentagon -- and each company along the way was in business to make a profit.

Under the contract, Regency was to pay Blackwater $11,082,326 for one year, with a second year option, to put together a 34-person team that would provide security services for the "movement of ESS's staff, management and workforce throughout Kuwait and Iraq and across country borders including the borders of Iraq, Kuwait, Turkey and Jordan."

Blackwater's personnel were to do more than just convoy security. They were also to run command centers in Kuwait and Iraq 24 hours a day, seven days a week, that were to control all ESS security operations; prepare risk assessments; develop security procedures; train ESS personnel in security; and even vet other Iraqi security forces hired by Regency.

But their main role was to provide "tactically sound and fully mission capable protective security details, the minimum team size [being] six operators with a minimum of two vehicles to support ESS movements."

Blackwater's pricing was to be on "a per person support basis, not including costs for housing, subsistence, vehicles and large equipment items," according to the contract. The team would be made up of two senior managers, 12 middle managers and 20 operators.

Regency was to provide Blackwater personnel with housing and necessities, including meals, as well as office space and administrative support. In addition, Regency would provide basic equipment, including vehicles and heavy weapons, while Blackwater was responsible for purchasing individual weapons and ammunition.

According to data provided to the House panel, the average per-day pay to personnel Blackwater hired was $600. According to the schedule of rates, supplies and services attached to the contract, Blackwater charged Regency $1,075 a day for senior managers, $945 a day for middle managers and $815 a day for operators.

According to data provided to the House panel, Regency charged ESS an average of $1,100 a day for the same people. How the Blackwater and Regency security charges were passed on by ESS to Halliburton's KBR cannot easily be determined since the catering company was paid on a per-meal basis, with security being a percentage of that charge.

Halliburton's KBR blended its security costs into the blanket costs passed on to the Defense Department.

How much more these costs are compared with the pay of U.S. troops is easier to determine.

An unmarried sergeant given Iraq pay and relief from U.S. taxes makes about $83 to $85 a day, given time in service. A married sergeant with children makes about double that, $170 a day.

Army Gen. David H. Petraeus, the top U.S. commander in Baghdad overseeing more than 160,000 U.S. troops, makes roughly $180,000 a year, or about $493 a day. That comes out to less than half the fee charged by Blackwater for its senior manager of a 34-man security team.

National security and intelligence reporter Walter Pincus pores over the speeches, reports, transcripts and other documents that flood Washington and every week uncovers the fine print that rarely makes headlines -- but should. If you have any items that fit the bill, please send them tofineprint@washpost.com.

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