Terrorism and Opportunity

By Mark Smith

Few people know that foreign militaries are seldom self-sufficient when deployed in remote countries. We imagine that a soldier prepares his own meals in a mess hall, washes their own uniforms and even drives their own vehicle as part of their daily activities.

The fact is that foreign militaries outsource almost every operational activity to the most basic need. There have been studies that show it takes an average of nine private contractors to support one soldier when deployed.

Who would have thought that foreign militaries hire private security contractors to protect them and their bases? The outsourcing is due to a variety of reasons including cost, timeliness, performance and lack of internal resources when deployed.

Many foreign companies have profited from the war in Iraq and currently Afghanistan; however, the trend is shifting, and due to the administration of President Barack Obama and its overall learning curve, the door is slowly being opened to new competitors.

With this changing trend there are numerous opportunities for foreign companies from other countries to be awarded with lucrative governmental contracts than ever before.

Eight years ago, when the United States liberated Iraq and Afghanistan, things were much different. Perhaps, the United States and its allies did not intend on an extended operation, or the prolonged engagement has changed the climate of the contracting sector.

Or perhaps the various governments have come to the conclusion that less popular countries are indeed able to provide the same goods and services for a much lower cost.

In the beginning, it was relatively easy for a large company from a developed nation such as the United States or the United Kingdom to receive contracts to provide basic goods and services. Though the process was regulated, the margins for profit were enormous despite the fact that the products and services being delivered were basic.

The militaries and governments were prepared to pay premium prices for the speed of acquisition and mobilization. Since then, the militaries and governments have amended the award policies and widened the opportunities to other nations, not only to reduce cost but to act as a vehicle for capacity building.

This transition occurred slowly. In the beginning ex-patriots were hired as contractors to provide basic services such as working in the food service, or as drivers or clerks.

Much later, for a company to remain competitive due to budget constraints and new players in the market, large firms turned to workers from less developed nations such as Nepal, former Soviet Union states, the Philippines and Myanmar to maximize profits by paying lower salaries for the same quality of service.

The number one problem that interested companies have in entering into the arena of military/governmental contracting is lack of experience. Not experience in the core product or service they wish to promote, but experience in the complex language, culture and protocol of military and governmental contracting.

This has led to the increase in independent proposal writers and consultants that represent potential companies and re-package the assets of a company into a palatable form to present to decision makers and eventually win business.

What makes military/governmental contracting attractive is there is little risk involved. Foreign exchange, the stock market and trade barriers generally do not affect a company involved in military/governmental contracting.

Unlike the private sector, regulations exist that protect the contractor and a bidder has a level playing field to be evaluated fairly. A potential contractor is even allowed to protest an award and seek damages should the need arise.

Furthermore, militaries and governments pay on time. There is no threat of past due collections or non-payment as found in the private sector.

Despite eight years of occupation and rebuilding efforts, Afghanistan is far from reaching its potential, and the country is still in need of basic structures and services.

Foreign governmental agencies such as the U.S. Army Corps of Engineers, United States Agency for International Development, Japanese International Cooperation Agency and the United Nations are continuing to fund multimillion dollar projects to rebuild the country.

These projects include construction of roads, schools, bases, water supplies, various basic infrastructure components as well as all of the support services the specific projects require such as project management, operation and maintenance, and engineering services.

Doing business in conflict areas is not on the agenda for many companies. However, aside from conflict areas, there are literally thousands of governmental organizations that require goods and services in almost every sector worldwide.

It is common for companies to make the assumption that the international presence in Afghanistan is short lived and not worth the investment of capital to mobilize into the sector. The fact is that there are currently billions of dollars allocated and already approved to fund the rebuilding of Afghanistan.

Despite the fact that in the future the U.S. and its allies are likely to pull out of the country, the approved projects are still going to materialize. In short, it will not be easy to pull out of Afghanistan and will take a long time. There will even be opportunities in the future pull-out of the country.

A company that establishes itself now as a reputable contractor to foreign militaries and governments will increase its possibilities worldwide by creating strong past performances and a reputation that gives it preference among companies that are new to the industry.

For a company that wishes to increase revenue, maximize assets or expand capabilities in general, military and governmental contracting is a great opportunity in this challenging time of the global economic crisis.

Mark Smith has served various companies in an executive capacity for the past five years in both Iraq and Afghanistan, winning multimillion dollar contracts in various sectors for the international companies he represents. He may be reached at sdc.afgh@yahoo.com.