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

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.

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