The Private Military Contractor Industry Is Reinventing Itself After The Demise Of Blackwater

"WE WERE selling $1m a year in merchandise with the company logo on it," says Erik Prince with a mixture of nostalgia and defiance. Blackwater, the company in question, rose to worldwide prominence as an outsourced branch of the American army during the occupation of Iraq and Afghanistan. It had plenty of admirers for the way it had pioneered a new branch of the defence industry, earning a total of around $2 billion from Uncle Sam for providing armed personnel to the Pentagon, the State Department and, secretly, the CIA. But the firm was overwhelmed by its more numerous critics, who said it was an undisciplined, unaccountable bunch of mercenaries.

In 2010 Mr Prince gave up the fight. He sold the firm, which he had founded in 1997 and which got its first big break by teaching police to handle school shootings after the 1999 Columbine massacre. It is smaller now and mostly does less controversial work such as guarding diplomats and providing training. Its new name, Academi, could scarcely sound less aggressive.

Mr Prince has started talking, after a long silence, to promote his book, "Civilian Warriors", in which he mounts a defence of his firm as unyielding as a Blackwater contractor under enemy fire. Mr Prince says he never intended to build a new sort of defence firm. But he stumbled on a huge opportunity to fill gaps in military capacity cost-effectively. Blackwater provided security to government officials such as Paul Bremer, the head of the transitional authority after the invasion of Iraq, and after that, senior State Department employees in Iraq and Afghanistan.

He says he got his entrepreneurial instinct from his father, who built a successful motor-industry supplier and taught him that the best way to win and keep a customer is always to say yes, then overdeliver--a formula that worked spectacularly well for Blackwater until the deadly nature of its overdelivery became so controversial. Now he is glad to be out of the industry he helped build. With the winding down of America's military campaigns in Iraq and Afghanistan, it has become a "very crowded field; too many firms competing for a shrinking pie." But Blackwater's demise created space for two rivals: DynCorp International, a 60-year-old firm that diversified into military security, and Triple Canopy, founded in 2003 with a similar business model to Blackwater's.

Groups such as Human Rights First campaign against governments' use of private military contractors, and Barack Obama attacked Blackwater in his first presidential campaign. George Bush responded by modestly tightening the rules on its deployment. But there has been no change of course since Mr Obama took office. "There is no going back, we just need to figure out the new rules for when private military firms should be used and when they should not," says Sean McFate, an academic at Georgetown University who previously worked for DynCorp.

Imitators everywhere

Post-Blackwater, two trends have dominated the new industry, says Mr McFate: globalisation and indigenisation. On the supply side, there are a growing number of private military firms, and not all of the new ones were formed by former special forces from Western powers, such as Aegis and Blue Mountain, two British firms. Warlords in places such as Afghanistan and Somalia are creating contracting firms that they staff with local talent. Their embattled national governments are seeing the merits in contracting out security. So America is no longer the only big buyer of private force, notes Mr McFate.

One thing that would greatly improve the industry's prospects is if the United Nations began using private contractors for peacekeeping missions, as it is said to be considering. Today, such missions are staffed by soldiers from poorer countries, who are often badly trained. Mr Prince thinks that private contracting would make the UN more effective, but he has no intention of going after that business. For him, the new promised land is Africa, where he is investing in firms providing services to the oil and gas industry, in places where he thinks his expertise in providing logistics and security can give him a competitive edge.

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