NEXT TEST FOR BLACKWATER

Can Firm Get New Pentagon Work After Iraq Incident?

A Defense Department contract involving antidrug training missions
may test the durability of the political controversy over Blackwater
Worldwide's security work in Iraq.

The Moyock, N.C., company, which was involved in a September shooting
in Baghdad that left 17 Iraqis dead, is one of five military
contractors competing for as much as $15 billion over five years to
help fight a narcotics trade that the government says finances
terrorist groups. Also competing for contracts from the Pentagon's
Counter Narcoterrorism Technology Program Office are
military-industry giants Raytheon Co., Lockheed Martin Corp. and
Northrop Grumman Corp., as well as Arinc Inc., a smaller aerospace
and technology contractor.

The contracts are expected to be awarded as the need arises, so the
Pentagon's level of concern about employing Blackwater will likely be
measured over time and by whether the company wins leading roles or
is shut out. Companies competing for the work might be called on to
develop detection or surveillance technology; train U.S. and foreign
forces; or provide logistics, communications and
information-technology systems, among other areas. Blackwater faces
the question of whether it is too tainted to be tapped for such work,
even though the contract doesn't involve the kind of security detail
that it performs in Iraq. The Sept. 16 shooting in Baghdad strained
relations between Washington and the Iraqi government, which alleged
that the shooting was unnecessary.

The company, formerly known as Blackwater USA, maintains that its
ability to win additional government business hasn't been affected by
scrutiny from Congress, the State Department and the Justice
Department. Blackwater spokeswoman Anne Tyrrell said customers have
"confidence in our ability to perform in a capable and professional manner."

Peter Singer, a senior fellow at the Brookings Institution in
Washington, said Blackwater's troubles are not a "death knell," for
the company but said: "This extremely public kind of controversy
certainly isn't of much help in winning contracts."

Last week, Sen. Bernie Sanders, a Vermont independent who caucuses
with Democrats, and Democratic Rep. Jan Schakowsky of Illinois
introduced the "Stop Outsourcing Security Act," which would halt the
government's practice of using companies such as Blackwater to
provide private security for U.S. diplomats in Iraq.

Rep. Henry Waxman of California, chairman of the House Oversight and
Government Reform committee, continues to pursue inquiries into
Blackwater's operations in Iraq and its business practices. The
Federal Bureau of Investigation, which is probing the Sept. 16
shooting, is expected to report its findings in the coming weeks.

Tensions with Iraq over the U.S. employment of private contractors
are likely to persist. Saturday, a DynCorp International guard shot
and killed an Iraqi taxi driver in Baghdad as a convoy passed a
traffic jam. Iraq's Interior Ministry alleged that the shooting was
unprovoked. U.S. embassy spokesman Philip Reeker said DynCorp is
working with the Interior Ministry to investigate the shooting.

DynCorp spokesman Greg Lagana said that the company is investigating.
"We left the scene believing no one was injured," Mr. Lagana said.
Although the Pentagon's contracts represent a potential windfall to
the companies, they likely wouldn't come close to providing
Blackwater the same kind of cash flow that has come from the
government's spending for security work in Iraq. Since 2001, closely
held Blackwater is estimated to have been paid over $1 billion for
its government services.

Instead of giving all of the business to a single firm, the Pentagon
plans to award the antidrug work on a task-by-task basis, requiring
Blackwater and its rivals to compete constantly.

In August, the Defense Department gave each of the five companies a
$25,000 contract to look at intelligence, surveillance and
reconnaissance missions in Saharan Africa. Four more contracts have
since been awarded, but the government has classified the details.

For bigger companies such as Lockheed and Northrop, the value of the
antidrug contracts are miniscule when compared with building fighter
jets and naval ships. Yet, work such as this is increasingly
important as they seek to expand into new markets that could grow
over time. For Blackwater, which started in 1997 as a small company
that trained law-enforcement officers and others at its compound in
North Carolina, such contracts are crucial to growth. Since 2001,
Blackwater's roster of military veterans and former law enforcement
officers has swelled to more than 40,000, and it has built a fleet of
airplanes and helicopters larger than those of some of the countries
where it does business. Blackwater hopes to sell its own surveillance
airship and a custom-built armored vehicle for dangerous missions.

Under the Defense Department contract, Blackwater might end up as a
subcontractor to a rival. Lockheed lists Blackwater as one of 37
companies it might use to supply nonsecurity services such as
training personnel. Blackwater received $44 million in contracts from
Lockheed between 2005 and 2007 for work as a subcontractor on
antidrug training and border-related work in Afghanistan, according
to the Defense Department. Richard Douglas, deputy assistant defense
secretary for counternarcotics, counterproliferation and global
threats, said Blackwater's training of Afghan antidrug forces has
made them more effective. "We've been very happy with the results of
our association with them in Afghanistan," he said.

Gina Chon in Baghdad contributed to this article.