This year’s 7 percent increase in the $41.1
billion proposed 2006 budget for the Department of Homeland Security
(DHS) appears likely to continue in coming years, according to a number
of leading industry figures in homeland security. Indeed, the shift
within the budget in favor of procurement is likely to benefit
contractors even more.
For defense contractors concerned that the
defense budget may be close to topping out, homeland security provides
a refreshing area of hope. Homeland security is likely to benefit from
6 percent to 8 percent funding increases over the next five years,
Bruce Walker, director of homeland security for Northrop Grumman Corp.
of Los Angeles, Calif., told me.
Homeland security benefits not only from
strong administration funding, but also from strong support in
Congress, agreed FrankLanza, chairman and chief executive officer of
L-3 Communications, New York.
For example, he pointed out, the Deepwater
program to modernize the Coast Guard with new aircraft, unmanned aerial
vehicles and ships has strong support in Congress for acceleration.
Homeland security promises to benefit from a
shift in funding due to the benefits of more advanced detection
technology, according to Lanza.
Currently, a large portion of DHS’ spending
is tied up in airport screeners and the bureaucracy needed to support
that effort. Yet companies such as L-3 Communications, Smiths Detection
and General Electric’s InVision are working to create more capable
As detection improves through the use of
improved portals that can detect explosives, better X-ray machinery and
improved information for screeners on individuals needing to be
checked, false alarms will decline and the numbers of screeners needed
to check passengers will decrease, Lanza said. Similarly, improved
detection machinery will cut the number of checked bags needing to be
opened, again dramatically cutting the numbers of screeners needed.
Going beyond DoD research
The funding freed by this massive screening
effort will be put to use in procurement and research and development,
Those benefits will come not only from a
shift in detection technology but from the integration of various
systems and the application of technologies enabling greater sharing of
information, which will streamline the effectiveness of homeland
security efforts, in the view of HugoPoza, vice president for
Raytheon’s Homeland Security Strategic Business Area.
While research and development remains a
critical priority, relatively little money goes to the effort,
complained Lanza. DHS has benefited from heavy Department of Defense
(DoD) spending on research, which can then be adapted to homeland
That paradigm has worked to a limited extent,
in Poza’s view. For example, Raytheon, based in Waltham, Mass., has
been able to take simulation tools developed for defense and apply them
to homeland security. Genesis, a computer program originally developed
for intelligence applications, is able to gather publicly available
information about an individual and provide it quickly to
law-enforcement agencies such as the Border Patrol. Raytheon is also
planning to apply technology developed to identify optimal sensor
placement for defense applications in its effort to win the America’s
Northrop Grumman has tested its RQ-5 Hunter
unmanned aerial vehicle, which is also used by the US Army, to help
monitor illegal traffic along the Arizona border. It is applying
technology developed to protect the C-130 cargo plane against
Despite these successes, as time goes on and
the threat changes, it will no longer be possible to draw so heavily
from research done by DoD, Poza believes. For example, detection and
containment of biological threats is an urgent need, but biological
countermeasures remain a glaring deficiency for which there has been
little past DoD funding.
There is also a problem with the allocation
of DHS research funding. Rather than going to industry, national
laboratories are receiving a disproportionate sum, said Northrop
Grumman’s Walker. While industry tends to look for the immediate
near-term solutions that DHS is seeking, laboratories have a tendency
to look at longer-term research.
The growing number of DHS programs promises
to put continued upward pressure on the budget top line, as well. In
addition to programs such as Deepwater and US-VISIT, major programs
that contractors anticipate will move ahead, others will drive the need
for additional spending in future years.
Programs to watch
Key DHS programs in the years ahead include:
- America’s Shield—A program to improve border security along
the northern and southern borders of the United States, using improved
sensors and predictive intelligence. The request for proposals is
expected in September to October, with an award in February 2006 for
the $2 billion, five-year program. Competitors are likely to include
Raytheon Co., Lockheed Martin Corp., Northrop Grumman and the Boeing Co.
Integrated Wireless Network. A 15-year program to enable wireless
communications between DHS, including border agents, Federal Bureau of
Investigation agents, the Department of the Treasury and the Department
of Justice. The award is expected in July, with companies such as
Lockheed Martin Corp., General Dynamics Corp., Motorola and Raytheon
Co. expected to bid.
- Combined Infrastructure Program, or
DHS-1. This sweeping effort to consolidate the infrastructure of DHS
will involve individual efforts awarded to contractors. Work includes
consolidating all security operations centers within DHS and
consolidating the network within DHS. As part of this overall effort,
Northrop Grumman last year won a $337 million contract to design,
operate and maintain DHS’ classified network infrastructure for its
headquarters and state and local directorates.
- Container Security Initiative. Given the small number ofcontainers
that are inspected when they enter American ports, DHS is looking at
ways to improve security. HST
Philip Finnegan is
director of corporate analysis at the Teal Group, a firm based in
Fairfax, Va., that provides strategic and market analysis to major