Homeland Security Watch

I’ve covered the work of the DHS Essential Technology Task Force here and here, and yesterday the ETTF reported out its final recommendations to the Secretary during the public portion of the HSAC’s bi-annual meeting with the Secretary.

The Secretary of Homeland Security tasked the Homeland Security Advisory Council with establishing an Essential Technologies Task Force (ETTF) to address the following questions:

• What are the legal, financial and operational issues that must be understood to assess whether and to what extent DHS should acquire various types of technology on a service or lease basis, rather than as a purchase/capital investment?

• What types of technology might be considered as candidates for different approaches?

• What types of financial arrangements would the private sector likely be prepared to accept, and how should DHS assess the pros and cons of each?

IBM’s Scott Gould and I were among those invited to testify before the Task Force. On the two occasions that I presented to them, my testimony focused on key attributes of successful technology acquisition from other parts of the USG, as well as opportunities for DHS to collaborate with international partners for joint technology development, the models for which reside at the EU, NATO, and elsewhere.

Both Scott and I made the point that without an overarching framework to guide a Department-wide acquisition strategy, little progress is likely. Scott actually recommended using the Global Movement Management framework as a model, which the Task Force chose to include as a specific example in their final report. That report described in detail the following seven top-level recommendations:

1. Build a high performance acquisitions and program management function implemented by capable staff.

2. Adopt a rigorous Department-wide requirements management process.

3. Develop a Department-wide acquisition strategy with a clear implementation plan.

4. Improve engagement with the private sector.

5. Manage innovation though a variety of approaches.

6. Use the regulatory and standards setting role of DHS to generate economies of scale across stakeholder domains.

7. Continue to advocate for the reduction of homeland security Congressional committees.

The Secretary stayed only to delivery praise to the Task Force and swear in three new members to the HSAC. He left before ETTF chairman George Vradenburg delivered his presentation on the Task Force’s findings. This is unfortunate. The ETTF is another example of how the HSAC is becoming a more focused and more useful advisory entity to the DHS leadership. Kudos to Chuck Adams and Amanda Rittenhouse for their tireless efforts over the last several months in leading the Task Force’s staff team.

Before he left, Chertoff charged the HSAC membership with one more task: “What are the ten tasks for the next Administration to take up and accomplish over its first year or two?”

It seemed odd to charge this group with something so trite. However, he explained, rightly, that it is important that efforts be made to preserve the institutional knowledge of the Department into and through its first ever Presidential transition.

I’d like to know what you think should make the top ten list. Comment below.

Yesterday IBM and GW’s Homeland Security Policy Institute convened a panel event and discussion entitled “Technology in Homeland Security: A Double-Edged Sword.”

Brad Buswell, Deputy Under Secretary for S&T at DHS kicked it off with a presentation on how his directorate views the technology landscape, with a focus on not falling victim to the “failure of imagination” the 9/11 Commission blamed as one of the reasons the 9/1 attacks were not disrupted. This notion caused a number of us to ask about the practical limits on such an approach to technology. Specifically, how to insure against spending money on an “anything’s possible” mentality that invests in countermeasures against any threat imaginable? Buswell explained that White House guidance, Department level plans, and input from the customer community (the component agencies at DHS) helps bound the imagination.

Jan Lane stepped in for Frank Cilluffo to moderate Busewell’s presentation and Q&A and I joined the panel as moderator and occasional referee. Frank was able to join toward the latter half and weigh in on the issues.

Our panelists provided a diverse treatment of this challenging topic. Parney Albright, former DHS Assistant Secretary for Science and Technology, and now Managing Director & Vice Chairman at Civitas, weighed in on the challenges confronting the innovators on the business side of the equation who seek to take pre-prototype solutions to market and how that shapes the spectrum of technology solutions deployed at the state level.

Christian Beckner, Professional Staff Member on the Senate Homeland Security and Governmental Affairs Committee, explained some of the rough patches still preventing a more accelerated trend in technology as a homeland security advantage, as well as indications of areas of interest from an oversight perspective. (Note that Christian spoke not on behalf of the Committee.)

Greg Nojeim, Director of the Project on Freedom, Security, and Technology at the Center for Democracy and Technology offered insightful warnings about the unintended consequences of technology when it is not developed or deployed with privacy protections at the initial stages. He cited such things as the PATRIOT Act and government wire-tapping outside of FISA.

Langdon Greenhalgh, CEO of Global Emergency Group, provided the needed perspective of the international emergency response community, which depends to an ever increasing degree on technology as an enabler.

I’m working with Jan and Frank to generate an after action report that condenses the highlights of the discussion. Look for it to be available here and possibly on the HSPI website.

Over 70 participants attended representing the following, among other, organizations:

• DHS, NPPD, IP, HITRAC
• DHS Homeland Security Advisory Council
• Homeland Security Institute (DHS S&T)
• DHS S&T
• U.S. Secret Service
• Department of State
• Department of Energy
• The White House
• Immigration and Customs Enforcement
• Senate Homeland Security and Governmental Affairs Committee
• Government Accountability Office
• European Union
• IBM
• Bingham Consulting Group
• Northrop Grumman Corporation
• Lockheed Martin
• Computer Sciences Corporation (CSC)
• Trade Security Institute
• Dutko Worldwide
• The Washington Times
• USA Today
• Swedish Institute of International Affairs
• Embassy of El Salvador
• Embassy of Switzerland
• International Association of Fire Chiefs
• Embassy of Australia
• International Development Bank
• Latin America Working Group
• Center for Strategic & International Studies (CSIS)
• Partnership for Public Service
• Center for Democracy and Technology
• MSCL, LLC International Maritime Consultancy
• Oxford Analytica, Inc.
• American Red Cross
• Institute for Regulatory Science

Readers may recall the Global Security Challenge as the technology and innovation competition started a couple years ago to focus on homeland security and CT capabilities. This year, co-president of the GSC, Simon Schneider, wrote me to explain that they’ve expanded the competition in two important ways. First, they are inviting early-stage innovators to compete with ideas, not necessarily prototypes or finished products. Second, they’ve created a new category for the best solution for protecting crowded places – an area that is of particular concern to the UK Government.

This year’s Best Security Idea award is aimed to support researchers, infant companies with no revenue yet, and any other inventors who just have an idea for a security solution. Judges are seeking submissions with compelling “disruptive potential,” rather than product maturity. The prize for this competition category is mentorship by Siemens Venture Capital and the opportunity to present the winning idea on stage of the GSC Grand Final in London.

Secure Futures, the GSC’s partner company and a UK-based national security “innovation firm,” will provide financial and advisory support for a new award category in the Global Security Challenge competition to reward the most innovative ideas for securing crowded areas. Winning solutions, according to GSC, may include innovative video surveillance solutions, access control technologies, or solutions for better communicating with crowds. This award is a subcategory of the Best Security Idea Award with a focus on contributing to public safety. The winner receives $10,000. Since this is held in London, I’d recommend asking for that in pounds or euros.

The big fish at the GSC is of course the $500,000 grant sponsored by the Technical Support Working Group, an interagency technology development entity led by DOD, DHS, and State. This prize is open to competition from any security technology startups with less than $5 million in revenues in 2007 and a working prototype. All finalists receive mentorship by leading VC firms.

DHS announced it has contracted California-based Computer Sciences Corp. for information-technology support. Under the $53 million contract CSC will provide desk support, systems training and security and strategic business system planning among other business intelligence analysis support services for USCIS.

USCIS announced that it has selected a team that includes Northrop Grumman Corporation to provide large operations management services at the USCIS California and Vermont service centers. The three-year indefinite delivery/indefinite quantity (ID/IQ) contract has a total ceiling value of $225 million to the team, on which Northrop Grumman will be a subcontractor to Stanley, Inc.

A $357 million contract from USCIS went to Northrop Grumman to continue providing biometric capture services in support of U.S. citizenship applications and green card renewals. Biometric capture services involve electronic scanning and recording of fingerprints, and photograph and signature collection, for identification purposes. Under Northrop Grumman’s management of the biometric program, USCIS has reduced its fingerprint rejection rate from 20 to 1.5 percent.

A $225 million contract supporting USCIS Service Center Operations in Nebraska and Texas went to SI International. The company also supports USCIS Office of Records services with the tracking and accounting of more than 62 million immigration files.

The Security Breakfast Series launched in WDC this morning. Titled “What’s Next: The Future of Homeland Security Technology,” the event included a mix of official DHS representatives and private sector leaders mainly from the venture capital and investment banking community. Crowell Moring and Legend Merchant Group were core sponsors.

Main theme over danishes: there’s money to be made in homeland security and the government is looking for us to wise up to the fact.

Bob Hooks, Director of Transition for DHS S&T, made two important points. First, the asymmetric nature of the threat faced by DHS and its component agencies is far broader than that which DOD must confront. Second, technology as a “force multiplier” serves a central role in meeting DHS needs in this mission. To make it even easier for the investors in the room, Hooks brought an unclassified document that lists (without too much specification, of course) the high priority technology needs the Department seeks.

Drawing a difference between DHS and DOD is easy to do, but Hooks’ point suggested an added challenge. Technology is in great need at DHS, but the budget is far smaller than anything similar at DOD. Hence the market forces that came for coffee this morning. An underlying assumption made explicit by almost every panelist was that the most successful technologies for homeland security will require a commercial application. Michael Steed of Paladin Capital drove this home with a drumbeat of investments his group has made in funds valued at several million dollars. Heck, the Department was even smart enough to bring on a Chief Commercialization Officer to help the private firms get the idea.

Tom McMillen of Homeland Security Capital Corp spoke to the trajectory of the threats DHS will likely consider top priorities while suggesting that a Democratic win of the White House in 2008 is sure to generate greater federal investment in homeland security (at the expense of Iraq funding, which is about $452, 447, 997, 763 to date).

However, another important role of the private sector in securing the homeland was out of scope for today’s discussion. In addition to selling services and solutions for DHS to defend against terrorism, the private sector is also in many ways the target of terrorism. What makes the asymmetry in protecting the homeland so much broader than that which the Pentagon deals with has both to do with the methods that must be defended against and the spectrum of targets that includes almost anything in the civilian domain. Private industry, however, is not only a target or vector for terrorism. There are ways in which the private sector — global shipping, banking industry, HAZMAT, etc — can become part of the defense in doing daily business.

The guys at the DNDO call this “grafting security onto the private sector.” In this way, a globally flung network of shipping fleets could be vectors for detecting the presence of dangerous materials. The international banking industry could partner as they sometimes do through SWIFT to detect the presence of dangerous money flows. As the public and private sector begin to work more collaboratively from this standpoint, we might see the asymmetry winnow. Moreover, if terrorists use our weaknesses against us, let’s use theirs against them: they don’t have international alliances through the World Customs Organization, but we do. They don’t have working relationships with the global banking community, and yet we do. Indeed when panelists this morning spoke of how technology has the potential of being a “force multiplier” for federal efforts to secure the homeland they may have sold it short. A broader perspective on how the public and private sectors can work together and exploit our shared strengths – “grafting security” onto the private sector – could go a long way in shifting the asymmetry.

Nortel Government Solutions began a new contract this month with a potential value of $39 million to support U.S. Citizenship and Immigration Services (USCIS) procurement strategy development, project planning, reporting, purchasing and database management. The new award is scheduled to run through November 2011. 

Rainmaker: To transform from paper-based technology to information technology, USCIS is preparing to release a contract for its Business Systems Transformation initiative with an estimated value of $235 million. 

Science Applications International Corp. (SAIC) won a three-year, $85 million contract from ICE to provide information technology operations and maintenance support. 

G&H International Services of DC won a $1.6 million contract from DHS to provide research and development for the Public Safety and Security Institute for Technology Program.

ICF International won three nine-month contracts worth a total of $1.6 million from the San Francisco Office of Emergency Management to help coordinate and improve local disaster preparedness. 

Serco Inc. won a three-year contract from the Space and Naval Warfare Systems Center for $62 million to expand its existing port and antiterrorism security systems at Navy ports. 

Both the RHG Group and Transcom won $7 million contracts from DHS for transportation services.

Jane’s Information Group was acquired by IHS, Inc., which delivers analysis about the energy and engineering sectors.  They paid approximately $183 million in a stock deal to Jane’s owner Woodbridge Co.  

Jane’s, a solid source of intel and analysis on a range of defense and security since topics 1898, commanded about 4.4 million shares of common stock from IHS, whose shares fell 29 cents to $41.42 last week. 

Jane’s Homeland Security & Resilience Monitor launched a few years ago in a partnership with London’s Royal United Services Institute.  RUSI’s Sandra Bell is among the leading thinkers on HLS issues and is someone I credit with elevating the concept of resilience as a viable defense against assymetric theats in a civilan context.  The Brits are sort of keen on that. 

When the GAO foiled DHS efforts to detect smuggled nuclear material coming across the border last year, they did so without actually having to dupe the detection equipment.  They forged the associated documentation from the Nuclear Regulatory Commission.  That shifted blame from the DNDO to the strategy itself and the coherence among the motley web of agencies involved in securing the Homeland. 

GAO’s investigators were able to enter the United States with enough radioactive sources in the trunks of their vehicles to make two dirty bombs using counterfeit documents.  

To be sure, CBP felt the heat for this, too, since their strategy allowed the documentation to travel separately from the material it described.

The CBP inspectors never questioned the authenticity of the investigators’ counterfeit bill of lading or the counterfeit NRC document authorizing them to receive, acquire, possess, and transfer radioactive sources. 

And the NRC had to do some soul searching about the part it plays in this strategy.  But whatever happened to the issue of dealing with the forgery? 

While this was another example of both imperfect strategy as well as technology, the technology issue is almost always easier to solve.  Here’s an interesting option: Something called the Laser Surface Authentication or LSATM (developed by Ingenia Technology) reads the surface of paper, plastics, and metals with a low cost laser to determine its structure and veracity.  It generates a signature or “fingerprint” to verify a material for authentication and tracking of anything from credit cards to passports to medicines.  Perhaps even NRC documentation someday. 

Groundbreaking stuff – especially for a company only a few years old.  Last year it was this breakthrough technology that won Ingenia the Global Security Challenge, an international competition run by students at the London Business School. 

The LSATM snagged the top prize of $10,000 bestowed by the jurors.  The jurors were not students, but rather the Director of Siemens Venture Capital, the Global Director of Information Risk Management for Barclays Capital, the Deputy Director of the DOD Technical Support Working Group, and the Strategy Director of BAE Systems Integrated System Technologies, among others. 

Not bad for a bunch of grad students. 

Here’s another way to gauge the success of a competition: The top prize this year jumps to $500,000.  Get to work though because the deadline was already extended from June 30 to July 15.  Check out the press release here. 

Who knows, this year the winner may offer an exit function for US-VISIT.  

Happy Fourth of July!

Spencer Hsu and Renae Merle write in today’s Washington Post that the U.S. Coast Guard responded to Congressional frustration over the failure of a consortium of contractors to deliver on the $24 billion modernization program called Deepwater.  Among other disappointing developments under Deepwater, a clear necessity for providing the USCG part of what it needs to carry out a growing list of HLS missions, the new cutters built by consortium leads LockheedMartin and Northrop Grumman don’t float.  $100 million a piece, they’ll never be used. 

Failures prompted the House Transportation and Infrastructure Committee leadership yesterday to call for the Justice Department to open a civil and criminal investigation into Deepwater.  As a result of this restructuring of Deepwater, Coast Guard must reissue a 43-month extension of the contract. About $2.3 billion has been committed to the program so far, and the second phase is reported by Hsu and Merle to be worth $2.5-$3 billion.

Perhaps we should’ve seen it coming.  Last August, the DHS IG issued his warning about the program’s execution.  IG Skinner cited “limited oversight as well as unclear contract requirements,” which prevented DHS/USCG from “ensur[ing] that the contractor is making the best decisions toward accomplishing Deepwater IT goals.”  Hmm.  Do we blame the requirements, the agency, or the contractor?  The Washington Post’s Steve Kelman wrote an insightful analysis explaining diff’rent strokes for different IGs by suggesting an ideological posture that may decide how this question is ultimately answered.

And it looks like it may be answered soon enough: Tomorrow’s hearing (4/18) before the House Transportation and Infrastructure Committee at 2:00 p.m. in 2167 Rayburn is entitled “Compliance with Requirements of the Coast Guard’s Deepwater Contract.”  For a witness list, click here.

– Special Note –

Please keep the families and friends of the victims of yesterday’s shootings at Virginia Tech in your thoughts. VT student bloggers commenting on the shooting were highlighted here.  More on this issue is available.  -CZ

The homeland security strategy advisory firm Civitas Group LLC released a report this week entitled “The Homeland Security Market: Essential Dynamics and Trends”, updating a 2004 report on the same topic (full disclosure: I was a co-author of that earlier paper). The new report contains some valuable insight into the state of the homeland security market, in particular the section from pages 8-11 on “dominant market characteristics,” which outlines nine top-level issues that people need to understand about the homeland security market. As with the earlier version of the report, I think that it’s an objective and sober take on the homeland security market, in contrast with other reports of this ilk that forecast multi-gazillions of dollars of DHS spending in the coming years.

The New York Times and the Washington Post published stories yesterday and today criticizing the Coast Guard’s Deepwater program, which is managed by a Lockheed Martin and Northrop Grumman joint-venture, Integrated Coast Guard Systems. There are a number of disturbing details in these two stories about the management of this project, for example:

Facing a shortage of patrol boats, the contractors and the Coast Guard decided to speed development of a larger ship, the Fast Response Cutter. The hull was to be built from glass-reinforced plastic, known as a composite, something never tried on a large American military ship.

While acknowledging that it might cost much more to build the 58 planned cutters with composite hulls instead of steel, Northrop and Lockheed claimed the boats would last longer and require less maintenance, saving money over the long run.

Coast Guard engineers again were doubtful that Northrop’s design would work, citing concerns about weight, hull shape and fuel consumption. The Coast Guard also found inconsistencies in the cost data Northrop used to justify the new hull.

One former Northrop executive said the company was pushing the plan not because it was in the best interest of the Coast Guard, but because Northrop had just spent $64 million to turn its shipyard in Gulfport, Miss., into the country’s first large-scale composite hull manufacturing plant for military ships.

“It was a pure business decision,” said the former executive, who disagreed with the plan and would speak only anonymously for fear of retribution. “And it was the wrong one.”

That became clear when a scale model of the Fast Response Cutter was placed in a tank of water — and flunked the test. After three years and $38 million, Northrop Grumman’s plan was suspended.

The Coast Guard clearly needs this new generation of ships and equipment. But these types of procurement screw-ups are unacceptable. Hopefully Coast Guard Commandant Thad Allen will take aggressive action to remedy these issues in the coming months (something that the NYT story suggests).

I attended and spoke at the Global Security Challenge Conference today in London, England, an event that was organized by a group of London Business School students over the past year centered around a business plan contest for promising homeland security start-ups. It was an excellent conference, featuring a diverse and interesting group of speakers and involving some top-notch companies in the business plan competition. I’m pretty jaded by all of the homeland security-related business pitches that I’ve heard over the past 4+ years, but the quality of these plans was excellent:

• Ingenia Technology
• ScanWalk
• Secerno
• TIRF Technologies
• Vumii

Ingenia Technology was the ultimate winner of the competition, for what looks to be a very interesting technology for document and asset authentication based upon the natural physical signatures of items.

The speakers at the conference were also very informative. A number of them invoked the Chatham House rules, so I can’t go into detail on the day’s remarks, but I can note that I was surprised by the extent to which many of the Europeans viewed the U.S. homeland security market as ideal in its openness and flexibility in comparison with what they experience in the European Union. And I learned details about two European technology development programs that I hadn’t previously known much about: the European Security Research Programme and NATO’s Defence against Terrorism program.

The most valuable takeaway from the event for me was witnessing the practical results that a small cohort of MBA students could achieve in putting together an event like this. The homeland security community has perhaps fallen for the fallacy of bigness over the past few years, thinking that we need Marshall Plan-like endeavors to solve our critical challenges. Yes, in some sectors we do need large projects akin to the traditional DOD system integrator model, but other elements of the homeland security R&D system require speed, agility, and openness as key parameters rather than size and scale. This conference demonstrated how you can catalyze the innovation cycle by bringing together technologists and business leaders and cut through many of the bureaucratic hurdles that hinder more effective R&D in the security arena. The students who started this event have created an excellent forum, which hopefully will continue in the years ahead.

I’ve pasted a copy of my remarks as prepared for delivery at this link. And I’ve created a webpage with a number of links that were relevant to these remarks at this link.

ps. A nice shot of Tower Bridge (not London Bridge, as MTV might have led one recently to believe) from the conference site:

A recently-created page on the Fido.gov website provides comprehensive access to detailed information on the planned procurements at the Department of Homeland Security and its constituent agencies in FY 2007. I haven’t seen this information presented in such a comprehensive and timely manner in previous years, so kudos is due to the procurement shop for their efforts.

On an important side note, there’s an interesting description of a new opportunity at the DHS preparedness directorate, worth $20-$50 million, found within this database:

Provide National Domestic Preparedness Consortium member (New Mexico Technology) congressional earmarked appropriated dollars for training first responders.

If this is truly a “congressional earmark,” then it’s certainly well-hidden. I checked the DHS appropriations bills and conference reports for both FY 2006 and FY 2007, and I can’t find any reference to this. What’s up? Is this something that goes back to prior years? Or is this some kind of verbal or implicit earmark by someone in the New Mexico delegation?

Perhaps “New Mexico Technology” deserves this money, but not in this way. The DHS appropriations bills are relatively clean today, and everyone who cares about effective homeland security needs to work to keep them that way.

According to stories in Wednesday’s New York Times and Washington Post, The Boeing Company has won the DHS contract for the Secure Border Initiative (SBI). From the latter story:

Aerospace and defense giant Boeing Co. has won a multibillion-dollar contract to revamp how the United States guards about 6,000 miles of border in an attempt to curb illegal immigration, congressional sources said yesterday.

Boeing’s proposal relied heavily on a network of 1,800 towers — most of which would need to be erected along the borders with Mexico and Canada. Each tower would be equipped with a variety of sensors, including cameras and heat and motion detectors.

The company’s efforts would be the basis of the government’s latest attempt to control U.S. borders after a series of failures. The contract, part of the Secure Border Initiative and known as SBInet, will again test the ability of technology to solve a problem that lawmakers have called a critical national security concern. This time, the private sector is being given an unusually large say in how to do it.

Boeing sold its plan to the Department of Homeland Security as less risky and less expensive than competing proposals that would have relied heavily on drones for routine surveillance work. Boeing plans only limited use of small unmanned aerial vehicles that could be launched from the backs of Border Patrol trucks when needed to help pursue suspects.

For more on Boeing’s bid, see this Bloomberg story from August and Boeing’s initial press release on SBI from May.

Update (9/20): More analysis on the decision (which appears will be officially announced on Thursday) from the St. Louis Post Dispatch.

Update (9/21): The official announcement was made today by DHS. You can read the transcript of the press briefing at this link.

From today’s New York Times, a story surveying the problems in which Project BioShield is currently mired:

The last of the anthrax-laced letters was still making its way through the mail in late 2001 when top Bush administration officials reached an obvious conclusion: the nation desperately needed to expand its medical stockpile to prepare for another biological attack.

The result was Project BioShield, a $5.6 billion effort to exploit the country’s top medical and scientific brains and fill an emergency medical cabinet with new drugs and vaccines for a host of threats. “We will rally the great promise of American science and innovation to confront the greatest danger of our time,” President Bush said in starting the program.

But the project, critics say, has largely failed to deliver.

So far, only a small fraction of the anticipated remedies are available. Drug companies have waited months, if not years, for government agencies to decide which treatments they want and in what quantities. Unable to attract large pharmaceutical corporations to join the endeavor, the government is instead relying on small start-up companies that often have no proven track record.

The article builds off the excellent piece in Time Magazine back in January on BioShield and goes into great detail on the nasty fight between VaxGen and Emergent BioSolutions (formerly BioPort) over anthrax vaccine contracts.

The Department of Homeland Security announced today that it would award contracts totaling $1.35 billion in value to three companies as part of the Cargo Advanced Automated Radiography System program:

The U.S. Department of Homeland Security (DHS) announced today the award of the Cargo Advanced Automated Radiography System (CAARS) program contracts totaling an estimated $1.35 billion to SAIC of San Diego, Calif., American Science & Engineering of Billerica, Mass., and L-3 Communications of Woburn, Mass. The CAARS award, which comes following a fully competitive acquisition, will complement the nation’s radiological and nuclear detection capabilities.

For more on the CAARS program, see this recent presentation by DNDO director Vayl Oxford.

The website YouTube and other sites like it are rapidly reshaping the playing field of information exchange in ways that people are only beginning to realize. The latest example of this phenomenon comes from a video posted on YouTube last Thursday, by a man who identifies himself as an engineer for Lockheed Martin and then proceeds to list flaws with the 123-Foot Cutter produced by Lockheed as part of the Coast Guard’s Deepwater program. Over 3,000 people have watched the video since it was put online, and its posting led to an article in the Navy Times on Monday, which notes the Coast Guard’s reaction:

A spokeswoman for the Coast Guard’s Deepwater recapitalization program said the service is aware of the video and the allegations, and added that the Coast Guard is cooperating with an ongoing investigation into the matter by the Homeland Security Department’s Inspector General.

“The Coast Guard takes very seriously concerns of national security, and are fully cooperating with the IG’s investigation, and because of that ongoing investigation, [the service] will not discuss the details that appear in the video,” Deepwater spokeswoman Mary Elder said Monday.

The Coast Guard’s chief of media relations, Cmdr. Jeff Carter, said the service has requested that YouTube, Inc. remove the video.

“It contains material that is inappropriate for discussion in a public forum and could compromise the safety and security of Coast Guard cutters and their crews,” Carter said.

I have no personal insight into the substance of the allegations in the video, but I’m intrigued by its very existence. And I think that this not likely to be the last video of its kind. I wouldn’t be surprised to see people posting videos that test and expose flaws in the security of certain facilities or systems, as a way to draw public attention to vulnerabilities and get them fixed. This is the new reality on the Internet, and it’s something that homeland security officials need to begin to grasp today.

Forbes Magazine published a couple of stories today on the state of the homeland security market, one on SAIC’s upcoming IPO, the other providing a more general survey of the market. The latter story is a bit convoluted in its analysis, not surprising given the challenges of trying to define and apply clear parameters to the homeland security market, but it does a better job than most similar stories at pointing out the multiple factors and points of evidence that must be considered in assessing the general trajectory of the market.

The House Government Reform Committee released a report this morning entitled “Waste, Abuse and Mismanagement in Department of Homeland Security Contracts”, in conjunction with a hearing on the topic. The report earned front-page treatment in the Washington Post today - surprising given that it contains little new information. The report make a number of attention-getting claims, but many of these are misleading when you look at the underlying data and check the sources cited in the footnotes.

For example, one of the report’s banner claims is that it “identifies 32 DHS contracts collectively worth $34.3 billion that have been plagued by waste, abuse, or mismanagement.” Sounds shocking, right? If I was reading this quickly, I would think that DHS has wasted $34 billion of the taxpayers’ money. But take a look at the distribution of this “$34.3 billion.” Nearly half of it - $17 billion - is for the Coast Guard’s Deepwater program, their effort to modernize their fleet of ships and planes - a program that usually ranks up there with mom and apple pie. While projected costs have risen for this program, the most likely reason for this is not waste or fraud, but the Coast Guard’s transformed requirements after 9/11. And keep in mind that this $17 billion includes spending out into the next decade - as is the case with the next largest item on the list, the US-VISIT program (at $10 billion, only a small fraction of which has been spent to date).

The remaining $7.3 billion of this total largely consists of two things: first, TSA contracts back in 2002 before the creation of DHS, which were no doubt flawed (something that the Congress itself deserves a share of responsibility for, given the deadlines that it set for complying with ATSA mandates). And second, post-Katrina FEMA contracts which were also flawed (and which I’ve also frequently criticized).

The list does include one additional recent contract - the acquisition of Radiation Portal Monitors - but the report’s treatment of this contract makes a very erroneous claim. The report states that:

According to press reports, on an average day at the combined ports of New York and Newark, only 6% to 7% of the shipments are run through the radiation portals.

…linking to the transcript of a 60 Minutes report in March 2006, which clearly states that the 6%-7% applies to the VACIS x-ray imaging equipment - not the radiation portal monitors.

Finally, the report makes the claim that “Procurement spending at DHS has surged 189% since the creation of the new Department, rising from $3.5 billion in 2003 to $10 billion in 2005.” I’d like to see the underlying data that supports that claim. Since 2003 I’ve tracked DHS spending as closely as anyone outside of government, and this doesn’t square with my prior analysis, which would suggest that the % growth in contracts between 2003 and 2006 is actually quite small. I suspect that the Committee is using a source that has incomplete data for DHS’s first year or two, given the lack of reliable public data on contracts for this period. Or perhaps this increase is due to the fact that DHS was heavily reliant on contracting through other agencies in its first 2-3 years, and the database that the Committee used credits this spending to other agencies (this is why it’s important to cross-check with budget documents). Or perhaps the report uses one-time post-Katrina contracts to falsely denote a meaningful trend. My sense is that that this “increase” is actually an indicator that the DHS procurement shop has done a better job in the last two years of accounting for all DHS contracts.

There no doubt have been problems with homeland security-related procurement in the past few years, especially during TSA’s first year of existence and the post-Katrina spending spree. But this report is an error-filled and misleading account of this record.

Update (7/27): Overheard on the DC metro this afternoon, confirming my contention that this report and the Washington Post story give misleading impressions: “You won’t believe this story…it says that DHS has wasted 34 billion dollars in the last two or three years!”

Update 2 (7/28): More misleading press coverage of this report, this time from AP:

The Homeland Security Department spent $34 billion in its first two years on private contracts that were poorly managed or included significant waste or abuse, a congressional report concluded Thursday.

As I mentioned earlier in the post, $27 billion of this total is for full costs of the Deepwater and US-VISIT programs, out over the next 10-15 years. The vast majority of this total - at least 75% of the $27 billion - has not yet been spent by DHS.

The Department of Homeland Security announced contracts awards for the Advanced Spectroscopic Portal (ASP) program, totaling $1.157 billion, to Raytheon, Thermo Electron Corporation, and Canberra Industries. The program is intended to develop the next generation of radiation portal monitors, for use at seaports, rail depots, and mounted on trucks. This is an important and necessary program, given the performance limitations of the current generation of passive detectors. As DHS noted in its press release:

The ASP program improves upon the existing polyvinyl toluene based radiation portal monitors which are currently being deployed to the nation’s points of entry by Customs and Border Protection, as well as overseas through the Department of Energy Megaports Initiative. These new systems will enhance current detection capabilities by more clearly identifying the source of detected radiation through spectroscopic isotope identification.

“The ASP program provides significant improvement in the detection of special nuclear materials such as highly enriched uranium and weapons grade plutonium,” said Vayl S. Oxford, Director of the Domestic Nuclear Detection Office. “The program is critical to implementing the Global Nuclear Detection Architecture. By identifying these materials through spectroscopy, these next-generation systems will reduce the false alarm rate by distinguishing between special nuclear materials and naturally occurring radioactive materials.”

This statement of work for the procurement and this specification document provide detailed information on the program.

The New York Times has a long piece this weekend that chronicles the exodus of senior homeland security officials to the private sector in the last 2-3 years. The story includes with it a comprehensive list of senior officials who have headed off to the private sector, and maps out senior-level departures against the DHS org chart.

The story mentions a number of loopholes in government ethics rules that former DHS employees have been able to utilize to their advantage; these loopholes should be closed immediately. And the story is a symptom of what I think is the real problem at DHS: the paucity of career employees, and instead the over-reliance on political employees and contractors acting as pseudo-employees. That workforce strategy makes this outcome predictable.

But that said, I don’t fault any person’s decisions to leave DHS, which is undoubtedly a high-stress place to work, and move to the private sector. It should also be noted that many of the people on the NY Times’ list worked in the private sector prior to joining DHS, and the Department benefited from their business experience - so it’s also natural that these same people would go back to the private sector. Finally, I’m not sure if the “revolving door” swings faster in DHS than in other mission-oriented parts of the federal government, such as DOD…the story provides no basis for comparison.

The New York Times published an interesting story yesterday on Rep. Hal Rogers, chairman of homeland security subcommittee of the House Appropriations Committee, and his efforts to direct homeland security dollars to his Kentucky district:

The Department of Homeland Security has invested tens of millions of dollars and countless hours of labor over the last four years on a seemingly simple task: creating a tamperproof identification card for airport, rail and maritime workers.

Yet nearly two years past a planned deadline, production of the card, known as the Transportation Worker Identification Credential, has yet to begin.

Instead, the road to delivering this critical antiterrorism tool has taken detours to locations, companies and groups often linked to Representative Harold Rogers, a Kentucky Republican who is the powerful chairman of the House subcommittee that controls the Homeland Security budget.

It is a route that has benefited Mr. Rogers, creating jobs in his home district and profits for companies that are donors to his political causes. The congressman has also taken 11 trips — including six to Hawaii — on the tab of an organization that until this week was to profit from a no-bid contract Mr. Rogers helped arrange. Work has even been set aside for a tiny start-up company in Kentucky that employs John Rogers, the congressman’s son.

“Something stinks in Corbin,” said Jay M. Meier, senior securities analyst at MJSK Equity Research in Minneapolis, which follows the identification card industry, referring to the Kentucky community of 8,000 that has perhaps benefited the most from Mr. Rogers’s interventions. “And it is the sickest example of what is wrong with our homeland security agenda that I can find.”

Most of the facts in the story have been published before, but it does a good job of summarizing the relevant facts. The story might leave some readers with the impression that the homeland security budget is larded up with pork, but the main lesson that I take away from it is the opposite: that the extensive public scrutiny of the homeland security budget constrains special interest spending in the budget, as indicated by DHS’s decision to reverse course on Rogers’ TWIC-related earmark in the FY 2006 appropriations bill.

Henry Waxman, the ranking member of the House Government Reform Committee, released a report today documenting fraud and waste associated with contracts related to Hurricane Katrina recovery efforts. The evidence found in the report is appalling, especially in a time when the needs for disaster recovery and homeland security are so great. The people who have bilked the taxpayers on the Katrina recovery efforts need to be held accountable.

Amid the latest sordid political scandal to emerge in Washington is this item:

The car service, Shirlington Limousine and Transportation Service, won a $21.2 million contract from the Department of Homeland Security in 2005, said Larry Orluskie, a Homeland Security spokesman. It was a contract for small businesses, and Shirlington Limousine was one of three companies that competed for it, Mr. Orluskie said.

Shirlington Limousine’s contract is for one year, with an option to renew for four years, he said. The company provides about 10 shuttles for department employees and about 10 sedans to drive senior executives. Michael Chertoff, the homeland security secretary, and his deputy do not use the service, Mr. Orluskie said.

I’ve been reading through the procurement-related documents for this contract tonight. The set of documents put forward in the course of awarding the contract can be found here, and the notice of the award is here. This document is especially detailed. One thing that is unclear from all of the reportage as well as the documents is whether the $21.2 million is only for the base year, or whether it also includes the projected payments in the four option years. Based on my assessment of the project requirements, it’s probably for the five year total - otherwise, this makes highway robbery seem like a charitable profession.

Even assuming that it for five years, it’s still a lot of money. The bid documents break out the estimated number of contractor labor hours and benchmark labor rates (including benefits), which when you plug in the numbers and add the employer FICA & Medicare contributions, implies a per-year labor cost of $657k to meet the contract requirements:

The contract also requires the purchase and maintenance of ten shuttle buses. There is limited information online about prices for the models that are indicated in the procurement documents (National Bus Sales and Leasing Model GC1#0853, El Dorado Model 220, and Thomas Built Model 124), but this link shows 2004 model El Dorado 220’s being sold for $27,500. I’ll estimate a purchase cost of $75,000 per vehicle (w. five-year straight line depreciation to zero), annual maintenance costs of $15,000 each over the five year period, and gasoline costs of $11,250/vehicle per year (15 gallons per day x 250 workdays x $3/gallon). That leads to an implied fleet cost of $412,500 per year over the five-year period.

The procurement is also for executive sedan service, but only for drivers, and explicitly not for the vehicles or gasoline. The drivers’ salaries come out of the totals above, as far as I can tell.

Bottom line: this contract should have operational costs in the neighborhood of $1.07 million per year. Add in another 25% for overhead (e.g. employee background checks, insurance) and project management, and another 15% for profit, and we’re still only talking about $1.5 million - much, much less than the implied annual contract value of $4.2 million.

There could be other factors that I’m not considering, or I could be interpreting this incorrectly, but if so, that’s due to opacity and ambiguity in the contracting documents. DHS should provide a full public accounting of this contract to ensure that the taxpayers’ money is being spent appropriately.

Update (5/4): Here’s a copy of the contract.

Update 2 (5/8): Democrats on the House Homeland Security Committee ask the DHS IG for an explanation of the deal.

New on the Department of Homeland Security’s website, an overview of DHS contracting activities in fiscal year 2005. The report notes $12.5 billion in procurement activity at the Department in 2005, which includes contracting activity related to Hurricane Katrina. In fact, four of the top six companies listed on page two of the document have contracts solely related to the Katrina recovery, primarily for trailers and other emergency housing.

Steve Flynn at the Council on Foreign Relations (CFR) and Daniel Prieto at the Reform Institute have written a new report for CFR entitled “Neglected Defense: Mobilizing the Private Sector to Support Homeland Security.” The report provides a solid analysis of the challenges associated with strengthening the private sector’s involvement in homeland security and puts forth a set of insightful recommendations about how to enhance its role.

The report includes the following general findings:

• The federal government has failed to establish national priorities for critical infrastructure protection.
• The federal reorganization since 9/11 has raised the difficulty and transaction costs for the private sector to work with the federal government.
• Information sharing between government and the private sector remains stunted.
• Overall investment in private sector security initiatives has been modest.
• Private sector protective efforts have been more effective in sectors that face regular threats of criminal attack and in sectors that already must comply with established security regulations.
• The federal government has failed to provide meaningful incentives or standards for securing critical sectors that pose the highest risk and where voluntary efforts have proven to be insufficient.
• The private sector has not been effectively integrated into response and recovery planning for major disasters, though some promising public-private initiatives have been piloted.
• The federal government has not adequately developed alternatives to shutting down entire economic sectors in the aftermath of a terrorist attack, nor has it done sufficient planning for reopening these sectors.
• Insurance adoption has been promising, but it requires continued government engagement in the insurance market to be sustained.

And it offers the following recommendations about how to improve this situation:

1. Washington needs to change its policy paradigm regarding the private sector, which, in effect, tells companies to protect themselves. On critical infrastructure issues, Washington needs to provide leadership, not followership.
2. Either DHS or a group of outside experts needs to quickly complete, as required by law, a national list of priorities for critical infrastructure that can serve as a strategic road map for spending and protective actions. At the same time, Washington should not allow completion of this list to delay immediate efforts to improve security where well-known and widely acknowledged security gaps exist.
3. Washington must move beyond talking about the need to dramatically improve information sharing with the private sector and hold government officials accountable for actually doing it.
4. DHS must strengthen the quality and experience of its personnel. One way to do this would be to establish a personnel exchange program with the private sector.
5. Congress and the administration should work closely with industry to establish security standards and implement and enforce regulations where necessary and, especially, where industry is seeking standards and regulation.
6. Congress should establish targeted tax incentives to promote investments in security and resiliency in the highest-risk industries.
7. Congress should establish federal liability protections for companies that undertake meaningful security improvements.
8. Homeland security officials should substantially increase the number of exercises for responding to catastrophic events. Private sector assets and capabilities should be fully integrated into these exercises, with a view to achieving deeper private sector integration into national and regional emergency response plans.
9. Federal response plans should identify specialized supplies/capabilities that will be in short supply following certain types of terrorist incidents or high-consequence events, including vaccines, ventilators, electric transformers, laboratory capacity, and decontamination equipment. Washington should work with the private sector to ensure the availability of these supplies and capabilities.
10. DHS should establish a federal awards program, modeled after the prestigious Malcolm Baldridge National Quality Awards program, which recognizes private sector achievement and innovation in homeland security.

Overall, this is a thoughtful and balanced report, and an important contribution to the policy debate on homeland security. DHS and the private sector should take its recommendations seriously, and Congress should consider moving forward on ones that require legislative action.

For more on this, see the transcript of the event that CFR hosted to discuss the key issues of the report in early March.

Evidently Dana Milbank’s new beat at the Washington Post is homeland security-related snark:

Vendors at this week’s homeland security convention have the answer for any catastrophe. They will sell you body armor, vehicle barriers, nuclear detectors, manhole-cover locks, unmanned helicopters — and Kyrgyz yurts.

After Hurricane Katrina destroyed thousands of homes, the good people of Kyrgyzstan saw a business opportunity. So the embassy rented a booth at the Washington Convention Center and got Kyrgyz officials on the program as speakers and hosts of the Homeland and Global Security Summit. This allowed the embassy to erect a yurt, the traditional nomadic tent of Central Asia, and offer it as a housing solution for the Gulf Coast.

“After Katrina, people really need some temporary houses,” explained the Kyrgyz Embassy’s Saltanat Tashmatova, at the front door of the yurt. A brochure says the 14-foot-high structure, made from sheep’s wool and “cool in summer,” sells for $10,000 — but the floor model can be had for $7,000. Any sales yet? “We just started,” Tashmatova said with a shrug.

Give it time, Kyrgyzstan: There’s enough money for everybody in the homeland security budget. The host of the convention, Equity International, boasts that “more than $150 billion” will be spent this year to thwart terrorism and respond to natural disasters. Equity International promises attendees “valuable networking opportunities” and “the right contacts” to get a piece of the action.

I was down at the Convention Center on Tuesday for another event, and saw the yurt when I peeked into this conference for a few minutes. I’m doubtful that the idea will sell, but I have to admire the gusto and entrepreneurial spirit behind it.