Troop cuts could mean contractor surge

General David Petraeus, the U.S. commander in Iraq, and U.S. Ambassador to Iraq Ryan Crocker listen to opening statements before testifying to a joint House Armed Services and Foreign Relations Committee today.

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KAI RYSSDAL: General David Petraeus made his long-awaited appearance on Capitol Hill today. The general said he believes the United States can reduce its presence in Iraq to pre-surge levels by next summer, to about 130,000 troops, that is. Marketplace's Steve Henn reports American defense contractors see that as an opportunity..


Steve Henn: According to a Pentagon report released earlier this year there are roughly 130,000 private contractors working in Iraq for the Defense Department. James Schmidt is senior vice president for ArmorGroup North America. His company earned about half its total revenue or $133 million in Iraq last year. He sees the potential for more.

James Schmidt: If the military decides to make reductions in force within Iraq, the private industry can help in that process.

Schmidt believes as U.S. commanders adjust to having fewer boots on the ground they'll inevitably feel stretched. He hopes they'll turn to private companies like his.

Schmidt: We can take on rolls, particularly in defensive protective security services, that might free up some of those forces to be better optimally utilized.

Most contractors in Iraq offer logistical support -- delivering meals or doing laundry. Some help train the Iraqi police or army, and about 25,000 work in security. Analysts say more security jobs could open up for contractors as U.S. troops leave, and Iraqi firms are well-positioned to get that business because of connections. But . . .

Peter Singer: Well, the reality -- it may be Militia Incorporated right now.

Peter Singer at the Brookings Institution says many Iraqi security companies are suspect.

Singer: More and more companies in all likelihood are proxies for militias. They're a way for someone in a political party to stash their guys in a militia and give them a corporate roll.

And Singer says if the situation in Iraq gets too unstable, many Western security firms could pull out.

In Washington, I'm Steve Henn for Marketplace.

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Steve Henn was Marketplace’s technology and innovation reporter for the entire portfolio of Marketplace programs until December 2011.

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