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Pentagon reviewing Middle East contracts

Nancy Marshall-Genzer May 16, 2011

Pentagon reviewing Middle East contracts

Nancy Marshall-Genzer May 16, 2011

Correction: The original version of this story gave an incorrect figure for the total amount of U.S. aid to the Middle East in 2010. It was nearly $6 billion. The transcript has been corrected.

Kai Ryssdal: The United States is far and away the biggest seller of arms and military equipment in the world. Along with actual weapons, we also send billions of dollars to our allies in military and economic aid, too. A lot of it to the Middle East.

But if you’re an American defense contractor, you can’t just go out and sell things to, say, Saudi Arabia, without permission from the government. Our government.

All the chaos in the Middle East has given the Pentagon pause. It’s reviewing some deals in that region that’ve already been made, while contractors want to hang onto one of their best markets. Marketplace’s Nancy Marshall Genzer has that story.

Nancy Marshall Genzer: Defense contractors large and small are struggling to adjust to the Pentagon review.

Among them: Advanced Technology Systems. Struggling is probably not a good way to describe this company. It’s located in a posh office park just outside Washington. The lobby looks like it belongs in a fancy hotel, complete with fountains and comfy chairs. A glass elevator takes me to the ninth floor, and the company’s executive vice president, Mark Kimmitt. He’s a retired Army brigadier general, and he thinks of his business in terms of combat.

Mark Kimmitt: No plan survives first contact with the enemy. You can have the best business plans in the world, but events change.

Advanced Technology Systems provides maintenance services for tanks and planes. And the Pentagon pays the company to train the troops of foreign allies. But Advanced Technology Systems was swept up in the larger Pentagon review of Mid East contracts when a contract the company won to train Lebanese troops was given a second look. Now it’s up for bid again.

Kimmitt: During those months while the government was considering whether it should continue this program, naturally, that sort of blew some holes into our business projections.

But Kimmitt would never dream of taking his company out of the Mid East — there’s just too much money to be made. Pratap Chatterjee tracks Mid East arms sales at the Center for American Progress, a liberal-leaning think tank in Washington.

Pratap Chatterjee: I mean right now, $1 in $6 that are spent on arms are spent in the Middle East. And you have to compare that to the fact that only one in 12 people in the world live in the Middle East.

Washington gives aid to allies in the region with the understanding that they’ll spend some of it on U.S. weapons. Last year, the U.S. gave Middle East countries almost $6 billion in military and economic aid. And the flow of money could increase once the unrest fades.

Some contractors are already planning for the aftermath of the violence. Doug Brooks heads the International Stability Operations Association, a trade group that represents security and logistics contractors. Brooks says some contractors see dollar signs in the reconstruction of Libya.

Doug Brooks: Most of the war is being fought with rockets and artillery and that does create an enormous amount of damage that needs to be rebuilt. If there’s still some fighting going on and things like that, then the costs do go up.

Profits for defense contractors could just as easily go down if governments in the Mid East decide to spend less on weapons, and more on social programs to pacify their restless populations. But there’s no sign of that happening on a large scale just yet.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

Ryssdal: Check out how much aid we give to countries in the Middle East, in this nifty map.

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