How companies can capitalize On U.S. 'smart power' approach.

• Author: Berenson, Douglas
• Position: VIEWPOINT

*The Obama administration's strategy for combating terrorism is to integrate soft and hard power into "smart power." It is the collective use of military, diplomatic, economic and development efforts to achieve security objectives.

A critical element of smart power is to assist friendly governments so they can take over more military and law enforcement missions, thus lessening the need for direct U.S. military involvement.

For companies seeking to capture new business in this market, the challenge is to be able to work with multiple customers--not just the Defense Department but also the State Department, U.S. Agency for International Development, intelligence community and law enforcement agencies.

Perhaps the largest source of funding is the "Function 150" foreign affairs budget, mostly administered by the State Department and USAID. These funds pay for activities such as humanitarian assistance, development support, training and education, translation, logistics, maintenance, construction and security. In addition there are a variety of other programs in the State Department-counter-narcotics, non-proliferation, anti-terrorism, foreign military training, peacekeeping operations and embassy security. The Defense Department funds programs in counter-narcotics and humanitarian demining, and supports Iraqi and Afghan security forces' equipment and training. The Department of Justice also oversees counter-narcotics and international law enforcement.

In fiscal year 2010, the Obama administration is requesting more than $39 billion for these programs.

Contracts generally fall into the following categories:

Logistics. Expeditionary logistics involve efforts to sustain U.S. and allied forces in Iraq and Afghanistan, including transport, housing and food services support and morale/recreation/welfare services. The coming months will see a shift in spending emphasis from Iraq to Afghanistan, as well as delivery of assistance to communities in conflict-prone areas of Afghanistan and possibly Pakistan. To date, these services have been provided mainly via the large LOGCAP contracts held by KBR, and more recently Fluor and DynCorp. Requirements will broaden to areas in Africa and to non-Defense agencies.

Construction and Technical Services. Building and expanding U.S. and allied bases in critical regions is likely to increase. Afghanistan looms as the most immediate area of demand, but East and West Africa are also potential regions of activity...