Nation-building: post-conflict reconstruction to remain a booming business.

• Author: Gropman, Alan L.
• Position: ICAF Industry Study

* Post-war reconstruction will continue to create lucrative business opportunities for contractors for years to come, concludes a study by the Industrial College of the Armed Forces.

Firms that provide "reconstruction and vital infrastructure" services include primarily engineering and construction companies that compete for aid-sponsored reconstruction contracts such as rebuilding roads, reconnecting power and water supplies, and managing projects.

The industry is "robust and prosperous with intense competition among service providers," said the study, which was written by a group of military officers and government civilian officials. Since the end of the Cold War, the United States has on average engaged in post-conflict rebuilding operations every 18 months, they point out. The demands on the nation to "respond to the needs of failing states, countries emerging from conflict, or regions recovering from natural disasters are likely to continue," the study said.

In 2004, 151 companies doing reconstruction work in Iraq and Afghanistan received contracts during a two-year period that generated combined revenue of almost $52 billion. This marked a six-fold increase over the 2002-2003 period, in which only 72 companies were involved in contracts in Iraq and Afghanistan, with combined revenue of more than $8 billion.

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The top four companies involved in reconstruction work in Iraq and Afghanistan from 2002 to 2004--Halliburton, Parsons Corp., Fluor Corp. and Washington Group International--received a combined total of more than $23 billon in contracts.

The 21st century will see increased demands placed on industry, the study predicts. The most marked security phenomenon since the end of the Cold War has been the proliferation of armed conflict within states. The United Nations International Committee on Intervention and State Sovereignty forecasts that the number of intrastate conflicts and natural disasters experienced in the 1990s and in recent years will increase in the coming decades. "It will take decades to complete reconstruction requirements in developing countries," the report said.

Despite the considerable challenges that reconstruction firms face, such as unstable political systems, corruption and lack of security, the industry is expected to thrive, especially given the increased U.S. government and military support to post-war stabilization. According to Department of Defense directive 3000.05--dated November...