Homeland challenges defense industry

The Homeland Security Department is proving to be a challenging customer, but defense contractors are trying to be patient based on the promise of a lucrative future.

"It's difficult to address the Homeland Security Department in its current state," said Steve Carrier, vice president of business development and strategic planning at Northrop Grumman Information Technology, noting that similar challenges exist when dealing with the Defense Department's new homeland defense arm, Northern Command.

Chief among the problems is that neither HSD nor Northcom is fully staffed, Carrier said. Other challenges in working with the new departments include:

* The money trail is difficult to follow.

* Acquisition offices are "immature" because of drawn-out procurements and the integration of multiple agencies.

* Congressional oversight committees are not completely functional, leaving industry feeling "homeless."

* Large prime contractors serve as marketing conduits for smaller, niche firms.

* There is lack of indemnification from unlimited liability if a solution fails.

"Indemnification is the showstopper," Carrier said, adding that it does not make sense for a multibillion-dollar company to risk its future on a multimillion-dollar contract if it can be sued and face unlimited liability.

Retired Army Maj. Gen. Robert Nabors, senior vice president for enterprise solutions and homeland security at EDS, echoed those sentiments and warned that industry must have "managed expectations" with DHS, because only $2.9 billion is earmarked for IT, not $28 billion as has been previously stated.

He added that companies have always accepted responsibility for errors through predetermined insurance, but unlimited liability would cripple them.

Speaking May 8 at the AFCEA International conference in Washington, D.C., both men agreed that the fiscal 2004 budget looks far better for industry than the current fiscal year funding does.

Daniel Wiener II, chief information officer of the Army Reserve, reminded everyone that it took DOD about 20 years to get its business processes established after its inception in the middle of the 20th century and called for patience.

"The worst thing we can do is overreact," Wiener said. "We need to walk carefully before we run."

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