Since Sept. 11, 2001, the U.S. Department of Homeland Security and its agencies have paid private contractors at least $130 billion, an analysis of federal databases shows. The top ten contractors won at least $65 billion, or roughly half, of that. General Electric's (nyse: GE - news - people ) InVision heads the list, with at least $15 billion in contract revenue, followed by the likes of IBM (nyse: IBM - news - people ), L-3 Communications (nyse: LLL - news - people ) and Honeywell (nyse: HON - news - people ), according to a computer analysis of federal contract awards and actions.
Click here for a slide show of the major Homeland Security contractors.
These numbers are based on conservative estimates from the Federal Procurement Data System. Such federal procurement data may have input errors, which cannot be checked or may be incomplete. One error, for instance, showed that an award to IBM, recorded as $5 billion for fiscal year 2006, is actually worth only $201 million for that year. But neither IBM nor the Department of Homeland Security would provide a correct amount, insisting that the Federal Procurement Data System was the official, and only, data available. The Treasury Department was able to provide a corrected amount.
Critics may complain that the U.S. has still not spent enough, or wisely, on homeland security, but the department's budget has grown every year since its inception. The 22 agencies that joined to form the department had a combined budget of $28.2 billion for fiscal 2003, according to the Office of Management and Budget. For fiscal 2006, which ends on Sept. 30, the department's budget was $40.3 billion. And for fiscal 2007, President George W. Bush has requested $42.7 billion.
Other government agencies, from the Defense and Justice Departments to county governments across the U.S., are also pouring money into the same market where SAIC, whose public offering this fall could match Google (nasdaq: GOOG - news - people ) in size, operates. In fact, Homeland Security receives just half of the federal government's spending on such projects, according to U.S. budget documents. And private companies, too, are spending big to protect themselves.
While no one knows exactly how big this business is--it encompasses slices of the information technology, biometrics and traditional security industries, for example--homeland security is one sector of the economy that is definitely on an upward track. Civitas, a Washington, D.C.-based homeland security consulting firm, pegged the overall government market for contracts available to private companies at $42.4 billion in 2004. Analyst Mark Shaheen, who is currently updating the data, said spending on homeland security had grown significantly in the past two years.
"I certainly don't think the intelligence and homeland security business is going to go away anytime soon," said William Farmer, managing director of Jefferies Quarterdeck, a Washington, D.C. investment bank.
At Economy.com, Sophia Koropeckyj, managing director of industries, says homeland security spending probably accounts for about 0.5% of the economy, overall--barely the equivalent of the electrical equipment or weight-loss industries.
Homeland Security Research, a market research company, predicts that homeland security industry spending will grow to $170 billion per year by 2015.
Indeed signs of the market's exuberance are everywhere. The National Homeland Defense Foundation, which organizes an annual homeland security symposium, said attendance at its conference over the past three years jumped to nearly 1,000 participants from 600. Government Security News, a homeland security industry publication, has expanded from a quarterly to a biweekly publication since it was launched shortly after Sept. 11. So far this year, the publication has listed more than 50 homeland security conferences versus none four years ago, said Edward Tyler, the publication's founder and publisher.
The number of companies awarded homeland security contracts has also soared. In 1999, nine companies received homeland security contracts from the federal government. That number had jumped to 3,512 by 2003, when the Department of Homeland Security was formed. Last year, the total was 33,890--nearly a tenfold increase.
With the amount of corporate interest in homeland security spending, it comes as little surprise that lobbyists have jumped on board, too. In 2001, just two lobbying firms registered as homeland security lobbyists with the U.S. Senate Office of Public Records. By the end of 2005, 543 companies, individuals and lobbying firms had registered as lobbyists on homeland security issues.
For some companies, particularly big ones, there's another draw to homeland security spending. At least $28 billion over the past five years was distributed through noncompetitive processes, according to the analysis of government databases. Of the top ten companies, 21% of their revenue from the department was awarded through methods other than full and open bidding, the records show.
"On balance, they [noncompetitive contracts] will be more lucrative," says Chris Yukins, a professor at George Washington University Law School and lawyer at Holland Knight law firm. "Because of the repetitive nature of government procurement, one contractor will often be awarded repeatedly."
The big money, overall, is going to big companies--about $87 billion, or two-thirds of homeland security spending since Sept. 11. Of those large contractors, seven rank among the nation's top 500 companies in 2005.
The top ten contractors' list also aptly portrays how Homeland Security is budgeting itself. The department and its agencies have spent at least $45 billion--about a third of its contract money--on data-processing services from companies such as IBM and ITS.
In second place comes the $23 billion spent on alarm and security systems, like the baggage screening machines that InVision and L-3 manufacture. Other big-budget Homeland Security products include guard services, radio navigation, printing and bookbinding equipment and temporary trailers.
Such contracts can run into the billions of dollars. And there's no end in sight.