Defining the Public-Private Partnership on Terror

One manifestation of how terror affects business can be witnessed within the context of the public-private partnership in the war on terror. The ever-evolving relationship between government and industry is symbiotic: Government supports business and industry aids government. However, there are tensions that may impede further cooperation between the two players.

Government Supports Industry
In waging its war on terrorism, both at home and abroad, government assists industry in a number of ways. The public sector purchases diverse homeland security products and services, including traditional defense equipment; security equipment, technology and services; technology products and services such as telecommunications and software; pharmaceuticals and biotechnology products; germ detection equipment and services; and survivalist gear such as gas masks and bomb shelters.

Government funding is also allocated to assist contractors to develop advanced military hardware, including advanced infantry gear and non-lethal weaponry. The public sector aids industries such as aviation and insurance directly and indirectly, providing funds and guarantee programs in anticipation of and after terror attacks.

The public sector shares intelligence with industry and provides business with guidance on combating terrorist threats. Since 9/11 government officials have alerted various sectors-financial services, energy, aviation, chemical facilities and real estate-of possible impending terror attacks. In May 2002, the government provided guidelines for protecting ventilation systems in buildings from biological, chemical and radiological attacks.

Government also enacts laws that somewhat limit private-sector liability arising from terror attacks. For instance, airlines and others were partially shielded from liability when 9/11 victims' families relinquished rights to potential lawsuits if they participated in the 9/11 Victims Compensation Fund. Potential insurance industry liability arising from terror attacks perpetrated on behalf of foreign interests was lessened due to post-9/11 legislation. The Support Anti-terrorism by Fostering Effective Technologies Act of 2002 potentially limits homeland security companies' liability should a government-certified product or service fail to prevent a terror incident.

The rising trend of privatizing some civilian and military functions enables business to enter into areas previously under the purview of government. For instance, in October 2002, Army Secretary Thomas White announced that the Army might shift additional support jobs to the private sector. Government provides business access to, and assistance from, labor resources instrumental in combating terrorism. For instance, in the case of commercial aviation, the National Guard's presence at airports deterred terrorist attacks. Intelligence and law enforcement data about suspected terrorists is sometimes shared with industry.

The public sector aids industry by offering business-friendly procedures within a homeland security-based context. For instance, companies that follow supply chain standards, procedural safeguards, and employee background investigations and training can benefit by gaining faster transit through customs.

Industry Aiding Government
Industry assists government in combating terrorism through a variety of means, including furnishing homeland security goods and services, safeguarding government assets, providing intelligence, outsourcing government roles and risks, and complementing governmental counterterror efforts.

The private sector makes available to government products and services collectively designated as homeland security wares. The public sector uses diverse bio-chem-radiological detection units in conjunction with metal and bomb detectors worldwide. Border and immigration government employees use biometric devices and video-technologies, among others.

Industry advises government on how to reduce terror threats. Architecture, engineering and construction firms assist government agencies in designing more terrorism-resistant buildings, such as embassies. Firms produce bomb-resistant walls and bullet-proof glass that serve counterterror purposes.

Companies-individually and through associations and alliances-share information about industry vulnerabilities and threats with the public sector. In fall 2001, a Minnesota flight school notified law enforcement officials about the suspicious behavior of Zacarias Moussaoui. Financial institutions inform government officials about possible terrorism financing activities of clients and prospective customers.

The use of private-sector employees, such as security guards and bodyguards, to complement government security efforts is illustrative of how industry provides personnel that assist in the war on terrorism. Private contractors do foreign language translations, risk and vulnerability assessments, and terrorism-related data analysis. While using private contractors shifts some risks to industry, government interests may not always be served should a company fail to perform its duties as intended (or in-line with agreed-to budgets).

The private sector's control over substantial parts of critical infrastructure-from telecommunications to electricity grids-lessens government demands on securing that infrastructure. However, it does not alleviate public-sector concerns that industry will take its security responsibilities seriously.

Tensions in the Public-Private Partnership
The government-industry dynamic in the war on terror creates friction between the two spheres. The concurrent federalization and privatization of some direct and indirect counterterror activities-from federalization of airport screeners post 9/11 to privatization of some military/intelligence functions-creates some of the tension. There is also the issue of whether the private sector should carry out certain functions, no matter the possible cost savings. Other effects of the federalization-privatization dynamic include economic and political power shifts.

Post-9/11 laws radically affected how selected sectors (e.g., commercial airlines, import-exporters, and shippers) conducted portions of their operations (e.g., security and logistics). For instance, commercial airlines and import-exporters now must follow federal rules that affect the conduct of their businesses, and they are also often subject to new security fees and hidden costs.

Government places restrictions and greater oversight on business in order to reduce threats. For instance, new regulations place additional obligations on business to provide information on employees and customers who might be connected to terrorism. Some of these data-sharing activities can potentially expose firms to liability and disclosure of competitive information.

In the case of a national crisis, government may put pressure on companies to provide critical goods, such as pharmaceuticals, at lower prices. This was actually the case in fall 2001 when HHS obtained favorable prices on Cipro, an antibiotic used to counter anthrax-induced illness.

Even when industry can produce goods helpful in reducing terror risks, government obstacles may include lengthy regulatory procedures. In contrast, some companies offer products and services that are bogus or fail to meet government needs. For instance, a firm was accused of providing untrained bomb-sniffing dogs, making the canines useless in the tasks the government needed them to perform.

Private contractors may face lengthy and expensive cost overruns when working with government. As government counterterror responses are time-sensitive, industry delays are hurtful in multiple respects.

Another over-arching tension is whether government or industry should establish standards for industry security practices, and if so, whether such measures should be mandatory. Subsumed within this issue are matters relating to perceived vulnerability, possible countermeasures, timing of implementing security and costs thereof.

Companies and their employers may ignore government advisories of prospective attacks. Meanwhile, government may fail to heed the insights of industry as it relates to possible counterterror solutions. Interaction between the public and private sectors are stressed when differing interests and perspectives occur in crafting means to combat terrorism. Government's expansive counterterror efforts impact private sector management and employees whether they are called for reserve duty or serve as private contractors abroad.

An evolving definition of what constitutes the war on terrorism and what roles industry and government have in this fight (and what they are willing to give up) will impact how the public and private sectors will interact. Relevant too is the role of costs in securing industry and determining which entity should pay what in order to safeguard companies, individuals and the homeland at large. This is particularly relevant with regard to protection of critical infrastructure.

The developing public-private partnership in homeland security must be attended to with significant resolve and compromise as economic security, national security, and public safety are at stake. In the coming years, government will buttress industry while business will assist public sector counterterror efforts. Nevertheless, the government-industry paradigm will occasionally include tensions as disparate perspectives and actions with regard to combating terror will undoubtedly arise.

Dean Alexander is CEO of OnEarth Solutions Corp., a hardware and software engineering firm assisting homeland security companies. This article is an abridged version of Chapter 6 of his recent book, Business Confronts Terrorism: Risks and Responses (Univ. of Wisconsin Press, 2004). Mr. Alexander can be reached at