5 Big Winners from TSA Security Rules

BOSTON ( MainStreet) -- What price security?

For the Transportation Security Administration, it comes at nearly $8.1 billion a year, its budget for Fiscal Year 2011.

The noble goal of keeping air travel safe from terrorist threat hasn't meant critics of the agency formed shortly after the attacks of Sept. 11, 2001, have been silenced.

There are disgruntled travelers who rail against the "security theater" of taking off shoes and passing through X-ray machines. Airlines complain that they have suffered millions in lost customers and out-of-pocket expenses. Several airports are looking at the prospect of opting out of TSA agreements to pursue private security contractors that might save them money. A study by Cornell University even made the claim that traffic fatalities have risen since the hassle of air travel has pushed added motorists onto highways.

But amid the gripes and cost to airports, airlines and taxpayers, there are some who profit from the threat of terrorism and the efforts of the TSA.

Like any government bureaucracy, the TSA depends on billions of taxpayer dollars to fund its personnel and efforts. That has meant a gold rush of sorts among vendors large and small who provide the technology and expertise the agency requires. More than 21,000 contracts have been awarded since the agency was created.

Among the companies that have benefited from multimillion-dollar contracts since the TSA was founded in 2001 are Unisys ( UIS), Siemens ( SI), Lockheed Martin ( LMT), L-3 Communications ( LLL), Accenture ( ACN), Deloitte & Touche, General Electric ( GE), Northrop Grumman ( NOC), BearingPoint and IBM ( IBM).

Year by year, opportunities keep emerging for private enterprise to grab an even bigger piece of the pie.

Unfortunately -- for taxpayers, at least -- the agency may be spending money without proper oversight.

In March 2010, an audit by the Department of Homeland Security's Office of the Inspector General flagged procedures in place to procure and oversee private contractors for 29 support service contracts totaling $662 million from the TSA's Office of Security Technology. Reviewing the 13 highest-value of these contracts, the auditors found the agency "did not provide adequate management and oversight of acquisitions for support services for transportation security programs."

"TSA did not have reasonable assurances that contractors were performing as required, that it contracted for the services it needed, that it received the services it paid for or that taxpayers received the best value for its tax dollars," the report added.

An infamous example of the TSA wasting money via private contracts was the failed attempt to implement bomb-detecting "puffer machines."

The devices were supposed to use a blast of air on travelers to dislodge and analyze particles that might indicate the possession or handling of explosives.

In 2004, the TSA loaded up on $30 million of the machines, buying 207 from General Electric and Smiths Detection. One catch: they didn't work. Prone to dust-related malfunctions and false readings due to high humidity and the presence of jet fuel, the machines were discarded and are now collecting dust in storage facilities.

Former officials now in business for themselves
The failure of bomb-sniffing "puffers" set the stage for the use of millimeter wave body scanners -- those X-ray machines that produce an abstract image of a "naked" passenger to search for weapons and contraband.

The American Recovery and Reinvestment Act, the stimulus package of 2010, paid for 450 scanners.

Despite protests by many travelers, the TSA has plans to greatly increase the machines' use. In May, the agency announced that Lockheed Martin had been awarded a $72 million contract "to help TSA integrate and deploy new passenger screening and security equipment at airports across the east and central United States. It includes the use of Advanced Imaging Technology equipment and software upgrades."

Irritating TSA watchdogs all the more is that a key adviser to the Department of Homeland Security is Norm Augustine, former CEO of Lockheed Martin.

It is not the first time a TSA purchase of such scanners had a familiar name behind the scenes.

Former Homeland Security secretary Michael Chertoff was an outspoken figure in calling for the need for the TSA to buy the scanners. His view, in the eyes of critics, may have had more in mind than just safe skies.

After leaving government, he became a lobbyist and founded the Chertoff Group. Among its clients was Rapiscan Systems. Owned by OSI Systems ( OSIS), the company was awarded a $25.4 million contract in 2009 using Stimulus Act funds to make and install the controversial "backscatter" scanners, stealing market share away from L-3 Communications as a preferred provider.

The cost doesn't end at the equipment. According to the Government Accountability Office, the added cost of running the AITs as the agency expands their use could cost up to $2.4 billion over their expected service life.

If your company wasn't able to score a body scanner contract, you may be interested in the latest bidding process under way.

The Department of Homeland Security is seeking a vendor for a "Shoe Scanning Device ... capable of detecting threat objects concealed in footwear without requiring passengers to remove their footwear."

TSA employees, honest and not
There are plenty of rank-and-file TSA employees who gain from the agency's mandate.

The agency has 60,000 employees at 450 airports. In June, 44,000 Transportation Security Officers known as "screeners" elected the American Federation of Government Employees, the nation's largest federal employee union, as their exclusive union representative.

Unionization was made possible for the 44,000 employees after TSA head John Pistole agreed last winter to allow employees limited collective bargaining rights.

Before recent layoffs, the TSA had been courting more employees to join the fold through the unorthodox method of advertising on pizza boxes.

"A career where X-ray vision and federal benefits come standard," read one such ad in the Washington, D.C., area. "See yourself in a vital role for Homeland Security. Be part of a dynamic security team protecting airports and skies as you proudly secure your future."

Some TSA employees have found a way to profit beyond their paychecks. Approximately 500 TSA agents have been fired or suspended for stealing from passenger luggage.

In July, for example, TSA officer Nelson Santiago-Serrano, stationed at the Fort Lauderdale-Hollywood International Airport, was arrested for allegedly stealing $50,000 worth of electronics from passengers' luggage and fencing it.

States who sell your confiscated stuff
What happens to all the items confiscated by the TSA -- all those lighters, knives and snow globes?

In many cases they are sold off by state surplus property agencies, with states, not the TSA, profiting from the sales.

Alabama has an eBay store under the ID alstatesurplus, as does Pennsylvania (pastatesurplus) and Kentucky (kysurplus). Illinois alerts shoppers to regular auctions via a Facebook page.

Georgia, Texas and Washington are among the states that have physical "surplus stores" shoppers can visit for all their pocket knife needs.

Some items may bypass such auctions. Firearms are given to local law enforcement and many municipalities donate usable items to VA hospitals or nonprofit organizations to use or sell. Scissors can often find their way to local schools.

Proposed legislation in California would have airports donate all those confiscated soaps and shampoos to homeless shelters.

According to a statement posted on the TSA's blog, a similar process was rejected as administration policy.

"Early on, there was a move to donate the liquid items to local homeless shelters but we were forced to suspend that practice after the determination was made that there is a liability risk," the TSA says. "We couldn't continue to donate items and not know if the if the water was truly water or if the shampoo was truly shampoo. While unfortunate, the litigious world in which we live forced the abandonment ... of that process. So now, those items are tossed out."

Checkpoint-friendly product makers
Companies that make travel products have also built market share amid TSA restrictions.

Laptop-bag makers now frequently tout that their zippers allow east access and are "checkpoint friendly."

According to the TSA, travel-ready bags include the following features: a designated laptop-only section you can lay flat on the X-ray belt; no metal snaps, zippers or buckles inside, underneath or atop the laptop-only section; and no pockets inside or outside the laptop-only section.

Toiletry makers have also hit the market with specially designed 3-ounce containers that meet carry-on liquid restrictions. (Because the U.S. isn't on the metric system, the TSA technically allows 3.4 ounces -- which rounds nicely as 100 ml for foreign travelers.)

-- Written by Joe Mont in Boston.

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