Public defender | Harrison-based Strategy X scopes out a niche in homeland security consulting

For the last two years the town of Bridgton has been staring down the barrel of an outmoded security system. As populations in the region have grown and overwhelmed some municipal facilities, smaller towns in Androscoggin and Cumberland counties have begun using Bridgton's courthouse and police station more often.

That increased usage, however, has exposed weaknesses in the facilities' surveillance systems, according to David Lyons, Bridgton Chief of Police. Security cameras have been malfunctioning on a regular basis, and the outdated VHS system the cameras record to has become unreliable. Squad cars with 20-year-old communications systems are now years behind the latest law enforcement technologies, such as roving Internet hookups that facilitate the enforcement process.

So in October, Lyons turned to Harrison-based security consultants Strategy X, which looked over the Bridgton system and made recommendations for upgrades to cameras and squad cars estimated at roughly $750,000. Strategy X then helped Lyons write a grant to the Maine Emergency Management Agency for the funds ˆ— a delicate task given the 130 or so requests the agency gets each year, according to Lyons. "I know my business on the enforcement and policing end," says Lyons, "but I wouldn't feel comfortable implementing those kinds of changes on my own."

While funds for the Bridgton deal hang in grant-process limbo, Strategy X remains busy tackling some bigger, and potentially more critical, security issues as it strives for a piece of the national homeland security consulting market. In June, it received a $6 million contract with the Department of Defense for work taking place at classified locations across the United States. As part of the contract, Strategy X can offer consultation services ranging from modeling fallout from a potential disaster at a nuclear weapons holding facility to installing a security system to deter unauthorized personnel from wandering onto a military base.

While worrying about the best way to stop a suicide bomber might not sound like fun to everyone, to Clifford A. Lewis ˆ— a former military security expert and CEO of Strategy X ˆ— it's business as usual. And that business is growing, he says. With $9.5 billion earmarked for hiring civilian contractors in the 2006 Federal Homeland Security budget, landing DOD contracts is the tip of the iceberg, says Lewis. Protecting dams, power plants and fiber optic networks are all areas Lewis has identified for private-sector contracts. "The market is absolutely huge," says Lewis. "If you go into the president's strategic plan on homeland security, you'll see where the primary concern is infrastructure. Eighty-five percent of this nation is owned by private enterprise."

Trying to stand out in a host of potential competitors is a feat, however, with giant defense contractors like Los Angeles, Calif.-based Northrop Grumman and Arlington, Va.-based ANSER Corporation populating the market. These companies, along with scores of other firms, are after a piece of the global security consulting business, which is estimated to grow to $95 billion in combined private sector and government spending by 2010, according to the Washington, D.C.-based Homeland Security Research Corp.

With a proliferation of ex-F.B.I. agents and military personnel looking for work in the industry, competition can be steep, according to Robert Mahlman, a retired political science professor from the University of Maine and ex-intelligence operative in the Far East. "There are more people employed by private security companies than there are by state and local police," says Mahlman. "The field isn't as wide open as it was 20 years ago."

To distinguish itself from that competition, Strategy X is selling potential clients on the company's military experience. Its consulting approach focuses on security plans that take into account all elements of an operation, including personnel, training and policies ˆ— not just security technology. And before making any recommendations, the team does extensive on-the-ground (and sometimes covert) research to collects data. "Most of us are former military," says Wayne Hawkins, Strategy X's chief operating officer. "We've been dealing with anti-terrorism, risk assessments, vulnerability studies, installations, modeling and simulation for a number of years."

Sending in the red team
Before taking control of Strategy X in December 2004, Lewis spent 20 years in the Air Force in security oversight roles. He authored reports, ran assessments and trained personnel all over the United States and overseas. It was no light duty: He typically conducted more than 100 facility security evaluations a year with a personally trained team, he says.

That expertise led him to the homeland security market upon retiring from the Air Force in 2003. After working as an employee at another firm (which he declined to name), Lewis quit to start a business that focused more on the consultation process itself, rather than an approach that he says stressed selling certain products or technologies of its vendor partners. In 2004, he took over Strategy X, a defunct publicly traded company that had been industry hopping as a dot-com and a real estate firm, before being bought and completely restructured by Lewis. The appeal, he says, was to take over an existing company with corporate paperwork already in place, rather than starting from scratch.

By tapping connections from his years in the service, Lewis hired personnel he thought would fit with his new consulting approach. He also decided to put the company headquarters in Maine because, "that's where I am, that's my home," says Lewis. "We are a geographically separated company, our operations are really run out of Florida. But with today's technology, you can work from anywhere."

The consultation process Strategy X uses for its security assessments was perfected in the military, according to Lewis. The approach calls for an experienced team backed by computer modeling and simulation. For example, if Strategy X is testing perimeter security for a large military base, it may run "red team" operations. A "red team" is a covert group that tries to sneak into a facility, documenting all security weaknesses it discovers.

Once the team completes its survey, it takes that information back to the lab to run through computer analysis and simulations covering everything from potential terrorist attacks to natural disasters. After analyzing all the angles, the team compiles a thorough security plan for the client, including recommendations for personnel retraining, implementation of security technologies in key areas and structural upgrades. "[We can] help the [client] make decisions on what best to spend their money on," says Hawkins. "Then we can engineer, design and manage that installation."

With a widespread net of approximately 15 employees ˆ— distributed throughout Alabama, New York, Maine, Texas and Pennsylvania ˆ— Strategy X is working on a number of jobs, though the details of most aren't made public for security reasons. One notable exception is a potential assignment in Union Springs, Ala., where in November Strategy X signed an agreement with Townsend Economic Development, a nonprofit geared to bringing business into the region. The contract calls for Strategy X to draft a security plan for the nearby Bullock County Airport, which TED sees as a potential asset to attract businesses to the region.

Although the company hasn't made a formal proposal to the airport board yet, securing the initial deal with TED illustrates one area in which Strategy X may find a niche that's not crowded by giant defense contractors. "Strategy X, number one, is not a large defense contractor. A big defense contractor would not be interested in our county," says Jack Arrington, director of technology for TED. "So the first point when looking for a contractor was: Who are the entrepreneurial companies able to gain advantage by being here?"

Similar economic conditions could make Maine a potential market for more Strategy X business beyond its work in Bridgton. The company is working on putting together a grant package for a statewide job that involves border and port security operations. (Lewis wasn't able to give any details on that grant, however, due to the unpredictability of such jobs coming through. "Being a publicly traded company, we have to be very careful with what we put in print," Lewis says.)

Arthur Cleaves, Director of the Maine Emergency Management Agency, says the state has identified public buildings, government facilities and other state infrastructure as potential targets for terrorism or areas of "significant concern." But Lewis notes that the state faces more security risks that many people might overlook. "What the residents of Maine forget is that 9/11 started at our [Portland] airport," he says. "We have lots of transportation and train systems and huge ports. All are extremely vulnerable to terrorists."

Despite the opportunities offered in the homeland security market in the aftermath of 9/11, starting a company in the industry isn't as easy as hanging a sign in the window, says former professor Mahlman. Established names like Northrop Grumman and Lockheed Martin Corp. all do diverse types of government defense contracting. This summer, for example, Lockheed Martin won a $200 million contract to provide a new surveillance system for the New York City subway and bus system.

But Lewis says he geared Strategy X to capitalize on the competitive market by stressing its testing, analysis and consulting services. "We don't view anyone as our competitors," says Lewis. "Our company strategy from the very beginning was to team with the larger companies and be sub-contractors to them. So we view them all as possible team members."

In fact, Strategy X' s biggest contract to date is an $8.5 million Department of Defense subcontract signed in April with Alexandria, Va.-based defense contractor Radian Inc. The Strategy X team can be tasked out to provide consulting services to a wide range of Radian projects, anything from securing corporate structures to military installations, until they hit the $8.5 million point.

But running a company in the homeland security market has other unique challenges. Because most contracts are awarded through a bidding process, a company can never be sure which of the jobs it's bidding on will come through, making revenues from year to year difficult to project. For example, Lewis says Strategy X is currently bidding on $350 million worth of jobs, but that winning 10% of those contracts would constitute a good year.

Strict DOD regulations also govern how jobs must be done, and who can do them.
Employees undergo thorough background checks, according to Lewis, and must get government security clearances that allow access to classified documents. It's a demanding environment for a near-startup company, he says.

Strategy X is also planning a significant financial change as part of its growth strategy. Currently, a so-called "pink sheet" stock traded on the Over-the- Counter market, Strategy X is planning to move to the the Nasdaq Small Cap Market in January, Lewis says. The move to Nasdaq, which attracts more investors, will give Strategy X stock more potential to appreciate, says Brad McCurtain, president of Maine Securities in Portland. "A move from pink sheet to Small Cap Nasdaq will increase a company's exposure," says McCurtain.

Beyond the new stock status, however, Strategy X isn't planning significant changes in the company's size in the near future, says Hawkins. Becoming overextended on contracts is the death knell for a consulting company, he says, because it leaves too few qualified personnel handling too many jobs. "The worst thing you can do in this business is grow too fast," he says.

Lewis agrees, citing a slow-and-steady approach that calls for maintaining the strong ties already established on the government contract side of business, and guiding a private sector marketing scheme that includes direct solicitation to municipalities and businesses, and forming relationships with larger defense contractors. The goal, he says, is the right kind of growth to match the team's expertise. "Five years from now we have no aspirations of being a company with 1,000 employees," says Lewis. "We'd like to become maybe not the largest homeland security company, but definitely the best."