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But why does a private-equity shop called Veritas Capital Fund take the No. 2 slot? That's easy. It specializes in investing in defense and aerospace companies. So Veritas owns a portfolio of companies -- and has a stake in others -- that pull down big Iraq-related contracts.
DynCorp International (DCP, news, msgs), which Veritas bought in 2005 and spun out last year, offers security services and police training, as well as logistical services. Veritas' McNeil Technologies provides interpreter and translation services to the military and U.S. government agencies in Iraq. Another of its companies, Wornick, supplies military rations.
It's also no big surprise that U.S.-based companies like Washington Group International (WNG, news, msgs), Fluor (FLR, news, msgs), Perini (PCR, news, msgs) and Parsons are on our top 10 list. They've landed many of the contracts to restore, repair and maintain oil fields, power plants, schools, public water systems and military bases. But the award of contracts to build the U.S. Embassy in Baghdad to First Kuwaiti General Trading & Contracting left many analysts scratching their heads.
Environmental Chemical does munitions disposal, while International American Products sets up systems that deliver electricity to military camps. L3 Communications (LLL, news, msgs) offers security screening services, linguists, training and law-enforcement services, and some equipment replacement.
| Rank | Company | Amount | |||||
|---|---|---|---|---|---|---|---|
2003 | 2004 | 2005 | 2006 | Total | |||
1. | KBR Inc. (KBR, news, msgs) and Halliburton (HAL, news, msgs) | $2,550 | $5,809 | $4,505 | $4,362 | $17,226 | |
2. | Veritas Capital Fund | 0.7 | 208 | 850 | 386 | 1,444 | |
3. | 111 | 205 | 533 | 82 | 931 | ||
4. | Environmental Chemical | 0 | 192 | 360 | 326 | 878 | |
5. | International American Products | 58 | 283 | 310 | 108 | 759 | |
6. | 116 | 413 | 123 | 105 | 757 | ||
7. | 72 | 312 | 185 | 81 | 650 | ||
8. | Parsons | 0 | 248 | 120 | 172 | 540 | |
9. | First Kuwaiti General Trading & Contracting | 0 | 7 | 469 | 24 | 500 | |
10. | 1 | 9 | 148 | 201 | 359 | ||
*Goods and services contracted specifically for Iraq. Source: Eagle Eye
Two companies that have seen their revenue shoot up the most in the ongoing military buildup -- largely because of Iraq-related spending -- are Armor Holdings and Renco, according to Hartung's calculations. They don't make our list because their overall defense-related revenue is too small. But they have done phenomenally well.
Armor Holdings, which sells vehicle and personnel armor, saw defense-related revenue shoot up 2,747% between 2001 and 2006, to $634.9 million. Armor is now a division of BAE Systems (BAESY, news, msgs).
Renco, which makes the extra-wide all-terrain vehicle known as the Humvee, saw Defense Department revenue rise 1,260% over the same period, to $1.9 billion.
Misspent funds
Not all of the Iraq-war money is well spent. "Because of the urgency of the war, a lot of these contracts have been subject to less scrutiny," says Hartung. Another problem is that the war has been funded outside of the regular defense budget process. Instead, it gets funded through "emergency" spending bills called supplementals, which offer much less detail and get less scrutiny on Capitol Hill.Hartung believes we've only seen the tip of the iceberg in allegations of fraud and corruption related to Iraq war spending. "Congress is starting to look into it, but it has not yet gotten down to specific questions," says Hartung.
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Details of wrongdoing are being uncovered by the Office of the Special Inspector General for Iraq Reconstruction, and you can also find summaries of misconduct here.
Hidden winners
Of course, there's a vast collection of military hardware and technology from fighter jets and naval vessels to spy satellites that are used in the Iraq war effort. But they're paid for by the broader Pentagon budget, so they won't show up in a scan of the federal procurement database for Iraq-related spending.To see who has benefited from the underlying buildup in defense spending under the Bush administration for the Iraq war and other anti-terror and defense efforts, I calculated who got the most in Department of Defense contracts from 2002 through 2006. You can see the top seven in my second chart.
| 2002 | 2003 | 2004 | 2005 | 2006 | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
1 | $17 | $22 | $20.7 | $19.4 | $26.6 | $105.7 | ||||
2 | 16.5 | 17.3 | 17 | 18.3 | 20.3 | 89.4 | ||||
3 | 8.7 | 11.1 | 11.9 | 13.5 | 16.6 | 61.8 | ||||
4 | 6.9 | 8.2 | 9.6 | 10.6 | 10.5 | 45.8 | ||||
5 | 7 | 7.9 | 8.5 | 9.1 | 10 | 42.5 | ||||
6 | 0.5 | 3.9 | 8 | 5.8 | 6 | 24.2 | ||||
7 | 3.6 | 4.5 | 5 | 5 | 4.4 | 22.5 | ||||
Total defense contracts | 171 | 209 | 230.7 | 269 | 295 | 1,174.70 | ||||
*More than $25,000 for any field of operation. Source: Department of Defense
While all of these companies have benefited from the Bush administration's defense spending ramp-up since the terror attacks of Sept. 11, 2001, not all are equally exposed to the Iraq war effort, says defense sector analyst Paul Nisbet of JSA Research.
In addition to ships and Gulfstream planes, General Dynamics (GD, news, msgs) makes ground vehicles and ammunition, so it generates a fair amount of revenue directly from Iraq war spending. But Lockheed Martin (LMT, news, msgs), which is working on next-generation military aircraft and also makes military electronics and satellites, has little direct exposure to the war, says Nisbet. Neither does Northrop Grumman (NOC, news, msgs), which makes ships designed to last three decades or more.
- Videos: Recent news on Lockheed Martin
Of all the companies on my second list, KBR saw some of the biggest revenue gains from the Iraq war. It was No. 37 on the Defense Department's top-100 list of military contractors in 2002. By 2006, KBR had climbed to No. 6.
At the time of publication, Michael Brush did not own or control shares of companies mentioned in this column.
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