Factors Constraining the Market
Scope and Fragmentation
The size, fragmentation and jurisdictional complexity of the ground transportation sector create a huge range of potential threat scenarios and targets. Some solutions used in aviation, such as screening all passengers and their bags for weapons or explosives, appear impossible on their face given the sheer number of passengers, the nature of the system (passengers board and exit at numerous times during a trip) and the limitations of current technology.
Lack of Resources
Faced with a choice between funding basic operations and additional security, many transit operators are likely to choose the immediate need. In addition, market feedback indicates that even in sectors with strong revenue, such as freight rail, security budgets are often tight.
The U.S. government has committed hundreds of millions of dollars for ground transportation security since 9/11, and seems likely to support it at or above US$150 million per year going forward (albeit in different funding programs), but this does not fill the gap. The Bush Administration has not stepped in more aggressively for several reasons. First, it expects local jurisdictions and corporations to support their own security requirements. Second, on a strategic level the Administration’s policy has been to invest far more heavily in securing the nation via “effensive” measures (Department of Defense and Intelligence Community funding for the Global War on Terrorism and the war in Iraq) versus “defensive” measures such as homeland security efforts. For example, the cost of one new Navy destroyer (app. US$3 billion), or two weeks of supporting the war in Iraq War, is about what Administration critics say should be spent on ground transportation security. 22) Finally, as discussed earlier, homeland security officials believe aviation security is a higher priority.
Government Leadership and Regulatory Action
The U.S. government’s efforts on ground transportation security have attracted criticism not just for their limited scale, but also for their implementation. For example, the police chief for the Washington transit system complained to the U.S. Senate that she had been waiting ten months for her security grant. On a broader level, critics have assailed the Department of Homeland Security (DHS) for failing to generate adequate plans to secure ground transportation. The repeatedly delayed “National Strategy for Transportation Security”-- issued in 2005 year but not available to the public -- has been criticized for lacking detail. Execution of the strategies that do exist has been hampered by over-lapping jurisdiction among the involved agencies, which include the TSA, DHS Office of Grants and Training (G&T), FRA, Federal Transit Administration (FTA), DOT and PHMSA, according to the Government Accountability Office (GAO) and others.23)
Even DHS’s own acting Inspector General warned in 2005: “While TSA continues to address critical aviation security needs, it is moving slowly to improve security across other modes of transportation.”24)
Factors Driving the Market
Regulations and Best Practices
Once the TSA finally did issue its “national Strategy for Transportation Security,” and following the Madrid and London attacks, the pace of standard-setting increased significantly. Various private organizations are now focusing on standards for ground transportation security. The American Public Transportation Association (APTA) is developing standards, which TSA, the Office of Grants and Training (G&T) and the Freight Transport Association (FTA) are monitoring.25) The American Association of Railroads (AAR) has developed a voluntary plan for its members. Current government activities include:
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An expected review by the Government Accountability Office (GAO) of TSA rail security efforts26)
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A pending compliance program for TSA Security Directives (SDs) for rail and mass transit systems issued after the Madrid attacks (SDs are focused on areas such as inspection of stations and use of canine inspection teams) 27)
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Federal Security Analysis and Action Programs (SAAP) -- reviews by TSA inspectors of transit system security plans, compliance and requirements
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FTA mandated mass transit security plans; due this year
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Completion of High Threat Urban Areas (HTUAs) Corridor Assessments: vulnerability assessments of areas transited by trains carrying toxic by inhalation (TIH) HAZMAT, including Washington, D.C., New Jersey, Cleveland, New Orleans and Houston
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TSA voluntary action items for the transportation of TIH materials
The TSA says it has already completed over 2,600 “criticality assessments” for systems across the United States, including 848 for rail systems and 1,778 for mass transit systems; conducted at least 50 Site Assistant Visits (SAVs) for mass transit, bus, tunnel, and terminal systems; and finished 132 Buffer Zone Protection Plans (BZPPs).
Given that many, if not most, of these activities will likely surface significant security shortcomings and independent authentication of the need to correct them, it appears possible they may provide the impetus for new spending.
Ground transportation security has become a hot political issue on Capitol Hill, spurred in part by recent plots on over-seas transit systems. Democratic leaders such as Sen. Hillary Rodham Clinton (D-NY) and House Homeland Security Committee ranking member Rep. Bennie G. Thompson (D-MS) have criticized the Administration for investing far too little in transportation security. In 2006, a bi-partisan effort by House appropriators sought US$200 million in transportation security for FY07, up from US$150 million during the previous two years. Two other bills would dramatically increase that number; each would allocate more than three billion dollars for transportation security over the next several years. One of them was sponsored by Republican Tom Petri (RWI), who complained DHS has spent about 1 penny per passenger on public transportation security since 2003, compared with US$9 per passenger for aviation. While political observers are skeptical about the chances for major funding increases this year, this activity demonstrates political support for increased funding, especially by Democrats.
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Another trend to watch for is the emergence of demand for
“dual benefit” solutions that enhance operational efficiency while providing security benefits. This may be especially true in the rail industry, which is increasingly looking at new technologies such as remote controls for yard operations, wireless communications, and RFID.
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ROI Security
Another trend to watch for is the emergence of demand for “dual benefit”solutions that enhance operational efficiency while providing security benefits. This may be especially true in the rail industry, which is increasingly looking at new technologies such as remote controls for yard operations, wireless communications, and RFID. Flush with cash, the railroads are pouring billions into capital improvements. One knowledgeable industry observer told us that in recent months, in many cases for the first time, his customers are seeing the cost of increasingly efficient security technology become competitive with traditional solutions such as fencing. Because solutions such as advanced video surveillance can produce other benefits -- reducing manpower requirements, detecting vandalism and preventing accidents -- the market appears prepared to begin investing in it. Perhaps most importantly to this industry, advanced technology can help keep trains “at velocity,” reducing delays that become costly as ripple effects move through the system.
Large manufacturing companies are also seeing ROI in security. “Then properly leveraged, investments in supply chain security may not only be offset to some extent by benefits… but, in fact, can be outweighed by such benefits, and can overall have a positive impact on a company’s bottom line,” reported a survey by Stanford University researchers on behalf of The Manufacturing Institute.28) The researchers surveyed 11 leading manufacturers in industries such as chemicals, consumer goods, food, information technology, and automotive parts and three Logistics Service Providers (LSPs).
The companies were cooperating with new regulations and programs covering international trade, such as the U.S. Customs Trade Partnership Against Terrorism (CTPAT), and in many cases had adopted other measures, including: supply chain software; Global Positioning System (GPS) and Radio Frequency Identification (RFID) tracking of containers and trucks; high-security bolt seals on containers; driver background checks; and two-way cellular/satellite communications.
According to the survey, manufacturers reported:
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Improved product safety (e.g., 38 percent reduction in theft/loss/pilferage, 37 percent reduction in tampering);
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Improved inventory management (e.g., 14 percent reduction in excess inventory, 12 percent increase in reported on-time delivery);
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Improved supply chain visibility (e.g., 50 percent increase in access to supply chain data, 30 percent increase in timeliness of shipping information);
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Improved product handling (e.g., 43 percent increase in automated handling of goods);
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Process improvements (e.g., 30 percent reduction in process deviations);
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Speed improvements (e.g., 29 percent reduction in transit time, 28 percent reduction in delivery time window);
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Resilience (e.g., close to 30 percent reduction in problem identification time, response time to problems, and in problem resolution time); and
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Higher customer satisfaction (e.g., 26 percent reduction)
The survey also revealed that some of these large companies “Cited an increase in annual security-related expenditures of up to 50 percent compared to five years ago, and are expecting this level of investment to be maintained or to further increase in the near future.”
IBM has responded to such opportunities with its Global Movement Management (GMM) program, a project to address technical and political challenges to global supply chain security. The company says it will align many of its business activities to develop new security-related projects across the corporation. They will include capabilities in customs, ports and border management; data analytics and risk management; secure communications and information sharing technologies; and identification and credentialing security systems.
HAZMAT trucking represents another potential example of ROI security. A study conducted for the U.S. Department of Transportation (DOT) concluded that investing about US$1.1 billion in eight technologies -- including satellite-based communications, global positioning tracking systems, remote vehicle-disabling devices, and “panic buttons”-- could significantly reduce the odds of a successful terrorist attack and save the industry up to US$4.1 billion by improving operating efficiencies.29)
Nature of Modern Transportation and Supply Chain Practices
The global inter-modal transportation industry, and increasingly the corporate supply chains it supports, is based upon inter-operability and connection from supplier to manufacturer to consumer. This tends to encourage the spread of common practices and equipment. In some cases, this process is fostered by U.S. government programs such as CTPAT.
In others it has even sparked the development of private sector standards. Fifty of the world’s leading technology companies are members of the Technology Asset Protection Association (TAPA), which has produced Freight Security Requirements (FSR). The companies require their freight shippers, and in some cases suppliers, to meet these wide-ranging FSR requirements, which can include video surveillance, access control, truck immobilization technology, tamper-evident seals, background checks, and strict procedures. By joining together, these companies have created substantial leverage to force the improvement of transportation security. Another example of cooperation is the joint project announced in August 2006, by the Dow Chemical Company, Union Pacific and Union Tank Car Company to address a weakness in their common supply chain by developing the “next-generation” rail tank car for highly hazardous chemicals.
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REFERENCE
22) "The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11," Congressional Research Service, updated June 16, 2006.
23) "Detour Ahead: Critical Vulnerabilities in Americas Rail and Mass Transit Security Programs," prepared on behalf of U.S. Rep. Bennie G. Thompson (D-MS), Ranking Member of the Committee on Homeland Security, June 20, 2006,
24) Richard L. Skinner, Acting Inspector General, U.S. Department of Homeland Security, Statement before the Subcommittee on Management, Integration, and Oversight, Committee on Homeland Security, U.S. House of Representatives, April 20, 2005.
25) Ibid, 21.
26) "Lawmaker Asks GAO to Probe Rail Security," www.govexec.com, August 24, 2006.
27) Ibid. 21.
28) Barchi Peleg-Gillai, Gauri Bhat, and Lesley Sept, "Innovators in Supply Chain Security: Better Security Drives Business Value," Stanford University, the Manufacturing Institute, July, 2006.
29) "Hazardous Materials Safety and Security Technology Field Operational Test," (submitted to DOT in November 2004) and "Hazardous-materials Trucks: Terror Threat?" Christian Science Monitor, July 07, 2006. |
Scott Greiper
Head of the Convergent Security Group; Principal,
Legend Merchant Group (www.legendmerchant.com)
Prior to joining Legend Merchant Group, Mr. Greiper was the Senior Analyst covering the Global Security sector for C.E. Unterberg, Towbin. His domain expertise includes surveillance (video/audio), physical and electronic access control, data analytics, intelligent software, sensor/detection technologies, asset tracking technologies and network security.
Mark Sauter
Managing Director and Market Knowledge Lead,
GrayDome Partners LLC (www.graydome.com)
Before co-founding GrayDome, Mr. Sauter served as the COO of the Chesapeake Innovation Center, Americas first business accelerator for homeland and national security. His experience includes serving as a senior executive at several venture capital-backed companies; principal investigator/program manager for a contract with a major U.S. intelligence agency; and an Army officer in infantry and special forces units.
For more information, please send your e-mails to swm@infothe.com.
ⓒ2007 www.SecurityWorldMag.com. All rights reserved.
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