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Intriguing Thoughts from Daniel Prieto

July 31, 2006 - GSN Magazine

Daniel Prieto, the co-author (along with Stephen Flynn) of a thought-provoking report issued last Spring by the Council on Foreign Relations, entitled Neglected Defense - Mobilizing the Private Sector to Support Homeland Security, remembers his rocky introduction to the concept of "public/private partnerships" in the security arena.

Prieto was working for a small entrepreneurial company that had figured out how to put geographic maps online (before mapquest.com and Google had taken over that space). Shortly after 9/11, Prieto's employer created a map of Lower Manhattan, showing various emergency sites and medical stations near the devastated World Trade Center. The map was widely distributed online and became quite popular.

Emboldened by this early success, the company attempted to peddle its wares to the recently-established White House office of homeland security, but made virtually no progress. Eventually, the frustrated company gave up on selling its mapping technology to the federal government and shifted its focus to the commercial travel industry.

Prieto recalled the episode last week at a small meeting in midtown Manhattan of the Business Threat Awareness Council, a group of private and public sector professionals trying to "improve threat awareness, promote best practices in threat management and business counterintelligence." His point was simply this: the relationship between commercial companies and the federal government in the field of homeland security has not been as productive as it should have been - and could have been -- during the past five years.

In part, that's because the federal government initiated its relationship with the private sector based on two incorrect assumptions.

First, government officials assumed that top executives at commercial companies, including huge global corporations, would have had enough incentive after 9/11 to invest in security enhancements to safeguard their personnel and facilities, even without guidance or mandatory requirements imposed by the federal government. But, for the most part, that has not proven to be the case.

Corporations have made modest investments in security upgrades, but for the most part they have been slow to identify their own vulnerabilities and even slower to spend their own money to eliminate those vulnerabilities.

Second, as Prieto sees it, government officials incorrectly assumed that commercial businesses would calculate the "Return On Investment" (ROI) from such security-related expenditures and conclude that they were worthwhile from a financial perspective. Government officials didn't realize that companies were even more likely to calculate the ROI available from alternative expenditures unrelated to security, and opt for whichever activities promised the juiciest returns on their capital.

In other words, left to their own devices, commercial businesses in a capitalist system will not automatically choose to invest big bucks in their own security.

That's where the government is expected to enter the equation, Prieto explained. In a time of confusion, the federal government should set out clear directions and offer clear standards, so commercial enterprises understand what is expected of them in the security realm. "Government can provide stability and predictability to make markets run better," Prieto suggested.

The government should also be able to prioritize among competing sectors - aviation, ports, rail and mass transit, for example - and among geographic areas - supposedly high-risk areas such as Manhattan and Washington, DC versus supposedly low-risk areas such as Wyoming or Montana. But the Department of Homeland Security has not proven itself to be very adept at this. Even worse, it has not been very effective at explaining its controversial "risk-based" grant-making procedures.

"They are moving the deck chairs around," said Prieto, after watching one DHS reorganization after another. But disillusioned company executives he has spoken with still complain that, "We are getting conflicting requests from different parts of DHS."

At a minimum, the government should be able to establish security standards that apply to various sectors, so companies will know that investments they might make to enhance their own security today will not be deemed irrelevant or outmoded a month from now. However, because of its laissez-faire philosophy, the Bush administration has been reluctant to issue such standards in many instances. "The government has tied its policy hand behind its back," said Prieto.

So, what should government be doing?

Prieto and Flynn's detailed 50-page report identifies a long laundry list of suggestions, a few of which Prieto - an engaging and articulate thinker, now associated with The Reform Institute, in Alexandria, VA - cited last week.

First, the government might want to offer tax incentives to businesses that invest their own cash in their own security enhancements.

Second, the government might want to make its real-world and table-top training exercises ongoing events, so the same officials participate year after year and actually improve their knowledge and capabilities as a result. Today, these exercises too often are used as "theatrical" events to garner positive publicity.

Prieto has his heart in the right place. He correctly expects a lot from government, but is disappointed that the government is not yet performing effectively.

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