Industry experts see market growth for ID cards, prisons

The market for homeland security products and services is plagued by uncertainty but is expected to experience a surge in certain specialized areas, such as identity verification and prisons for holding illegal immigrants, industry officials said Tuesday.

While attending a homeland security investment conference in Washington, investment brokers and business executives decried what they see as the Homeland Security Department and Congress not doing enough to create more certainty about the homeland security products, services and technologies that will be needed in the near future.

Participants at the conference expect the federal government to continue turning to the private sector to meet a range of homeland security needs, fueling speculation that the industry will be a lucrative one for years to come. The conference was organized by financial services companies CapitalSource Finance, Civitas Group and Imperial Capital, and focused on helping mid-size companies understand and access the homeland security market.

"DHS leadership, policies, approaches, procurement processes and philosophies have made investing in this sector increasingly difficult," Imperial Capital wrote in an analysis released at the conference. "To compound the problem, piecemeal information about funding and contract progress has created a haze around this growing market opportunity."

But the company added that it believes the market will stabilize and grow. Homeland Security Research Corp. predicts, for example, that the cumulative homeland security and homeland defense markets will exceed $400 billion from 2006-2010, or more than three times the amount from 2001-2005, the paper states. Imperial Capital estimates that the major business opportunities are in the fields of border and perimeter security; aviation security; port security; land transportation security; bioterrorism and chemical threat prevention; and public safety. The company predicts that technology will be needed in the areas of surveillance, including unmanned aerial vehicles; biometrics and credentialing; sensors to detect chemical, biological radiological and nuclear materials; cargo container tracking; records management and data mining; information security; as well as scanning devices and explosives detection devices.

Officials from individual companies outlined specific areas of their work during presentations at the conference. Bruce Davis, chairman of Digimarc Corp., said the market for upgraded driver's licenses is growing. He said Congress created uncertainty in the market when it passed the so-called Real ID law in 2005, which requires states to begin issuing secure driver's licenses starting in May. He said Homeland Security is expected to issue new Real ID regulations within weeks, which would help stabilize the market. The market for new driver's licenses is estimated to be as much as $11 billion. But Davis noted that it is not clear how much funding Congress will provide each year for the effort.

Conversely, more prison capability will be needed as the federal government identifies and captures more illegal immigrants in the country, said John Vanyur of Management and Training Corp. He said, for example, that another 10,000 federal detention beds for illegal immigrants would be needed if the Homeland Security Department and the FBI connect their fingerprint databases.

But he added that the need for more detention space is not fully clear because Congress continues to debate immigration and border security legislation.