By Allen R. Gibson, HomelandDefenseStocks.com 
December 2004  

In what must surely be good news for investors, the market for airport and border screening technologies continues to grow, and no single technology has yet solved all the problems. While checked baggage screening has been successfully implemented as mandated by Congress, screening of the other things that go on airplanes: carry-ons, people, and cargo; is still an unresolved issue. The TSA is now focusing efforts to address that issue, while spending another $30 million to buy more scanning machines for checked baggage.  

From improved bomb-sniffing machines, to iris scanning biometrics systems, to RFID enhanced baggage sorting, to travel documents with biometric identification built right in, the process of more accurately identifying and then tracking a traveler and their luggage is moving forward on all fronts.  

Recently, another major contract was announced by the TSA with a Lockheed Martin-led team to fund enhancements of their current generation of explosives detection equipment. The project is intended to increase the flow-through rate, which presents a major challenge when it comes to scanning massive amounts of cargo, and to enhance Explosives Detection Systems (EDS) capabilities. The $5.3 million contract under the TSA’s Phoenix Project will begin its next phase, field testing, shortly.  

According to Frost and Sullivan industry analyst Matthew Farr, in his recent report on “U.S. Federal Homeland Security Markets and U.S. Explosive Detection Markets,” the Iraq war has brought attention to problem of explosives, as over half our Iraq casualties have been from explosives. “So this is driving the market,” says Farr, “People know the threat’s out there, and that it’s real.”  

Before 2001, EDS was a niche market, notes Farr. “L3 and Envision were the only two certified companies then, and are still the only two companies certified to provide screeners. So the market is very, very open for competition. New products are being tested and proven worthy,” he says.  

In a statement before the House Subcommittee on Aviation in July, L3 Communications Security and Detection Systems, Inc., General Manager Allen Barber talked about the importance of enhancing the screening of air cargo.  noting that  break-bulk air cargo, represents 70 percent of all air cargo shipped on commercial aircraft today, so it needs a similar screening to checked baggage to “close the door” on a significant unresolved security issue.  

Now, the TSA has also awarded a contract to L-3. to participate in an air cargo screening pilot program using the company's popular eXaminer X-ray based Explosives Detection Systems. The TSA pilot program will be taking place in air carrier cargo facilities. This follows on other TSA contracts, one to purchase another $30 million worth of the machines for checked baggage use, and a second to deploy another six of the eXaminer’s networked version for baggage screening at six major airports, in contracts valued up to $10 million. The networked version will allow fewer operators to scan more bags at various locations with less cost.  

L-3 will utilize several subcontractors on its various EDS projects, including, Hewlett Packard, Scandia , and, until recently, Analogic Corporation. Analogic, however, is now working with Lockheed Martin, which led to a recently settled lawsuit. Overall, L3 says it is spending over $20 million dollars a year on R&D of new technologies.  

Such partnerships and joint ventures are a key element of doing business in the Homeland Defense space, according to Frost and Sullivan.  

Alliances key to success.  

“This industry really likes strategic partnerships,” says Farr, “since they help companies speed their projects to markets, recoups RDTE costs time and money during certification, and because the government looks favorably on partnerships, specially if they are with the large integrators.”  

One company that has taken the strategic partnership message to heart is Markland Technologies Inc. (OTCBB: MRKL), who has made a series of acquisitions and forged relationships with major players in the space over the past two years.  

Markland purchased Ergo Systems in 2003, which provided them contracts for border security from the DHS, and recently the company became a sub-contractor under Accenture, a major integrator, on the US-VISIT program. US-VISIT workers use biometrics such as digital, inkless fingerprint scans and digital photographs to determine if a person applying for entry to the United States is the same person to whom State Department officials issued a visa.. 50 of the U.S. land crossings with the heaviest traffic, will begin enrolling aliens in US-VISIT by Jan 01.  

Markland had already acquired Science and Technology Research, Inc., a bio-warfare chemical detector manufacturer for the US Navy, and are now looking to combine their license for that technology with ‘stand-off’ chemical detection capabilities from their E-OIR Technologies, Inc. subsidiary, which was just acquired in June. E-OIR specializes in fabrication of customized remote sensor systems and platforms, primarily under contract to the Army’s Night Vision and Electronic Sensors Directorate. Recently, EOIR developed and delivered an integrated sensor suite for counter-terrorism surveillance to the Army. The sensor suite is designed for use aboard man portable Unmanned Aerial Vehicle (UAV) platforms. Markland is also working on an accoustics-based EDS system that could mesh with X-ray based machines. The company’s Accoustic Core™ (AC) technology uses low-frequency acoustic energy that is safe for human exposure and is ideal for screening large volumes of containers or humans quickly and accurately. The AC technology can be utilized to develop products that can automatically screen luggage for plastic explosives by retrofitting AC technology based sensors into existing carry-on luggage inspection systems.  

“Our strategy from day one has been to develop an integrated suite of solutions for protecting our country. We feel the recent US-Visit subcontract provides great potential for future revenue growth,” says Markland’s CEO Robert Tarini. The strategy seems to be working, with the Company reporting its best quarter ever ended September 30th.  

Another company that is moving ahead with partnerships to break into the air security market is OnScreen Technologies, Inc. (OTCBB: ONSC), who’ve made Robinson Aviation Inc. a distributor of their LED emergency signs. Steve Velte of Onscreen says “Robinson is very highly respected in the aviation security industry, and their recent focus on introducing new technologies to our key target markets should make this a winning relationship for both parties.”  

On another front, major baggage systems manufacturer Accu-sort Systems Inc. announced that it has signed a deal to install its RFID-based baggage screening system at a fourth US airport. According to the Company, which has been in the baggage-handling business for over 30 years, more than 80 percent of all parcels shipped in the U.S. pass under their equipment. Its RFID sortation systems deliver a 99.9 percent read rate by using a four-antenna tunnel which can be added to existing conveyor systems adjacent to the EDS hardware. Unlike traditional barcodes, RFID doesn’t require ‘line of sight’ to work, resulting in higher read rates, and more efficient baggage sorting, than with traditional barcode technology. Pre-screeners will put a reusable RFID tag on suspect baggage, and the system will then automatically route that bag for enhanced screening.  

Meanwhile, at the immigration desk at Vancouver International, Canadian Customs has just begun a 17 month trial of a scanning system called “Iris Catcher” that lets travelers, who apply for and meet the trusted traveler requirements, skip the lineups at both Canadian and US customs. The advantage of the iris scan over a fingerprint, says a Customs official, is that the iris scanner uses over 260 points of reference to make identification – over four times as many as a fingerprint. Only low-risk travelers will be approved for the Nexis program.  

“We will cooperate further to ensure our shared border is closed to terror, but open to the safe movement of people and goods,” pledged Canadian Prime Minister Paul Martin during President Bush’s recent visit.

Allen R. Gibson

Allen R. Gibson has over twenty-five years of experience in media and corporate communications.  He has been a reporter, television producer, and marketing communications consultant for public companies in both the US and Canada .  

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