Every 5 years we get some insight into how much at least one government is spending on translation. Next month the U.S. Army will award US$5.2 billion in translation contracts, up from US$10 million before 9/11. Of course, the Army has spent a lot of money over the last few years on translation, but this omnibus contract signals its spending intentions for the next few years. Some responses to the tender also tell us something about a more active competitor to L-3, which last year purchased Titan to become the second-biggest LSP. L-3 is partnering with Northrop-Grumman, the second-largest government-focused translator, for its response to this contract.

Where is the Pentagon spending all this money? The Army tender will split the work up into 4 portions, with set-asides for LSPs that book no more than US$6.5 million in annual sales (that is, for most of the industry).

• A whopping US$4.6 billion is for Iraq-related translation. Military activity in the Middle East has spending on Arabic, Pashto, and Persian. That will be in addition to the nearly US$2 billion the U.S. is spending per week in Iraq.
• Language work for Afghanistan will come in around US$703 million, with Guantanamo Bay’s suspected terrorist holding camp accounting for US$66 million of language work.
• Northrop won a 3-year contract in 2004 for US$97 million in translation for the Balkans.

Where does New York-based Veritas Capital fit into the language business? It is one of the top 35 U.S. defense contractors. In 2004 the company bought McNeil Technologies and a chunk of DynCorp International — these 2 firms are leading the bidding effort for Veritas. McNeil has 1,300 employees working on U.S. government language projects, while DynCorp supplies military translators and trains the Iraqi police.

So why should you care about what’s happening in the public sector of language services? Both buyers and suppliers will be affected in some way:

• Taxes. If you’re a U.S. resident, it’s your tax dollar at work. The U.S. is catching up on deferred spending on language-related intelligence and defense.
• Prices. The wars in the Middle East will drive up prices. DynCorp is offering US$176,000 a year for Arabic linguists in Iraq. Over time, we expect military and intelligence demand to have some affect on civilian, non-Arabic translation prices as the war on terror begins seeking out sleeper cells in Europe and elsewhere.
• M&A. Translation work accounted for US$295 million of L-3’s first-half 2006 revenue. With lots of money coming from lucrative government jobs, defense contractors such as L-3, Northrop, and Veritas could change the merger and acquisition dynamics of the language services industry.
• Innovation. The Army work will drive new investment in specialized software technology from government-focused ISVs such as Basis Technology. Non-defense buyers can only hope that innovation in that sector will spill over into improved machine translation, translation memory, multilingual search, speech-to-speech technology, and better workflow.