"Private security companies, funded by billions of dollars in U.S. military and State Department contracts, are fighting insurgents on a widening scale in Iraq, enduring daily attacks, returning fire and taking hundreds of casualties that have been underreported and sometimes concealed, according to U.S. and Iraqi officials and company representatives," Steve Fainaru writes.

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While the military has built up troops in an ongoing campaign to secure Baghdad, the security companies, out of public view, have been engaged in a parallel surge, boosting manpower, adding expensive armor and stepping up evasive action as attacks increase, the officials and company representatives said. One in seven supply convoys protected by private forces has come under attack this year, according to previously unreleased statistics; one security company reported nearly 300 "hostile actions" in the first four months.

The majority of the more than 100 security companies operate outside of Iraqi law, in part because of bureaucratic delays and corruption in the Iraqi government licensing process, according to U.S. officials. Blackwater USA, a prominent North Carolina firm that protects U.S. Ambassador Ryan C. Crocker, and several other companies have not applied, U.S. and Iraqi officials said. Blackwater said that it obtained a one-year license in 2005 but that shifting Iraqi government policy has impeded its attempts to renew.

The security industry's enormous growth has been facilitated by the U.S. military, which uses the 20,000 to 30,000 contractors to offset chronic troop shortages. Armed contractors protect all convoys transporting reconstruction materiel, including vehicles, weapons and ammunition for the Iraqi army and police. They guard key U.S. military installations and provide personal security for at least three commanding generals, including Air Force Maj. Gen. Darryl A. Scott, who oversees U.S. military contracting in Iraq and Afghanistan.

"I'm kind of practicing what I preach here," Scott said in an interview on the use of private security forces for such tasks. "I'm a two-star general, but I'm not the most important guy in the multinational force. If it's a lower-priority mission and it's within the capabilities of private security, this is an appropriate risk trade-off."