The paper specifically identifies using PMCs more actively in peace and humanitarian support operations. In his introduction, UK Foreign Secretary Jack Straw wrote: "A strong and reputable private military sector might have a role in enabling the UN to respond more rapidly and more effectively in a crisis". This statement surprised some although UK Minister for Overseas Development Clare Short had expressed a similar view during a previous television interview. An outspoken left-wing Labour Member of Parliament, her revelatory endorsement of the security that PMCs could provide (both for local populations and humanitarian workers) helped rejuvenate the argument.

The UK private military sector spans a wide variety of businesses, catering to both governmental (at home and abroad), non-governmental and private needs. Most are concerned with the provision of security or security training in the broadest sense, from bodyguarding to hostage negotiation. The logistic capability of the UK sector is small. Few companies provide services that are contracted by the UK Ministry of Defence. There is potential for real growth in training, logistic skills and peace support.

The US private military sector offers some examples of its own. Noticeable about the US sector is the size of the companies involved. MPRI, Dyncorp, Armor Holdings, Vinnel, and Brown & Root each have large permanent staffs and extensive databases of contract workers. They generate large incomes and are often part of larger corporations. Vinnel, for example, became part of TRW and may eventually fall under the wing of Northrop Grumman. MPRI was bought by L3 Communications. Armor Holdings was listed by Fortune magazine as one of the top 100 fastest- growing companies in the USA in 1999 and 2000.

A second characteristic of US PMCs is their close co-operation with the US government, either working with or for the institution. Abroad, contracts are monitored or even issued by the State Department. Dyncorp won the contract to provide the US monitoring contingent to the Organisation for Security and Co-operation in Europe Kosovo Verification Mission before the NATO campaign. Brown & Root was contracted to help build and run Camp Bondsteel in Kosovo, the base from which US forces operate in the region. Bidding is continuing for the provision of follow-on training for the fledgling Afghan army, since the decision was taken to privatise the task. The US government has employed both Dyncorp and MPRI to meet some of the provisions of 'Plan Colombia' - the US project to support Colombia in the war against drugs.

The third defining characteristic of US PMCs, with the exception of MPRI, is that their core skill has always been logistic in the wider sense. Dyncorp began as Pacific-Eastern airlines, set up by two former Second World War pilots, transporting spare parts for the armed forces. In 1951, in co-operation with the US Air Force, they pioneered Contract Field Teams (CFTs), deploying technicians to wherever the military required. Dyncorp has held a CFT contract for 50 years.

During the 1990-91 Gulf War, Dyncorp technicians provided daily maintenance for the helicopter forces deployed in forward areas. This work was designated 'non-mission critical', hence the US decision to contract it out. Dyncorp continues to provide a full range of aviation services, including all levels of maintenance, engineering, technical documentation, flight operations including mission testing and training pilots and logistic support including supply chain and fleet management.

Dyncorp also provides a physical security service (notably to certain US embassies), police monitoring services for the UN on behalf of the State Department and operates ranges and bases for the US Department of Defense. Dyncorp also holds the contract to manage and operate the US Strategic Petroleum Reserve in a joint venture with McDermott Oil. Using manpower and equipment that is spread around the world, Dyncorp believes no company can react faster to a contract requirement, and it covers a broad panoply of services.

The company has faced criticism among opponents of the sector for its unclear involvement in 'Plan Colombia'. One allegation involves a search-and-rescue crew that included Dyncorp personnel, which went to the aid of a downed crop sprayer. On the ground they allegedly found themselves in a firefight with guerrilla forces. Were they technicians or soldiers? Was this proxy war on behalf of the US or self-defence? This muddying of the waters makes it very difficult for international institutions to come to any conclusions about the use of PMCs to create stability.

MPRI took a different approach to the private military sector. Founded in 1987 by former US Army Chief of Staff Carl Vuono, who was joined by several other former US generals, MPRI provides armed forces' personnel with training, education, leadership development, strategic planning, logistic planning and management, strategic communications, democracy transition, simulations and mobile training teams.

Unlike Dyncorp, it established itself as a provider of training rather than a provider of logistics. It holds a broad range of contracts including a number of national contracts in the USA, an area in which the UK MoD is at present unlikely to issue large contracts.

MPRI, for example, provides recruiting staff to both the US Army and the US Army Reserve. It also provides instructors and administrators for the university-based Reserve Officer Training Corps. MPRI, in effect, uses the same people the army would, but the army can pass on substantial financial burdens to the company. The personnel MPRI uses, recently retired from active service, benefit from a less painful shift to civilian life at an often-difficult age. The skills they have developed over many years of active duty become directly relevant to the job they now perform, rather than some form of obscure 'proof of character' on a résumé, and they are well rewarded for their knowledge.

The MPRI database contains upwards of 6,200 officers, including 340 generals and 3,000 senior non-commissioned officers, which include 200 Sergeant Major's Academy graduates. While some observers note this looks like "jobs for the boys", others reflect that it allows a level of retention of knowledge and skill invaluable to the US Army, not to mention its other customers.

For this reason, institutional knowledge is passed back by contract to the US Army to provide services such as doctrine support for Training and Doctrine Command, training design and exercises for the Joint Warfighter Experiment, planning and analysis for Strategic Personnel Management and education functions for the Force Management School.

This is where MPRI began to provide services, but it soon expanded to include overseas contracts. It had a contract to provide a National Security Enhancement programme for the Republic of Equatorial Guinea. This contract is a good example of how long it takes to receive US government approval. MPRI submitted to the US State Department in June 1998 its initial licence application to provide the contract; it was initially turned down over human rights issues in the African state. A request for reconsideration was made in January 1999 and a phase I licence for the programme was approved in June 2000 only after further consultation throughout the previous year - and all that merely covered the creation of an action plan.

The process of licensing can be very long in the USA, but it doesn't always mean the company is then beyond suspicion, as MPRI found out in the mid-1990s in Croatia.

MPRI says it provided a well-received Democracy Transition Assistance Programme to the country, with the backing of the Department of Defense (which originally referred the company to Croatia). This included senior leadership seminars and democracy training programmes. The State Department approved the activity only when it was clear there was no tactical component to the training or that it would not violate the 1991 UN arms embargo on Croatia, which made direct military assistance illegal.

Suspicions were raised when in August 1995 the Croats launched 'Operation Storm' to seize Serb-held Krajina. It achieved its objective in six days and did not reflect Croatia's performance earlier in the war. The tactics reflected the NATO manoeuvre-style all-arms battle, not Soviet-style doctrine. It was the greatest and fastest land defeat the Serbs had experienced, and arguably drove them to the Dayton Peace Process far quicker than NATO bombing. The Central Intelligence Agency was implicated when it was alleged that it flew a predator unmanned air vehicle from an island in the Dalmatian chain to provide intelligence for the operation. MPRI personnel in Croatia at the time were heavily implicated. MPRI argues that if they had the ability to train an army that fast that well, they would be a much larger, much richer company.

Whatever people believe, it did not advance PMCs' efforts to gain international credibility.

There are clear lessons MPRI and Dyncorp can teach the UK sector and the UK government. First, the kind of services they offer the US armed forces are much broader. While the UK will contract out some niche specialities, they do not possess the contracting mindset that, for example, the UK Department for International Development (DFID) has. DFID contracts out much of its work and has used PMCs for a variety of roles on missions abroad. It hired the explosive ordnance disposal and battlefield clearance company Bactech to help clear landmines and unexploded ordnance in Kosovo. It also hired PMCs to provide local security to humanitarian interventions. The UK sector has remained comparatively small. Companies have concentrated more on physical security. Many have their roots in the protection of mineral and oil extraction facilities. Manpower comes predominantly from ex-special forces who already have the required skills while making recruiting less problematic.

Whether UK PMCs are able to get more involved in training programmes and provide out-sourced services depends largely on the UK MoD. The private sector can build up capacity to provide this kind of service, but the keys to acceptance will be gaining credibility and government budget considerations. The perception of PMCs may change with eventual regulation and licensing, creating a more transparent private sector. Government budget squeezes are almost inevitable.

The main route to expansion chosen by UK PMCs seems to be through peace support operations. ArmorGroup (formerly DSL), a UK subsidiary of Armor Holdings in the USA, has worked with the UN providing security for UNICEF in Pakistan and Afghanistan. It provided civilian drivers for armoured personnel carriers for the UN Protection Force (UNPROFOR) in Bosnia.

It also provided security for two non-governmental organisations, Co-operative For Assistance and Relief Everywhere (CARE) and Global Overseas Adoptees Link (GOAL) in Rwanda. Keen to preserve their legitimacy and avoid the problems other companies have faced, they see benefits in UK regulation.

ArmorGroup spokesman James Fennell welcomes the Green Paper. "It will bolster our position that we are ethical. Through our contracts we are always proving we are legitimate," he says, happy that regulation will remove the illegitimate from among their ranks. ArmorGroup has its sights set on working more closely with the UN Department of Peacekeeping Operations. Rapid reaction is the new selling point, and legitimacy will be key to working for the UN.

ArmorGroup sees a market in developing the support functions and core capabilities of a UN force. Using the UN Organisation Mission in the Democratic Republic of the Congo (MONUC) as an example, ArmorGroup noted that at first no Western nations were keen to send troops and those that did send troops had little in common. There was also a noticeable lack of common logistic, signals and staff training.

ArmorGroup believes it can provide the kind of core capacity that would, under different political circumstances, come from a Western force. By training a troop-contributing nation's force before it deploys, they would provide it with skills enabling it to reliably operate alongside other nations' armed forces, particularly in command and logistic capacities. They would also supply support staff to the mission and train local staff once the mission had begun.

This is the ArmorGroup solution to improve the capability of UN forces drawn from non-Western states. The type of regulation they want is similar to export licensing: not required when supplying skills to organisations like the UN or NATO, but required to supply skills to proscribed foreign governments.

Another UK company has a different plan. Strategic Consulting International (SCI), run by former Sandline founder Tim Spicer, sees a direct role for a PMC in providing a rapid-reaction force for the UN. It would begin the process of stabilising the security situation of a region while governments decide what troops to send. This would require not only a logistic capacity so far unseen and untested by this new company, but much greater licensing flexibility by the UK to allow them to react fast enough to be worthwhile. That is why SCI favours general licensing of companies, but not individual contracts. According to Spicer: "Once regulation is in place and the system is working, I see rapid expansion [of the sector]."

The regulation finally imposed on the UK sector must achieve a number of things. It must provide transparency, because with it will come acceptance of the legitimacy of the sector which will allow it to grow. There will be reluctance. "I take transparency," says Tim Spicer, "to the level at which any other commercial organisation does. I draw the line though at 'nosiness', for three reasons: primarily client confidentiality; second, operational security; and third, the security of my employees, which I take very seriously."

Regulation must also be underpinned by international structures for regulation, or at least auditing, to ensure the legitimacy of contracts. Dr Kevin O'Brien, from the European RAND Corporation, sees it as a question of simple business sense: "The ones that want to be known as legitimate will do everything possible to work within the laws not only of the countries in which they are based, but of the countries within which they operate, as well as international law."

Regulation must primarily be concerned with regulating the work they wish to partake in, not the PMCs themselves. Dr O'Brien is emphatic: "You can't define the actor - you have to define the activity, just as a soldier is defined by what he does, not who he is, under the laws of war." To do the reverse would create confusion and great difficulty in a sector that offers such broad services.

Final UK regulation is not expected for some time. The deadline for suggestions and responses to the UK's consultative paper is 12 August. In its final form it may prevent the ease with which companies can work directly for other governments, but it will legitimise the sector, which will promote growth. It will also allow those legitimate private military skills providers to begin offering a wider range of services directly to the UK Ministry of Defence, which is likely to seek more and more ways of out-sourcing non-mission-critical tasks and pass on the cost burden to the private sector.