Disaster Waiting
To Happen

Simulation Shows How
A Terrorist Attack Can Escalate
Into an Economic Catastrophe

By GARY FIELDS
STAFF REPORTER OF THE WALL STREET JOURNAL

Talk about a nightmare scenario. Terrorists plant several radioactive bombs in shipping containers bound for U.S. ports, and one explodes in downtown Chicago three weeks after the plot is discovered.

Those hypothetical circumstances confronted 80 federal, state and business representatives recently in a "war game" organized by government consultants and business researchers. It was aimed at gauging how participants would respond to an attack-and the economic consequences.

The results, delivered to the new Department of Homeland Security, were in some ways scarier than the explosion. The simulation indicated that the stock market would nose-dive, the nation's ports would twice be shut down for several days, and the resulting cargo and manufacturing backlog would take months to clear completely. The participants' estimate of the total economic loss: $58 billion.

'This Isn't Scripted'

Everyone knows that the country's shipping system is vulnerable to terrorists. But participants in the experiment-staged in October by the consulting firm Booz Allen Hamilton and the Conference Board, a business-research group-were alarmed by how quickly the impact escalated into an economic catastrophe.

"It showed how ill-prepared we are," says Peter Scrobe, a vice president at the American International Marine Agency, a cargo insurance company. A well-coordinated attack could "shut down the world economy."

The simulation focused on the economic impact. Participants included shippers, railroads, retailers, wholesalers, manufacturers and government officials. "This isn't scripted," says Booz Allen's Mark Gerenscer, who oversaw the study. "We didn't know where it would go."

The final report concluded that tension among security agencies, shipping companies, manufacturers and retailers hurt coordination efforts. Participants often focused on their duties without giving enough thought to the impact of their actions on others. As a result, short-term responses had outsized, long-term economic consequences.

The simulation opened with an imaginary truck accident at the Port of Los Angeles. The truck turned over, and rescue workers discovered a "dirty bomb" in the spilled cargo-C-4 explosive surrounded by radioactive Cesium-137.

The same day, authorities in Georgia were said to have arrested three men suspiciously lurking at the Savannah port-one of them on the FBI's list of suspected terrorists. Intelligence analysts then revealed recently intercepted terrorist communications referring to pending "deliveries" to the U.S.-information that previously had been deemed too vague to identify a specific threat. In response, participants from the Customs Service, the Coast Guard and the two ports decided to close both so they could be searched.

So far, so good: no injuries and limited disruption. But then authorities linked one of the Savannah suspects to al Qaeda. Participants pretended he cryptically told interrogators that his mission was to pick up unspecified supplies at the port-and that other terrorists were on similar missions elsewhere. Next, workers unpacking a shipping container in Minneapolis found a dirty bomb identical to the one in Los Angeles.

Twelve simulated days into the experiment, ports reopened and federal participants decided to have them operate 24 hours a day to ease the backlog of cargo-laden ships. They also ordered that 20% of ships be physically inspected by Customs and Coast Guard officials, up from the normal 3%. But then the participants were informed that there weren't enough dockworkers and inspectors to handle the increased work, so it took 19 days for the ports to return to normal operations.

Next, a rail car full of French wine was said to have exploded in a downtown Chicago freight yard. So once again, the ports had to be shut. Even after the ports reopened, 26 days into the crisis, participants estimated it would take 66 more days for the backlog of cargo to be unloaded and for port and manufacturing operations to return to normal.

"There was no integrated response," Mr. Gerenscer says, "and there was little in terms of communication and information about what was going on."

'Who Is in Charge?'

The main questions facing the participants were, "Who is in charge, and how do you ensure the economic side will keep running?" says Dale Watson, a retired FBI counterterrorism official now at Booz Allen. He recommends a response plan be drawn up by the government and industry leaders. "If you don't have a plan, what you get is a knee-jerk reaction," he says.

After the simulation was done, participants agreed that cargo screening needs to be done abroad, before ships head to the U.S. They decided that companies need to upgrade their own security systems and that a central government entity with a panoramic view of the supply chain and responses by all parties would foster better coordination.

A senior Customs official says many of the experiment's conclusions are being implemented. The agency has instituted a security initiative in which 15 of the world's 20 largest foreign container-shipping ports have agreed to let U.S. inspectors screen cargo bound for America. Customs also has cut deals with more than 1,000 companies that have agreed to beef up security in their manufacturing and shipping operations in exchange for speedier inspections.