By Nathan Vardi at Forbes Magazine

DynCorp International, the Falls Church, Va., provider of mission critical services to the U.S. military, got good news Thursday from Houston rival KBR, which said it would not be protesting the recent loss of work supporting American troops in Afghanistan to DynCorp and Fluor Group.

“We recently met with the customer for a debrief of the selection criteria and the decision metrics for the awards,” said KBR chief William Utt on KBR’s Thursday conference call. “After the debrief we decided KBR will not protest the outcome of the awards.”

The announcement was excellent news for DynCorp, which has been consistently winning government war-zone work from competitors like Blackwater USA and KBR that have had trouble in Iraq. DynCorp is counting on the expanding war in Afghanistan to provide corporate growth and was bracing for a potential challenge from KBR. It is now likely that within six months DynCorp will begin working on a five-year, $5.9 billion deal awarded in July to logistically support U.S. troops in southern Afghanistan. Fluor won the work that will be required in northern Afghanistan.

DynCorp has emerged as one of the big winners of the wars in Iraq and Afghanistan, which now generate 53% of DynCorp’s $3.1 billion of annual revenue. The company’s revenue grew 45% last year thanks to a 51%-owned joint venture that has a multiyear $4.6 billion contract to supply 9,100 linguists to translate for U.S. soldiers in Iraq.

Last year DynCorp and Fluor, together with KBR, became part of the Logistics Civil Augmentation Program, or Logcap, a huge contract once awarded exclusively to KBR. The three companies now are competitively bidding on various jobs under the wars’ biggest contract. In the last six years, Logcap has meant big revenues for KBR, which earned an estimated $700 million of income (before interest and taxes) on $31.4 billion of revenues off of the program, mostly in Iraq, but been dogged by accusations of overbilling and negligence.

In July the Pentagon announced that it planned on having DynCorp and Fluor take over KBR’s work in Afghanistan under Logcap, doing everything from providing laundry to food and fuel. The decision came as President Obama sent 20,000 additional U.S. troops to Afghanistan to go after the Taliban in an expanding war. KBR has now accepted the military’s contracting switch in Afghanistan and will focus on trying to retain its Logcap work in Iraq, which should be up for bid by the end of this year.

“We all know that there has been a lot of, I think, pressure on the Department of Defense to diversify the contractor base,” said KBR chief Utt. “I think the military wanted to get a diversity of contractors.”

It is true that Defense Department officials believe bringing a market dynamic to the big Logcap contract would help eliminate some of the war-contracting problems the military has experienced in Iraq. But it also seems like KBR is being frozen out.

On KBR’s conference call, Utt said KBR did not win Logcap’s new Afghan jobs even though one of the winning bidders submitted a more expensive proposal than his company. Under the reconfigured Logcap, KBR has been unsuccessful at getting the first four new jobs the military has put up for bid.

On the other hand, DynCorp continues to get work from companies that have had public embarrassments. Blackwater USA, now known as Xe Services, got kicked out of Iraq after its employees killed civilians in Baghdad’s Nisur Square in 2007. In June the Department of State awarded DynCorp Blackwater’s old contract to provide air-support and security for American diplomats in Iraq, worth $915 million over the next five years.

The man who benefits the most from all this is Robert McKeon, DynCorp’s chairman and head of private equity firm Veritas Capital, who Forbes recently revealed owns one-quarter of DynCorp. (See: “Wall Street Goes To War.”) The company’s stock went up 1.6% Thursday, making McKeon’s DynCorp shares worth $285 million.

Despite conceding ground in Afghanistan, KBR was still able to report a 40% rise of second quarter profit of $67 million, compared with $48 million in the second quarter of 2008.

BAGHDAD, Iraq (CNN) — Five American security contractors were detained in connection with the killing of another American contractor last month inside Baghdad’s Green Zone, sources with knowledge of the investigation told CNN Saturday.

Iraqi and U.S. personnel took the five into custody in an operation inside the Green Zone before dawn on Friday, according to an Iraqi official involved in the investigation into the killing of James Kitterman. The five, who have not yet been charged, were being held by Iraqi security forces Saturday at a jail inside the heavily protected zone, he said.

The troops also confiscated weapons during the raid on the suspects’ firm at about 4 a.m. (11 a.m. ET), said the official, who spoke on condition of anonymity.

The names of the suspects and the company they work for were not released. The U.S. military declined comment and referred questions to the U.S. Embassy in Baghdad. Embassy officials did not immediately respond to request for comments.

Kitterman was found bound, blindfolded and fatally stabbed in a car in the district, formally known as the International Zone, on May 22. The 60-year-old Houston, Texas, resident owned a construction company that operated in Iraq.

The five suspects knew the victim, a source inside the Green Zone familiar with the investigation said. Both the Iraqi and the Green Zone sources noted that the FBI has been involved in the investigation from the start.

Once the suspects are charged and referred to trial, the case would be sent to Iraq’s Central Criminal Court, the Iraqi official said. If that happens, it would be the first time U.S. citizens were tried in Iraq since the United States returned the country’s government to the Iraqis.

CNN’s Mohammed Tawfeeq and Alan Duke contributed to this report.

UPDATED: With Adm. Mullen Saying He is Not a “Proponent” of Arming Merchant Marine; Piracy “Is Not My Priority Right Now.” He says: “I’ve Got A Big Globe.”

The head of the Maritime Administration, who oversees America’s merchant marine, said today that he opposed the arming of US merchant seamen to counter pirates.

“We do not want to arm mariners in any event,” James Caponiti, acting Maritime Administrator, said at today’s Navy League conference in Washington. He said the risks were just too great even though there is training for mariners to be trained in the use of small arms. He added that “we do not recommend arming our mariners with the kinds of weapons you would need for a maritime attack.” The Maritime Administration is part of the Department of Transportation.

Instead, ships should consider carrying qualified private security teams. In addition to concerns that mariners could become targets for pirates if they are armed, Caponiti said many foreign ports do not allow sailors to carry weapons or to bring them into port. These are issues the US will have to address as it considers the role of private security teams on US-flagged ships.

The Chairman of the Joint Chiefs, Adm. Mike Mullen, agreed that arming mariners was not the right approach, adding that piracy was “not my priority right now.” Clearly pushing piracy down on the threat ladder, he said: “I’ve got a big globe.” Mullen also offered the familiar statistic that piracy affects less than 1 percent of ships and the commercial shipping industry is willing to pay ransoms rather than take more costly measures. Finally, Mullen noted that, “in the end it’s a bigger problem. It’s about Somalia…” and what the international community choose to do about it.

Also, the chief of naval operations, Adm. Gary Roughead, said he doubted that the shipping industry would be willing to adopt another tactic that many experts have encouraged: the use of armed convoys to protect ships against pirates. “The merchant fleet serves a global economy and they want to make as much money as possible,” Roughead said, noting that waiting to sail in a convoy might wreak havoc with the tight time lines required by modern industry.

The head of the Coast Guard, Adm. Thad Allen, said a new maritime “code of conduct” should be out “shortly.” He did not disclose any details.

However, Allen did say that one concept that has been much discussed to discourage piracy, the creation of shipping highways, was worthy of consideration and is being implemented in some regions.

By David Price, Democratic Congressman from North Carolina